Governance

The seventh annual Good Governance Awards concluded on 17 November 2022 with the announcement of the winners across seven categories.  The Awards aim to recognise and encourage good governance standards and reporting in the charity and non-profit sector. It provides tailored feedback and recommendations to all entrants, allowing them to improve governance and reporting across a range of areas such as strategy, performance, and compliance with reporting standards.  The annual report represents a real opportunity for organisations in the charity and non-profit sector to showcase their transparency and trust by disclosing their strategic performance, governance practices, culture and financial results. A good annual report does more than meet minimum reporting requirements. It can provide a comprehensive picture of an organisation, including its achievements and future plans. It serves to reinforce relationships with stakeholders and build further relationships with the public, potential donors, volunteers and supporters. Each of the annual reports entered into the awards undergoes a rigorous assessment process, including a technical compliance review, an assessment of governance practice disclosures and, for those short-listed, a three-stage independent judge review. In the spirit of improving standards, we have compiled a summary of the Judges’ top recommendations arising from their review of this year’s shortlisted annual reports. Top ten recommendations for all organisations Ensure consistency between the non-financial narrative and the financial statements in the annual report, and that they read well as one report telling the story of the organisation. Too often these can appear like separate reports that have been ‘bolted together.’ Emphasise the connection from the organisation’s mission and vision, and how this flows through to its strategy and activities. Provide a summary overview of the background and origins of the organisation – It’s purpose, why it was established and the impact it wishes to make. Disclose key performance indicators (KPIs) that provide insight on the actual performance during the year against the organisation’s targets for that year and previous performance. Targets should clearly define what success for each activity or programme would look like in a given year and at the end of the current strategy. Ensure clarity, accuracy and consistency in the financial reporting and financial summaries which is not only a Financial Reporting Standards requirement but also fundamental to presenting a convincing report. Given the nature of work of charities and non-profit organisations, their sources of income and the level of public and regulatory scrutiny, boards and their advisors should opt-out of preparing reduced disclosure financial statements, an option otherwise permitted by Section 1A of FRS 102, and filing abridged or abbreviated financial statements. Opting for reduced disclosure is sub-standard to good governance practice for a sector that needs to be highly transparent and accountable for continued support. Design the report so it is readable online. Improve readability and impact by using photographs and other graphics to break up the text and visualise the data for readers e.g., graphics that illustrate the sources of funds, programmes expenditure, and KPIs such as the number of people helped. Outline the organisation’s process around board Director/Trustee recruitment, induction, training and board evaluations. Strengthen the profiling of Trustees/Directors. Provide summary biographies on each Trustee/Director, including details on appointment dates, attendance at meetings and whether they were elected, co-opted or how they were selected/recruited. Introduce balance to the report, and make it more realistic, by addressing the areas of frustration, concern or indeed failure encountered during the period rather than only highlighting the areas of success. Top five recommendations for larger organisations in particular In general, reporting on sustainability and climate is limited. A focus on ESG reporting would be an improvement. Consider if too much detail is being provided – some of the annual reports were long and included repeated examples. Highlight how the organisation implements board diversity and succession planning as well as the organisation’s policy on diversity (in its broadest sense). Define how the organisation monitors and mitigate risks. Provide insights into the organisation’s risk appetite and tolerance. Shine a light on future income generating strategies and sources, alongside projected costs, and any new areas of expenditure. For more information, and template annual reports for charities and non-profit organisations, see: Resources – Good Governance Awards. Chartered Accountants Ireland Technical Hub also includes member resources on financial reporting, audit and other regulatory requirements. Róisín McGuigan Carmichael Good Governance Awards Coordinator

Chartered Accountants Ireland has congratulated the winners of the 7th annual Good Governance Awards, which took place last night, in Chartered Accountants House, Dublin. The Awards is an initiative that recognises and encourages adherence to good governance practice by charities and other non-profits in Ireland. They were founded by Carmichael with the support of partners, including Chartered Accountants Ireland, and leading national bodies in the non-profit sector. Among the organisations recognised this year are Mental Health Reform, NiteLine, Breaking Through, The Ark and Barnardos. Minister of State at the Department of Rural and Community Development Joe O’Brien T.D. and Stephanie Manahan, CEO of Pieta, delivered keynote addresses on the evening. Sinead Donovan, Deputy President of Chartered Accountants Ireland, Diarmaid O’Corrbui, CEO of Carmichael, and Denise Charlton, CEO at the Community Foundation for Ireland also spoke to attendees about the importance of charity and non-profit organisations and the role of governance in building trust and confidence in the sector. Commenting Deputy President of Chartered Accountants Ireland Sinead Donovan said “I want to commend the commitment of employees, trustees and volunteers to building public trust in the charities and non-profit sector. Through the promotion of good governance, accountability, transparency and by working collaboratively with stakeholders, they are delivering value for money and making a positive impact for beneficiaries and society”. All entrants to the Awards receive feedback from some of the most respected and experienced experts in the sector. Commenting on the feedback, Níall Fitzgerald, Head of Ethics and Governance, Chartered Accountants Ireland and Judge in the Awards, observed “The quality of governance disclosure is getting higher every year and the Annual Reports of shortlisted entrants can serve as insightful templates for others. What is most impressive is the level of innovation in the way entrants are telling their story, illustrating their impact, and providing insight to their governance processes." “The higher scoring entrants are reporting beyond minimum requirements on issues like diversity, equity and inclusion, gender pay gap, sustainability and other challenges relevant to their charitable activities. This is a further example of the commitment to transparency and accountability in this sector and their awareness of what matters to society”. The 2022 winners are: Category 1 (annual turnover <€50k): NiteLine Category 2 (annual turnover between €50k and €250k): Breaking Through CLG Category 3 (annual turnover between €250k and €1m): Mental Health Reform Category 4 (annual turnover between €1m and €5m): The Ark Category 5 (annual turnover between €5m and €15m): The Jack and Jill Children’s Foundation Category 6 (annual turnover between €15m and €50m): Barnardos Ireland Category 7 (annual turnover >€50m): Trócaire As part of the mission to encourage and promote good practice in annual reports and others areas of governance, feedback is provided to all entrants. In addition, overall observations of what organisations did very well and areas for improvement are shared. Further details on the Good Governance Awards are available on www.goodgovernanceawards.ie.

At a Chartered Accountants Ireland webinar on 23 March on the governance of charities and not for profits (ROI), David Brady, non-executive director and management consultant, presented on the “charity board maturity model”. Five Levels of Charity Board Maturity*   Level Board characteristics Non-Compliant Negative attitude to governance. Unaware of strategic developments. Short-term funding focus. Receives only basic financial information. Unaware of outdated policies. Does not insist on a risk register. No rotation or succession planning. Antagonistic relationship with staff. Weak AGM process. Compliant Tolerant attitude to governance. Closed to developments other than self-beneficial. Ensures mixed portfolio of income sources. Ensures policies are current. Ensures risk register prepared for compliance. Rotation policy not implemented. Provides superficial staff support. AGM limited to board only. Effective Understands benefits of governance. Revises board and staff structures to exploit opportunities. Focused on seeking funding opportunities to support strategy. Use policy register to refresh and revise policies. Reviews risk register to manage risk and plan contingencies. Ensures appraisals and rotation policy implemented. External members attend AGM and decisions made. Progressive Seeks improvement governance. Keen to benchmark board maturity. Seeks collaboration in new initiatives that reflect market changes. Ensures policies updated in line with business/market changes. Defines risk appetite. Ensures skills gaps aligned with strategy. Ensures strategy informs decisions. Staff and board rotations planned and implemented. Elite Delivers a series of strategic programmes resulting insignificant impact and/or funding. Board and staff have collective problem-solving mind set. Reviews a series of financial and non-financial KPIs. Employs long-term resource planning. Promotes risk management culture. Reviews strategy regularly. Succession planning includes pro-active identification of new chair and board members. Embraces and learns from occasional failure positively. * Source: David Brady, FCA, of DB Consulting. In an insightful presentation in which he persuasively argued that compliance with a governance code should a basic expectation, David provided recommendations for moving a charity or non-profit on to the levels of effective, progressive or elite governance. The keynote presentation was followed a panel discussion featuring Inez Bailey, CEO of the Centre for Effective Services; John Roycroft, non-executive director National Advocacy Service for People with Disabilities and chair of its policy, communications and governance committee; and Aisling Fitzgerald, Director with PwC. Issues discussed in detail included: Is complying with a governance code, or an equivalent set of standards, sufficient to achieve good governance? A non-executive director’s experience of implementing the Charities Governance Code. Insights on how the senior management of a charity or non-profit can effectively manage and meet stakeholder expectations in relation to compliance and performance. Whether a charity is complex or non-complex per the Charities Governance Code. The importance of innovation in a charity or non-profit organisation. The societal contribution of the charity and non-profit sector in Ireland, and considerations for providing support to assist people suffering because of the crisis in Ukraine. The event was opened by Tony Ward, Chair of the Chartered Accountants Ireland Charity and Non-profit Network Group, chaired by Níall Fitzgerald, Head of Ethics and Governance, with a closing address delivered by Terea Campbell, Member of the Council of Chartered Accountants Ireland and Chair of the Institute’s Ethics and Governance Committee. A full recording of this webinar is available to viewed at: Governance of charities and non-profit organisations (ROI). Níall Fitzgerald FCA Head of Corporate Governance & Ethics at Chartered Accountants Ireland