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Some Consolation

Though there are substantive problems, charity transparency is improving

The World Giving Index consistently ranked Ireland in the top five until 2015, when it dropped to its lowest rank of ninth perhaps due to certain scandals in the Irish charity sector. Before the recent revelations concerning Console there had been a number of high-profile scandals over the last five years, affecting the reputation of the sector as a whole. To-date, there are 18,543 civil society organisations in Ireland, with just over 8,000 charities.

While reputational damage can be difficult to quantify, charities have reported a drop in their fundraising income in the wake of each controversy. A survey conducted by The Wheel, a national representative network for the voluntary sector in Ireland, in 2014, showed that 59% of the 297 charities surveyed reported a drop in public funding (by as much as 10%) from the previous year. Reductions in government funding, largely due to austerity measures in the past few years, have further savaged charity’s income. Consequently, in the past few years charities have seen their income shrink while demand for their services continues to grow.

Charity sector in numbers
Charity sector in numbers

Historically, charities have relied on people giving up their time and money to a help others. However, the latter half of the Twentieth Century saw charities’ operational plans shifting towards private-sector business models, and charities are fast becoming accountable to the standards and norms of the private sector.

While the ongoing Console scandal gathers headlines and the charity is now to be wound up, it is important to note that fraud can occur in any sector.Nevertheless, there are certain measures that can be undertaken to mitigate the dangers.

More stringent governance codes, tighter regulations, stricter oversight and greater investigative powers must be imposed. In particular, certain provisions of the Charities Act 2009 have yet to be passed. Part IV of the Charities Act 2009 would grant the Charity Regulatory Authority investigative powers to take pre-emptive action into the affairs of charitable organisations. This includes the power to require them to produce documents, entry and search of premises, and the ability to impose intermediate sanctions under Section 73(5)(a), including the removal of the charitable organisation from the register for such period as the Authority deems necessary. Moreover, in order to ensure uniformity, the Charity Regulatory Authority should set a financial reporting standard for charities, such as the Statement of Recommended Practice for Financial Reporting by Charities (the SORP).

The role media play in shaping public perceptions of the charity sector is crucial when assessing a charity’s virtuousness. Media coverage of a controversy, though appropriate in holding management to account, can foster negative perceptions which damage an entire sector. This is not surprising given the inbuilt cognitive bias called the availability heuristic: a quick method for making judgements about the likelihood of something happening.

Altruism Ireland was formed to build up a partnership of trust with the general public; a trust founded on transparency. Transparency is more than a buzzword. The truth is people won’t, and shouldn’t, donate their hard-earned cash unless there is trust that the money is being suitably spent. Therefore, each charity that comes on-board its platform is given a transparency score out of ten, based on three main criteria of communicating their projects, results and financial standing. The latter includes the requirement to disclose a CEO’s salary. The reason for this is not to expose individuals, but to help combat public scepticism around ‘golden salaries’. In May of this year, The reported on top charity executives earning in excess of €100,000 euro a year. What Altruism Ireland asks is for people to make informed decisions. Ultimately it is a matter of personal sensitivity to decide if a salary is appropriate for the level of responsibility of a CEO, but before making any judgements about salaries, Altruism Ireland encourages people to look at CEO compensation as a percentage of total expenses. For example, a charity with an annual income of €10m is more justified in paying their CEO €100,000 a year (1%), compared to a smaller organisation with an income of €1m.

Furthermore, unlike private fundraising platforms that charge in the region of 5-7% on donations, Altruism Ireland charges 0% commission, ensuring more of the money that people raise goes directly to the charity and into the hands of those who need it the most. Donating and fundraising for charity ought not to be driven by a for-profit motive.

Negative perceptions, however, continue to have real-life consequences. The World Giving Index; an annual report published by the Charities Aid Foundation which ranks how charitable a nation is, consistently ranked Ireland in the top five. That was until 2015, when it dropped to its lowest rank of ninth. Again, it is hard to quantify whether this is a direct result of certain scandals in the Irish charity sector, but it seems likely to have played a part. In order to combat a further fall and the lack of dialogue between the public and the charity sector, Altruism Ireland seeks to act as a bridge between the two in order to generate a better understanding of how the sector operates, and in doing so facilitating trust.

The ultimate aim of all involved in the charity sector is not only to ensure Ireland’s status as a highly generous society, but to turn it into the most efficient and transparent one.

John Clarke is Relationship Manager of Altruism Ireland

By John Clarke