Why charities should act ahead of regulation
Opinion: Throwing light on charity bosses’ salaries
‘We know almost nothing about the norms of senior executive remuneration in Irish charities, because they’re not disclosed.’ Photograph: Getty Images
The controversy surrounding the salaries of senior charity executives goes to the heart of issues central to the operation of charities in Ireland: the quality of their governance, the transparency of their finances, and the role of the State in regulating the sector.
By long-standing convention, soon to be reinforced by regulation, the senior executives of charities do not have places on their boards. This means charities are governed exclusively by non-executive directors or trustees, and perhaps this explains why most of them have preferred to allow their paid executives to defend their policies.
However, the remuneration of senior executives is an important reserved function of a board, and by forgoing the opportunity to defend their remuneration policies, charity directors have done a disservice to themselves and to the reputation of charities generally.
This is perhaps one reason why former Rehab chief executive Angela Kerins didn’t get any traction when she tried to make the case in the Public Accounts Committee and elsewhere that senior charity jobs are subject to competitive norms, and should be subject to the same kind of external evaluation as comparable jobs in the private or public sectors.
Another reason could be that we know almost nothing about the norms of senior executive remuneration in Irish charities, because they’re not disclosed.
In Ireland, companies limited by guarantee – such as Rehab Group and its charitable subsidiaries – are required to file audited accounts with the Companies Registration Office (CRO). However, unlike registered charities in the UK, they are not obliged to follow the special reporting standards devised by the Accounting Standards Board for charities.
This charity reporting standard – currently used on a voluntary basis by only a tiny minority of Irish charities – provides for the disclosure of the numbers of staff being paid in excess of €70,000 in bands of €10,000, as well as the publication of governance and fundraising costs as a percentage of annual expenditure.
By taking an ad minimus approach to financial reporting, the directors of charitable companies are passing up the opportunity presented by another of their key functions, which is to provide an annual report and audited financial statements to their members.
It is widely assumed that reporting standards will soon change, because charity regulation heralds a new dawn for financial disclosure by charities in Ireland. Unfortunately, this is not the case.
Sections 47 and 48 of the Charities Act, 2009 provide in detail for the Minister for Justice to regulate for the kind of information that is to be reported in charities’ annual statements of accounts. The majority of Irish charities which employ people are incorporated under the Companies Acts and are explicitly exempted from filing accounts under a provision that was intended to avoid the burden of double regulation. It is sufficient that they lodge their audited financial statements, as before, with the Companies Registration Office whose registrar already makes them public, but who is now also obliged to forward a copy to her opposite number in the Charities Regulatory Authority.