Give or take: time to restore trust in battered charities
Scandal-hit Console closed this week, casting a shadow over the entire charity sector. So how do we ensure that it is properly run and above board?
Published 10/07/2016 | 02:30
As a hard-working fundraiser for Console, Bríd Murphy felt shell-shocked when she heard the news that the suicide charity and its CEO Paul Kelly were under investigation. Bríd, from Ferns in Co Wexford, lost her 23-year-old son Gerard to suicide in 2011.
After Console, which was forced to close down on Thursday, helped Bríd and her husband through the most harrowing days of their lives, she became one of the charity's most successful fundraisers.
Over the past five years, the Murphys have raised over €50,000 for Console by organising an annual Gerard Murphy vintage and classic car show.
Bríd was understandably devastated when she learned of the lavish salary and spending of the charity's boss Paul Kelly.
"When I heard about it, at first I could not believe it was true," she tells Review.
Although she has full confidence in her local Console organisation, she says of the scandal at the top: "I can't understand how we are in the situation we are in. People knew about this, but didn't do anything about it."
The scandal had not only brought anguish to Console, its staff, its donors and the families who benefited from it, it has also cast a shadow over the entire charity sector only three years after the crises in bodies such as the Central Remedial Clinic and Rehab.
Just days after the Console scandal broke, the mental health charity St John of God was criticised for making once-off payments of €2m to senior managers in 2013.
And in another development, Carline - a charity providing supports to disadvantaged teenagers - has claimed at the start of court proceedings that its treasurer, Greg Walsh, misappropriated up to €161,000.
So where does this leave the charitable sector in Ireland, and does it inspire confidence among the thousands of volunteers who rattle tins, pack supermaket bags, do sponsored walks and hold coffee mornings?
Ireland now has 8,500 officially recognised charities, and a further 10,000 non-profit organisations including schools, sports clubs and other societies.
According to the website benefacts.ie, the non-profit sector employs over 100,000 staff, including paid staff and volunteers. It has an annual income of €7.7bn.
It's a vast sector of the Irish economy, providing valuable services in many cases, but the authorities are only now getting to grips with regulating it properly.
The Console scandal, with reports of misallocation of funds, has reinforced the view that Irish charities should be much more closely monitored.
Despite the huge number of people involved, Ireland has only recently appointed a charity regulator and developed a comprehensive charity register.
"It's a problem for the regulator that there are so many charities," says Professor Niamh Brennan, director of the Centre for Corporate Governance at UCD.
"It's almost impossible to keep on top of all the entities in that sector."
Virtually anyone can set up a charity and benefit from tax exemptions on donations once they show the organisation exists for "charitable purposes" and is for "public benefit".
The charities collecting money from the public range from tiny local organisations without any employees to vast multinational aid agencies such as Concern with an annual turnover of €150m.
The Charities Act, enacted as long ago as 2009, was supposed to clean up voluntary activity, but as a result of the recession, its implementation was delayed. And with the Console scandal, we are perhaps seeing the consequences.
UCD law lecturer Dr Oonagh Breen, an authority on charity governance, says: "Unless you regulate, you leave a hole for wrongdoing to happen and it ends up costing you more in the long run."
The aim of the act is to ensure greater accountability, protect against fraud and to enhance public trust in charities through greater transparency.
Although a charity regulator has been appointed and a register compiled, important parts of the law have not been implemented.
The act was supposed to give the charity regulator the power to investigate irregular practice. Only now, with the emergence of the Console scandal, has the Government woken from its slumber and decided to act on this, and it will finally be implemented in September.
Ivan Cooper, head of advocacy at The Wheel, a support body for charities, says: "We need to fully resource the regulator so that they can do the work that they need to do.
"The regulator started with only a handful of staff, who were supposed to track 8,000 voluntary organisations.
"It was grossly under-resourced. We want to see that he has the resources in place to investigate charities fully," says Cooper.
"They will need highly specialised professionals to carry out that work, such as forensic accountants."
Cooper also wants a triple-lock mechanism put in place to ensure that Irish charities subscribe to the highest standards.
Under the triple lock, charities would have to follow certain codes:
* A governance code ensuring that there are strict financial controls and that the highest standards of integrity are upheld
* Guiding principles on fundraising where the collectors deal with donors in a respectful and transparent manner, so that those giving know where their money is going
* Compliance with an international code on financial reporting for charities known as SORP (Statement of Recommended Practice).
Under the SORP standard, there is full transparency about the accounts including a broad outline of staff pay, and details of the pay of chief executives.
The issue of staff pay in charities is frequently controversial, and was at the centre of controversy at Rehab, where chief executive Angela Kerins was on a salary of €240,000 a year.
"In the case of charities, it's recognised that unlike private firms it's important that members of the public have a sense of how many people are getting paid a certain amount," says Cooper.
Under the SORP guidelines, if a chief executive is paid over €70,000, that amount should be revealed.
"Charities should also have to list the number of staff who are paid over €70,000," Cooper adds.
In around half of all Irish charities, there are no paid staff at all.
Salaries of more than €100,000 may seem wildly excessive to the generous donor on the average industrial wage, but the big organisations have to be professionally run in order to be effective.
One veteran of the charity scene argues that if a charity cuts its costs too much, the quality of its services may suffer. They may be left with under-trained, inexperienced staff and poor equipment.
"Charities are doing very important work in the community and we all know people who are benefiting from them," says Ivan Cooper.
"We wouldn't want that work to be given to a bunch of amateurs. While the trustees must be voluntary and unpaid, it is absolutely vital that the organisations are well administered and well managed."
One of the problems in the sector, particularly among the smaller charities, is that individuals often set up an organisation with the best of intentions, but they may not be up to the task of managing the charity.
UCD's Professor Niamh Brennan says: "It is a completely understandable reaction that if you suffer a bereavement or a tragedy that you want to honour the person.
"You get small charities being set up, and it ends up being tricky, because people may not have the capacity to run the charity in a business-like fashion."
Prof Brennan believes regulation of the charity sector is much lighter than in other areas.
"It is disappointing that a number of sections of the Charities Act have not been implemented and that the regulator was not properly resourced."
But even in a well-regulated system, there are no guarantees that a figure like Mr Kelly would be stopped, according to Prof Brennan.
"It's like saying that just because we have a police force, murders will never take place," she says.
"It is very difficult for regulators to keep up with people who engage in deception or fraud."
Even before the charity register was set up recently, the Revenue Commissioners have kept a public record of voluntary organisations eligible for tax relief.
These charities were automatically included on the new charities register set up by the regulator.
The tax-exempt charities were supposed to contact the regulator and update their details.
But Dr Oonagh Breen of UCD says there are still thousands of tax-exempt charities that have not fully engaged with the regulator.
Cooper says he hears frequent assertions that there are too many charities in Ireland, but he says many of them provide crucial social and healthcare services.
"In Ireland, we never developed a strong national health service. Instead many services were provided by churches and these evolved into thousands of voluntary organisations.
"The State has often got away with not paying the full cost of services, and communities have often been left to fend for themselves," Cooper adds. "You can't blame communities for coming together to meet these needs. It's like blaming the victim."
Charity sector in numbers
charities are registered in Ireland
people work as volunteers or paid staff with non-profit organisations
the annual income of non-profit organisations
total assets of non-profit organisation
amount spent by Console boss Paul Kelly (below) on credit cards