A challenging time for charities


The financial affairs of charities and not for profit organisations has become a very topical issue in recent times.

There have been numerous high-profile cases of governance breaches in many charities and not for profits, and these have had a very damaging reputational impact on the entire sector. Regulation and legislation is starting to make headway though, explains Tim Quinlivan.  These organisations are a key component of our society and play a pivotal role in many of the essential services that are relied upon by thousands of people.

Public confidence is vital for these organisations as many are dependent on funding from a variety of public sources, these sources include charitable collections, benefactors and of course grant funding directly or indirectly from the exchequer. There have been many changes to legislation and financial reporting and these changes are helping to restore confidence in the sector.

Charities Act 2009 is a piece of legislation that was specifically drafted to reform the law around community and voluntary activity in Ireland. Although slow to be enacted, this piece of legislation has been a positive influence on the sector and has created a very clear definition as to what a charity actually is.

The Act also created a body known as the Charities Regulatory Authority (CRA). The CRA is an independent statutory agency. Its main objective is to secure compliance by charities with their legal obligations and to encourage better administration of charities.

The CRA is now very active in the sector and is having a very positive impact on compliance and accountability. It has carried out many investigations and imposed sanctions on a number of charities. In addition to enforcement, the CRA offers very useful guidance and information for charities and not for profit organisations.

The financial reporting requirements of charities and not for profit entities has remained largely consistent with companies however this will soon change with the mandatory imposition of SORP FRS 102 on qualifying Irish charities.

The Statement of Recommended Practice (SORP) is mandatory for UK charities but not yet in Ireland. The SORP is likely to come into effect in the coming years and this will lead to yet another transition to be negotiated through. The SORP brings with it more detailed reporting and disclosure requirements. Undoubtedly it will lead to more transparency from a reporting perspective but it will require additional resources and input from all stakeholders.

Certain funding agents will have particular disclosure or compliance requirements. For example, many of the bodies that give grant funding will require the recipient entity to have their financial statements audited while others will require certain disclosures be made in relation to management remuneration.

Circular 13/2014 – Management of and Accountability of Grants from Exchequer Funds is another compliance requirement of bodies that receive grant aid from the exchequer. It sets out the principles to be abided by in terms of managing and accounting for grant funding along with stipulating certain disclosure requirements such as the name of the grantor, the amount of the grant taken into income and any grant income deferred at year end.

There are many different aspects to the financial affairs and the corporate governance requirement of charities.
Contact the team at Sheil Kinnear to discuss your requirements.