Not-for-Profit survey 2012

The opinions and concerns challenging Ireland’s Not-for-Profit sector

Executive summary

All respondents to this survey were charities and nonprofits with charitable status from The Revenue Commissioners, are from a wide range of organisations from 12 different sub sectors, serving more than 12 different categories of beneficiaries and a range of sizes which indicates responses from a broad spectrum of organisations.

From the outset we point out that charities and nonprofit organisations are different from a typical normal business enterprise in that the board of directors, in nearly all circumstances, are non-executive and, as such, will be removed from the day-to-day activities of the organisations and thus must rely on other mechanisms to monitor the performance of the organisation and effectively discharge their duty of care.

We believe that non-executive directors should review their strategic plans early and often consider how to minimise risks to the organisation and maximise best practice in the changed economic environment.

Key findings from the survey: The three most challenging issues facing the nonprofit sector are: 1 fundraising; 2 financing the activities of the organisation; and 3 the role of the board and other governance issues. These top three responses exactly mirror the responses from a year ago. Despite this, however, 17% stated that they did not intend complying with voluntary governance codes in the future, down from 24% a year ago. It is encouraging to note a more positive attitude to voluntary governance codes a year on.

The dominance of these top three issues is such that the fourth major issue confronting the sector, risk management, registers in the top three issues of only 8% of respondents.

We believe that the changed economic environment creates new and more challenging risks for nonprofits.

6% of respondents recorded “other” in their top three issues and a recurring theme within “other” was a lack of meaningful communication with government.

We asked respondents to consider how the top three issues have changed over the last five years and the recurring themes are increased difficulties in government funding, increased red tape in dealing with government and increased difficulty in fund raising from other sources.

Nearly 60% of respondents state that government or local authority funding is still the most important source of funding while at the other end of the spectrum 60% rank investment income as least important indicating the low level of investment funds held by the sector. This corresponds with the other finding on how little in advance the sector can plan ahead for.

When asked if the sources of funding have changed in the past 24 months nearly 73% reply that other fundraising has become more important and 56% reply that donations have become more important.

Given that fundraising and financing activities are the most significant issue challenging respondents, nearly half (47%) can plan activity for only 6 to 12 months and 27% can do so for a maximum of 24 months.

Given that fundraising and financing activities are the most significant issue challenging respondents, nearly half (49%) have considered increasing fundraising activities to improve funding while only 5% have considered taking a loan and 1% have considered establishing an endowment fund or trust.

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Risk management and disaster recovery rank low in priority for the sector with 74% indicating that they do not maintain a register of risks and 83% indicating that they do not have any form of disaster recovery plan.

Compliance with voluntary Codes of practice does rank a little better in priority for the sector. In relation to the voluntary Code of practice on fundraising only 12% indicate that they have signed up to the Code of practice, 42% will not sign up for various reasons and 46% plan to sign up in the foreseeable future. In relation to a Code of Governance, an encouraging 31% indicate that they have adopted one of the two Codes of governance specified, however 52% have not adopted a Code for various reasons and 17% gave “other” replies, most of which imply that they have adopted some other Code of Governance which would improve the positive response rate to about 45%.

Of the 52% who indicate that they have not adopted a Code of Governance, an alarming 40% state that they are not aware of any Code.

The sector is reasonably good at monitoring its level of compliance with relevant legislation with 70% of respondents stating that they monitor to varying degrees, however nearly 30% indicate that they do not monitor compliance with any legislation.

Our survey indicates that the understanding of legal responsibilities is very high amongst board members in the sector. Only 11% of respondents indicate that less than half of their board members understand their legal responsibilities. Surprisingly the legal liabilities of over 60% of board members are insured by their organisations. Only 20% of respondents indicate that they never review their Memorandum and Articles of Association or other constitution document for their suitability to the current organisation or do not know if any reviews have been conducted. We believe that this indicates a high level of awareness of legal, regulatory and constitutional matters within the sector which is very encouraging. However, this indication is somewhat at odds with the finding that 30% of respondents do not monitor their level of compliance with external legislation.

Unlike the charity sector in UK which is regulated by The Charities Commission and where all charities are obliged to publish their financial statements prepared in accordance with the Statement of Recommended Practice (SORP) for Accounting and Reporting by Charities

2005, Irish charities are not yet regulated or obliged to publish financial statements. Those Irish charities that are regulated by the Companies Acts and limited by guarantee are obliged to publish their financial statements but, in the absence of legislation, the application of the SORP is entirely voluntary and is adopted by some Irish charities as best practice. In our survey we asked the sector to indicate its level of adoption of the SORP. An encouraging 20% have already adopted the SORP, a further 20% are in the process now or plan to adopt soon, but 60% have no plans. Of those with no plans nearly 45% are not aware of SORP and almost 25% are waiting on clarification on the form of financial reporting to be contained within the Charities Act 2009 when it is implemented in the future. Thus financial reporting by the sector in Ireland is very inconsistent which makes it very difficult for users of the financial statements to make proper comparisons between charities.

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