DO THE RIGHT THING, DO THINGS RIGHT, NOTHING TO HIDE
Good governance is fundamental to the success of charities. Charities are entrusted with the money that individuals, corporates, and grantmakers have donated to further their charitable cause. Charities are seen to be the guardians of public monies and people trust charities to use them to impact the lives of beneficiaries. Consequently, the public has high expectations of charities and expect them to be well governed.
WHAT IS GOOD GOVERNANCE?
I posit that good governance for charities can be grouped under two categories:
Compliance is usually associated with the law (that is, Charities Act and legislations), as well as best governance practices stated in the Code of Governance for Charites and Institutions of a Public Character (IPCs). However, not everything can be covered by the law or be clearly stated in black and white. Sometimes, there are grey areas, and in these instances, trustees (that is, board members) of charities are expected to make decisions for the beneficiaries and the charity, based on ethics and values.
Charities must also ensure superior performance with high productivity. This means to deliver services through activities and programmes of high quality, at affordable rates, efficiently. Performance is ultimately measured by the impact that it makes to the beneficiaries and the community.
HOW TO ACHIEVE GOOD GOVERNANCE?
Good governance can be summed up in the following simple and catchy tagline: Do the right thing, do things right, nothing to hide.
1) Do the right thing
Doing the right thing is about taking responsibility to ensure that the charity organisation achieves both high compliance and superior performance.
The charity should always ensure compliance with rules and regulations. In addition to the law, all charities are driven by their charitable purpose which is written in the charity’s constitution. The charity should strive to further the charitable objectives that it had set out to do. That said, to prevent mission creep, charities must ensure that everything they do, such as their programmes and activities, must comply with the primary purpose of the charity.
Charities must also ensure that they are led by values and ethics. This goes beyond rules and regulations; this is about doing the right thing with integrity. It is doing the right thing as it is in the best interest of the charity, and also because it upholds the charity’s reputation. This is doing good right, and it is the moral compass of an organisation to always be steered in the right direction. Ethical culture and tone are set from the top – by the board members of the charity.
In addition to staying true to your purpose, trustees are also expected to drive performance of the charity organisation. Performance is about the sustainability of a charity, with a focus on strategy and clear understanding of risk management. Performance entails having the clear direction and understanding of the effectiveness and impact of the charity’s work, and the values that will be delivered in the long term.
Charities need to increase productivity of your organisation. This would mean taking time to re-evaluate the processes of your operations and eliminate redundant steps that are creating unnecessary waste. One way of doing so is through lean management and process re-engineering. This will make the production of services cheaper, better and faster. With greater productivity, the charity is also able to lower costs.
Performance is also measured by the impact that a charity organisation makes on the beneficiaries and the community. Impact is usually intangible and requires some longitudinal tracking. That said, one can measure more tangible results such as output (example, the number of programmes developed) and outcome (example, increase in the number of beneficiaries served). Low-level impact can be communicated through testimonials from beneficiaries, and even their friends and family who have been impacted by the charity.
Doing the right thing is usually seen as a balance between compliance and performance, and driven by values and ethics. However, this means there is always a trade-off. Instead, a more accurate way of looking at it is a reinforcing loop. This means better compliance will also lead to better performance of the organisation, driven by values and ethics.
2) Doing things right
Good governance is also about doing things right. This section touches on the fiduciary duties of the board members. Governing board members have the responsibility, and accountability, to ensure that processes are in place and that they can stand up to scrutiny.
Based on the Code of Governance for Charities and IPCs, the board is collectively responsible to ensure compliance with the charity’s governing instrument and all relevant laws and regulations. The board makes sure the charity is run well and operates responsibly, so that the charity would continue to be effective, credible and sustainable.
Board members’ responsibilities in a charity cover a wide spectrum of things. These are broadly categorised as Strategy, Assurance, Risk and People (Table 1); this list is non-exhaustive.
Table 1 Board members’ responsibility (charity)
3) Nothing to hide
Transparency is the last key item to achieving good governance. Transparency is having the openness to disclose relevant information in a timely and accurate manner to the organisation’s internal stakeholders such as board members and staff, as well as external stakeholders, such as donors, volunteers, the regulator and community. The information should also be comprehensive and easily accessible.
Disclosure to internal stakeholders
Certain information should be made transparent and open to board members and staff, as part of the charity’s internal process.
For example, to manage any perceived conflict of interest, in addition to setting clear policies and procedures, the declaration of any conflict of interest should be made to the board at the earliest opportunity. The declaration should also be recorded and communicated internally if required. Where a conflict of interest arises at a board meeting, the individual concerned should not vote on the matter nor participate in the discussions; instead he or she should recuse from the meeting.
This is to ensure openness within the organisation, and for the proceedings and processes to be able to stand up to scrutiny should anyone ask, for example, on the procurement and approval processes.
Disclosure to external stakeholders
Charities should also ensure clear reporting to external stakeholders who are involved in the charity ecosystem. These are the donors, volunteers, regulator and community (Table 2).
Table 2 Charities’ external stakeholders
Governance is the cornerstone of how a charity is properly managed and run. It enables the charity to be sustainable and well-functioning in both the long and short term. With good governance, there is greater trust at three levels – the charity level, the sector level and the national level where no one is left behind.
With good governance, the charity sector will be a thriving and trusted one for many years to come.
Dr Ang Hak Seng, FCA (Singapore), is Deputy Secretary (Singapore Cares), Ministry of Culture, Community and Youth; Commissioner of Charities, and Adjunct Professor, Nanyang Technological University.