It has not been a good time to be an Irish charity these last few years.
The Irish sector has always been more reliant on state funding than the British one. The NCVO almanac suggests that private income from individuals amounts to £14.3 billion out of a total income of £36.7 billion (39%) for the voluntary sector in Britain. The Irish Charity Tax Research group estimated that fundraised income makes up just 11% of total income in the average Irish charity.
Given this and the recent waves of austerity measures across the Irish Sea, charities have been hit hard by a collapse in government spending. The public too are feeling the pain and this has affected giving levels in a much deeper way than in Britain. We have seen the proportion of donors in the Irish population drop from 83% to 69% over five years, while British giving levels have remained constant.
On top of a squeeze in their income from both voluntary and statutory sources, many domestic charities are also experiencing an increase in demands for their services as unemployment and repossessions push many over the poverty line. All in all, the last thing that an embattled Irish voluntary sector needed was a scandal to make people question their trust in charities. Unfortunately, last November this is exactly what happened.
The Central Remedial Clinic (CRC) is a national centre for the care, treatment and development of children and adults with physical disabilities in Ireland. While it is largely funded by the Health Service Executive (HSE), it also has a sizeable charitable wing receiving voluntary donations. In November, it emerged that former CEO Paul Kiely was receiving a “top-up” to his salary from charitable funds. The original statutory salary from the HSE was €106,000 – the top-up more than doubled this to €242,000.
When Kiely resigned from the board of the CRC in December, it was reported that he had also received a top-up to his pension pot of €750,000 – half the total income of the charitable wing of the CRC.
This incident attracted enormous media attention and public outcry at what was seen to be misuse of charitable funds. Families of patients at the CRC were understandably outraged that donations intended to help those in need were being seen to be spent on paying off politically well-connected individuals. The general public, suffering themselves as a result of five years of austerity, were in no mood to be generous towards those at the organisation receiving high salaries from charitable donations.
While the organisation in question is technically not a charity (the Irish charity sector is not as clearly defined as the British sector – the CRC is actually a “section 38” body, which is independent but receives large proportions of state funding), it appears to be Irish charities which are feeling the brunt of the fallout. Questions around specific payments to executives at the CRC snowballed into the general question of high salaries in Irish charities. Fundraising Ireland reported that some charities experienced a drop in donations of 40% around Christmas time.
Discussions with clients at the debrief of our recent Irish Charity Engagement Monitor (ICEM) findings in Dublin suggested that although none of them had experienced a drop of that order, many were concerned about the potential long term impact of this scandal on the sector and on their brand in particular. Our own results showed trust in the sector was down considerably – indeed to a far greater degree than we have ever seen in our research in Britain. This is surely a cause for concern for charities – a donation is effectively an act of faith in the charity a donor is giving to. If that trust disappears, what do charities have left?
So which lessons can be drawn from this scandal? Is there any way Irish charities can prevent this happening again?
First of all, we know from our research in both Britain and Ireland that knowing about the existence of a regulator is a big driver of trust for the public. In Ireland, the government is planning to introduce a charitable regulator by the end of February (originally provided for in the Charities Act 2009, but never implemented). When this regulation does come in, charities should shout from the rooftops about it – regulation is a simple shortcut to being seen as a trusted institution. Similarly, British charities should talk more about the Charity Commission, because even if the public aren’t sure what it does, the simple presence of a regulator is reassuring.
Some large Irish charities are already using this scandal as an opportunity to reassure supporters that salary top-ups are not part of their culture and that money donated to them will be spent mostly on the cause. While some in charities may baulk at the idea of a race to the bottom in terms of administration and fundraising cost ratios, reassuring supporters need not be a case of being misleading. Our research shows that most charities already spend less on administration and fundraising than the public think even the perfect charity would spend. Reminding the public of this fact can mark you out as worthy of trust.
There is of course the broader question that the sector faces; reassuring the public that the salaries it pays staff are fair and necessary to attract the right people. While this is a challenge best taken up by a sector body, there are things that individual charities can do.
Transparency is key among these. If an organisation believes it is paying reasonable salaries (as every charity should), then it should also be willing to be open about salary bands (if not private and personal information about employees), to defend these in public and to talk about high salaries in the charity if asked. As we have seen in the case of Rehab, an Irish national charity which until recently held out on revealing its CEO’s salary, withholding information only makes the public think you have something to hide.
So what can British charities take from the recent Irish experience? First, charities are not immune from the effects of a recession. While giving has held up reasonably well in Britain during the recent economic downturn, the evidence from Ireland shows that a sustained recession combined with government austerity can lead to a real collapse in charitable giving.
Second, public trust is not a given and must be constantly won and re-won. While some in Britain may scoff that they have been faced with questions about CEO salaries for years and not seen any impact on donations, the same could actually be said about Irish charities. The fact remains that one major scandal can be enough to tip public opinion over the edge, especially at a time when the mood in the national conversation is fraught with anger.
We are looking forward to the next wave of our ICEM research in April with a mix of anticipation and trepidation. Will this this drop in trust remain a feature of the Irish charity landscape, or will it simply blow over in the long run? We will find out.
Trust in our opinion? Or are your disagreement levels Dublin? Leave us a comment below.