Good governance is an imperative among charities as well

WHETHER in a business or a personal partnership, bonds are built on trust. It can take years to earn and only a matter of seconds to lose. Increasingly, trust has become even more important in a world where there is a rising use of the Internet, data and analytics.

In an increasingly digitalised world, people are often second-guessing the content they consume online, and are frequently sceptical of the words and actions of organisations, people and the media. Just consider the rise of "fake news".

This same issue of trust directly impacts charitable organisations or charities as well, which can be a grave problem if not addressed and rectified quickly. The work most charities carry out is made possible through the funds they raise. There have been occasions where funds have been misused, an example being the National Kidney Foundation case in 2005.

Corporate governance should not be just a corporate priority; it should be a business imperative. As corporations increasingly go under the microscope for their practices, it is equally vital for charities to do so as well.

In today's digital and data age, another form of mistrust has emerged - that arising from the loss of security and privacy, especially through online activities.

Like most organisations, charities have embraced the trend to go online, as they seek to provide greater convenience to the public through online donation platforms. To succeed in this, however, they first have to implement and sustain a good governance framework - both online and offline.

A study by the National Volunteer & Philanthropy Centre (NVPC) has found that Singaporeans do not trust digital platforms as safe and secure avenues to donate; most still rely on offline modes. There is a perceived scepticism towards online calls for donations and a lack of trust in providing online channels with personal information when it comes to donating. This response, while not unusual, is a concern as Singapore transitions towards its Smart Nation goal, where everything (including charitable giving) is expected to go online.

LAYING THE GROUNDWORK

The public has higher expectations of non-profit organisations such as charities, whose missions are closely tied to doing good. With the aid of the Internet and social media, donors are doing their due diligence more easily these days to find out about a charity's mission, objectives, activities and financial outcomes. These channels have closed the gap between a charity and its donors and stakeholders, resulting in a greater need for transparency.

Often subject to higher moral scrutiny than business corporations, charities are accountable to their beneficiaries, stakeholders, funders and the public. They must strike a fine balance between doing good and using the donated funds judiciously. This is where good governance comes in.

Just as a business would enforce corporate governance practices to increase accountability and regulate risks, the same standards should be adopted by a charity. From strategy-setting to risk and financial management, effective governance is critical to steering charities through challenges and attaining their goals.

Governance in charities refers to the systems and practices for managing the overall direction, effectiveness and accountability of the organisation. Good governance ensures that a charity is run in a way that is responsible, effective, and in compliance with laws and regulations. This lays the firm foundation for the charity's reputation, standing, and, more importantly, its long-term sustainability.

AN OPEN BOOK

A key facet under good governance is disclosure and transparency. Before donors and stakeholders begin to ask questions, a charity should clearly provide details on its mission, structure, finances and activities. Donors should be able to do a quick scan of the charity's website and social media channels and be able to understand what the charity is about, review its financial reports, and discover its impact in the community.

A good example is multi-services charity organisation TOUCH Community Services, a recipient of the Charity Transparency Award in 2018, alongside MINDSET Care Limited.

A report published in the Journal of Accounting, Auditing and Finance revealed that the more transparent a charity (or non-profit organisation) is, the more it may receive in contributions. The study showed that non-profits which are more transparent and which share information - such as audited financial reports and metrics demonstrating progress and results - earn 53 per cent more in contributions than organisations that are less transparent.

In Singapore, transparency can be further strengthened to encourage more donations. In 2017, the total amount of donations collected by the 2,263 charities in Singapore was 7.3 per cent less than the previous year, from S$2.86 billion in 2016 to S$2.65 billion in 2017.

To help charities share key information with their stakeholders, the Singapore Commissioner of Charities introduced a new Visibility Guide Framework late last year.

This guides charities on how best to produce an annual report that contains the right information. The annual report is another key avenue for charities to disclose information and promote trust.

This will assure donors and sponsors that their contributions and donations are properly managed, and will make a positive impact on the beneficiaries they are supporting.

Keeping the communications line open and seeking feedback can go a long way in earning the public's and stakeholders' trust as well. For example, under the governance process at MINDSET, external advisors are appointed to sit on the steering committee; these include practising psychiatrists, who provide key updates and information on trends within the mental-health sector, so that the organisation can update its roadmap and processes where required.

Internally, feedback is obtained, for example, though the annual employee survey, which enables the organisation to act on the feedback and improve processes. A key finding of the recent survey was that there was a lack of awareness among ground-level staff on the purpose of the charity. Since then, multiple online and offline programmes have launched to address this and to provide opportunities for employees to do their part for the cause as well.

STICKING TO THE FUNDAMENTALS

A successful charity understands the value of sound governance and takes this responsibility seriously, as part of the process of building trust with its stakeholders and the larger community. Rather than viewing governance as a prescribed structure and set of rules to follow, it is important for leaders and members of the charity to embody the essence of governance in their day-to-day activities, the same way profit-generating organisations instill this as a discipline to ensure their continued sustainability.

After all, charities have a responsibility, not just to their beneficiaries, but also their stakeholders and donors.

Trust is a precious and fragile commodity, so building and maintaining trust through a governance framework that prioritises transparency and accountability must be at the heart of any charity's mission and programmes. Only then can a charity earn the trust that will ensure its longevity for doing good.