Charity governance ever more important during Covid-19

Michelle Chow December 16, 2020 08:47

The outbreak of Covid-19 has had a serious impact on many aspects of our life, including severely reducing charity fund-raising opportunities because of cancelled charity balls and campaigns. Many charities have also seen reduced corporate and individual donations as a result of the economic downturn. It is hard for charities to budget and function without a stable income and in times such as these – good governance is key.

Charities have always been highly reliant on good governance for their continued existence. Good governance is comprised of many factors, including high accountability, legal and regulatory compliance, effective internal controls and a balanced composition of the board and committees. Good governance is even more pertinent for charities than commercial enterprises, because charities exist not just to make a profit, but also to do good. Charities with solid governance, a responsible board, clear mission and passionate staff can always weather storms better than those without.

Transparency

First and foremost, transparency is the golden rule for good governance in the NGO setting. Transparency is not only about making information publicly available in compliance with regulatory requirements. At the outset of the Covid-19 outbreak, there was a panic in Hong Kong public hospitals as health care workers feared that there was an insufficient supply of personal protective equipment (PPE). The Hospital Authority immediately took the decision to inform the public regularly on its PPE stock, the number of days that the stock will last, and its plan to proceed with global procurement through the flexible approach of direct purchases. This amount of information was welcomed by the media. Because of the disclosure, the public reacted positively with a record donation of some 7.65 million masks from public-spirited organisations and individuals. Transparency turned a potential crisis into a concerted effort from the Hong Kong citizens to combat the virus in unity and solidarity. During Covid-19, it is more important than ever that various stakeholders are properly informed of the availability of the NGO's services as well as its financial position.

Transparency requires crafting key messages carefully and proactively conveying them to relevant stakeholders at the appropriate time. The messaging must be clear and distributed through multiple communications channels. Transparency also requires close communication and effective internal controls between management and staff, as frontline workers are the ones who execute the plan, meet with clients on a routine basis and take care of their daily needs.

Good governance requires resources

Charities suffer from a general misconception that the functioning of a charitable organisation does not require administration costs. Donors are less willing to let their donation be used to cover administration costs - most donors would like to see their money spent on the frontline charity projects. However, charities need to recruit the right people with the right mind to operate. This will often require hiring professionals with different expertise, such as accountants and lawyers, which involves significant cost.

How much do charities need to spend on their administration? There is no hard and fast rule, and it depends on the charity’s size and functions. For example, a research institute or think tank will generally require less administrative costs than its service-oriented counterparts. Generally, charity workers are paid less than a commercial company. However, a career in charitable work can be more personally rewarding, particularly for those with a passion to serve the community. With the financial difficulties brought on by the pandemic, charities will have to spend their money more sparingly. This requires superior governance capability, which cannot be achieved without sourcing the right talent and resources.

Good governance attracts talent

The search for top talent is becoming increasingly competitive every year. Whilst the new generation workforce is interested in performing mission-oriented work, they are also accustomed to obtaining a quality employee experience wherever they go. Talented individuals are more willing to serve in a highly organised, transparent NGO, with clear guidelines defining their roles and responsibilities. Adopting sound governance improves morale and job satisfaction, and ultimately improves the possibility of retaining existing governors and staff.

The article is co-authored by Eric Chim, Trainee Solicitor at Withers.

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Michelle Chow

Partner at Withers