Disclosing expenses is fine, but good governance is vital

Charities should look at how they demonstrate accountability, says Ray Jones of the Charity Commission

It was inevitable that the MPs' expenses debacle would lead to speculation about the situation in other sectors. The charity sector is to be congratulated for taking a lead on this issue. The outcome of the work being taken forward by the Independent Expert Group on Expenses set up by the NCVO and the Charity Finance Directors' Group will be of great interest to us all.

No one can predict what the outcome of their work will be, but I would be disappointed if their focus was simply on accounting disclosures. It's vital that this group recognises the broader governance issues surrounding the expenses question, because management style and corporate culture, values and philosophy set the tone for any organisation. I'm sure this point will not be missed by Lindsay Driscoll, chair of the Independent Expert Group on Expenses, who also chairs the steering group for the code of practice on good governance.

Despite the relatively high levels of awareness of the code of governance, very few charities report compliance with its principles in their annual reports. This is a missed opportunity. If you are following the code, why not say so? It's an old cliche, but one backed up by experience, that most problems within charities stem from poor governance. Current proposals for refashioning the governance code highlight at least three areas that are particularly relevant to the expenses debate - exercising control, behaving with integrity and being open and accountable.

Being open and accountable might point us towards disclosure of executives' expenses in accounts, but even here we have to be careful. Some roles require considerable travel; others do not. Simply listing an amount for travel expenses reveals little. To give explanations might add to the clutter that many people already complain about - and in any case, the information might not be published until 10 months after the year-end.

There's also the issue of whether disclosure should be a matter of law or good practice. Opportunities for legislative change are few and far between, and good practice codes are all too often limited in their impact.

If there is indeed an issue with expenses, as some have reported, then the cure lies in exercising control and behaving with integrity. Good internal controls with clear procedures for authorising and approving claims and a clear lead from the top must be high on the agenda. Disclosure might give us transparency and influence behaviour, but at the end of the day it's good governance that really protects the reputations of charities.

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