How to Ensure Transparent Compliant Operations in the Charitable Sector

A well-governed charity or NGO with transparent operations will gain strong public support – which is why understanding and adhering to increasingly complex standards & regulations and ensuring compliance is critical for success.

Nonprofit organizations worldwide play a crucial role in addressing a multitude of societal challenges ranging from education equality, human rights, and environmental conservation to providing healthcare and aid to those in need. But to retain their charitable status, they find themselves having to comply with a raft of regulatory standards to ensure they are functioning in line with guidelines and are operating transparently and ethically – especially in an age of information overload and scepticism.

Because charities rely on their reputation, they need to build trust with governments, donors, and the general public. Demonstrating compliance with increasingly strict and complex rules, regulations, and legislation set forth by regulators has become paramount to uphold a good reputation – not just for an individual organization, but for the entire charitable sector.

Charities – especially in the UK – have several independent regulators that set the rules for how they operate and oversee their activities. The number and range of regulators relevant to a nonprofit will largely depend on the charity’s activities.

In the UK alone, there are over 160k registered charities and in 2022-23 they concluded 5726 regulatory action cases, 68 of those were statutory enquiries which is their most serious type of regulatory engagement.  In 2022-23, they assessed 2,969 new serious incident reports. The guidelines and statistics from the Charity Commission reinforces the fact that charities must ensure their governance arrangements are robust and up to date!  

In this blog, we look at the key regulatory drivers in the NGO and charity sector and explore how the right technology can help your organization adhere to the highest ethical and operational standards.

Key Drivers in the Charity and NGO Sector

Charities Act 2011: Sets standards for transparency and accountability in charity governance

The Charities Act 2011 is a legislation in the United Kingdom that regulates charities, defining charitable purposes, establishing the Charity Commission, and outlining registration requirements. It emphasizes the public benefit requirement, sets duties for charity trustees, mandates financial reporting, and introduces fundraising regulations. The Act grants the Charity Commission powers to oversee charities, ensuring compliance and maintaining public trust in the charitable sector.

Bribery Act 2010: Requires robust anti-bribery and corruption risk management

Bribery is a key concern in the charitable sector. The UK’s main anti-corruption law, the Bribery Act 2010 is a piece of legislation in the United Kingdom that criminalizes bribery and corruption. It sets out four main offenses: offering or giving bribes, requesting or receiving bribes, bribing a foreign public official, and failure of commercial organizations to prevent bribery. The Act introduces strict penalties for individuals and organizations found guilty of bribery, including fines and imprisonment. It also provides guidance on adequate procedures for organizations to prevent bribery, promoting a culture of transparency and ethical conduct in business.

Code of Fundraising Practice: Outlines key principles and best practices for charities and fundraising

The Fundraising Code is a set of guidelines and standards that govern fundraising practices in the United Kingdom. It outlines key principles and best practices for charities and fundraising organizations to ensure transparency, accountability, and ethical conduct in their fundraising activities. The Code covers various aspects of fundraising, including donor communications, solicitation methods, data protection, and handling of donations. It aims to uphold public trust and confidence in the charitable sector by promoting integrity and responsible fundraising practices. Compliance with the Fundraising Code is voluntary, but adherence is encouraged to maintain high standards of fundraising ethics and effectiveness.

Equality Act 2010: Enforces non-discrimination and equal opportunities in operations.

The Equality Act 2010  is a comprehensive piece of legislation in the United Kingdom that aims to protect individuals from discrimination and promote equality. It covers nine protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. The Act prohibits discrimination, harassment, and victimization based on these characteristics in areas such as employment, education, housing, and the provision of goods and services. It also places duties on public authorities and private organizations like charities and NGOs to advance equality and eliminate discrimination. Additionally, the Act introduces provisions for positive action and measures to address institutional discrimination and promote equal opportunities for all individuals.

US State and Federal Regulations

Charities in the United States are subject to a complex regulatory framework that includes oversight from both state and federal authorities, as well as adherence to specific tax laws, charitable solicitation requirements, and industry standards. State regulations typically involve requirements for registration, reporting, and compliance with state-specific laws regarding fundraising, governance, and financial management. At the federal level, the Internal Revenue Service (IRS) regulates tax-exempt organizations, including charities seeking tax-exempt status. Charities involved in healthcare, education, or international activities may be subject to additional regulatory requirements from federal agencies such as the Department of Health and Human Services, the Department of Education, or the Department of State.

How can GRC technology help to ensure compliance with these regulatory drivers?

No matter where a charity is based, regulatory compliance needs to be an issue high on every charity’s agenda. Failure to comply with relevant regulatory requirements & legislation can have significant consequences for a charity; these include loss of trust and support, reputational damage, a fall in donations, financial penalties, increased costs, and regulatory censure. Serious incidents of non-compliance can even result in the closure of a charity.

In today’s world, technology has transformed the way organizations manage regulatory compliance and manage their operations. GRC platforms can make it easier for charities to comply with regulatory requirements, reduce operational risks, improve efficiency, and provide transparency into their operations.

Compliance with policies, procedures, and legislation

GRC technology can help organizations to manage regulatory compliance. Teams can use the platform to build an ‘obligations register’ of applicable regulations, legislation, and standards.  These specialist tools link to third-party regulatory content providers and send notifications to organizations when an applicable regulation changes. To further automate the process regulations are linked to any associated internal business processes, policies, and procedures – therefore, the organization can quickly understand which procedures need to be amended to align with the new guidelines. Software automation then provides a framework for structured change management workflows and a stringent sign-off and approval process – enabling management teams to understand the status of each change. The system provides a fully time-stamped audit trail of proof of compliance for regulators.

Charitable organizations must have robust policies in place to address key issues around bribery & corruption, money laundering, and conflicts of interest – while ensuring they have a comprehensive code of conduct for staff to follow. GRC technology can help charities to implement a policy management process to ensure policies are up to date, approved, and attested by employees.

Accountability and transparency are important factors in establishing non-profit governance. Conflicts of interest and financial mismanagement in charities can cause real problems if not addressed. Compliance workflows can be set up within GRC software to perform bribery & corruption checks and for employees to report potential acts of bribery and they can implement a gifts & hospitality log to ensure high-level gifts – that could be potential bribes – are not offered or accepted.

Transparent processes

Most charity related regulators across the globe require charities to operate with transparency, requiring them to openly documenting where funds are coming from and how they are spent.

GRC software with project management capabilities can equip charitable organizations with the tools they need to deliver projects on time and build stakeholder trust regarding donations and how they have been and are being used. Teams can easily set up donor logs and perform donor due diligence checks within the platform. By opting to adopt a GRC platform with strong project management capabilities, projects of all sizes can be mapped out with key timelines, deliverables, and budgets.  As projects are logged in the platform and related tasks and actions are completed, progress can be easily viewed, and controls can be set to flag problems like missed deadlines and overspending. Projects can also be easily prioritized to ensure budget and resources are allocated to the most critical initiatives.  By leveraging automated workflows, project managers can make informed decisions, allocate resources effectively, and ensure that the project is completed on time, within budget, and to the desired quality standards. Donations can easily be linked to the projects the funds are spent on providing complete transparency and meeting many regulatory operational requirements.

Achieve Regulatory Compliance with Camms

In an increasingly interconnected world, technology has emerged as a powerful ally in ensuring that the donations made to charities reach their intended recipients.

GRC platforms like Camms can enhance trust enabling more efficient charitable endeavours – offering unprecedented opportunities for transparency, accountability, and efficiency.

After all, donors and beneficiaries of charitable organizations stand to benefit from a more transparent and effective charitable ecosystem. The future of charity is increasingly reliant on innovation, offering hope for a world where every dollar makes the intended impact. Request a demo of our industry recognized GRC solution today!

Daniel Kandola

Vice President, EMEA

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