Sm 0759 0121 Web

Governance update

Organisations must demonstrate good governance, comply with legislation as well as funding conditions. Some conditions of 2019 Arts Council Funding Agreements are familiar while others new. Compliance with all conditions is important to ensure payment which is ‘dependent on all conditions being fully and satisfactorily completed’, but also to ensure  organisations are well managed and governed. Some conditions will require the attention of the executive as well as the board to update, formulate and adopt appropriate policies.

The first part of our Members’ Meeting this Wednesday will discuss governance and employment issues. Here’s an overview of some of them:

Arts Council – Conditions of Funding

Reserves Policy

Schedule 2 of the Arts Council funding agreements for 2019 contains a Special Condition stating that companies are required to prepare and approve a Reserves Policy during 2019. As an example, below is the draft wording for Theatre Forum’s Reserves Policy which will be published in the Director’s Report accompanying the 2018 Financial Statements.

Theatre Forum – Reserves Policy (draft)

As it’s generally accepted that registered charitable/not-for-profit organisations such as Theatre Forum CLG should aim to have between three and six months operational reserves in place, the Directors are adopting a reserves policy that aims to generate a three month reserve over six years. Three principles underpin this policy:

  • The aim is to fund a reserve at a level of three months operational costs to ensure that Theatre Forum CLG core activities could continue during a period of unforeseen difficulty.
  • Funding of the required level of reserves will become an integral part of the organisation’s annual planning, budget and forecast cycle, starting in 2019 and continuing in future years.
  • Reserves will be maintained in a short notice deposit account so that they may be readily realisable.

The following explanatory paragraph will be added to the company’s own Reserves Policy:

The Reserves Policy of Theatre Forum CLG takes into account the following risk factors:

  • Risks associated with income, including funding and sponsorship, being different or lower from that budgeted.
  • Risks associated with expenditure, including € and £ payments, being different or higher from that budgeted.
  • Planned activity level having identified potential threats and opportunities.
  • The organisation’s contractual commitments.
  • The potential costs associated with having to make staff redundant in an emergency situation.

In line with the company’s Constitution, the level of reserves will be kept under constant review through ongoing financial reporting in the company’s management accounts, the annual audited accounts as well as undertaking the necessary legal and regulatory compliance.

Considerations about a Reserves Policy

  • Managing/reducing a deficit would take precedence over funding a reserve.
  • Ideally the reserve would be unrestricted funds.
  • It should be kept in a separate account.

Theatre Forum has been advised that funding a reserve is not the accumulation of capital as described in the company’s Constitution. Therefore it does not require prior permission of the Revenue Commissioners.

Procurement Policy

Another Arts Council condition of funding is that companies procure goods and services in a fair and transparent manner. In Section 16(c) of the Arts Council’s Conditions applying to all funding recipients, responsibilities are found in the relevant Department of Public Expenditure Reform Circular/Statement of Principles/Appendix 2. Further on in the Compliance with laws section of the Arts Council’s funding agreements, it specifically states that recipients should comply with public procurement guidelines when purchasing goods and/or services. www.etenders.gov.ie. A question for arts organisations is how to apply the right procurement procedures to the making and presentation of art.

Theatre Forum – Procurement Policy (draft)

Theatre Forum CLG is complying in full with all applicable responsibilities of an Arts Council Grantee set out in section 5 of the Department of Public Expenditure and Reform Circular 13/2014. The company is adhering to the Statement of Principles set out in Appendix 2 of this Circular as well as the Public Procurement Guidelines for Goods and Services. The company ensures that the appropriate governance and oversight arrangements at board and employee level are in place for the procurement of goods or services.

It should be noted that the exemption detailed on Page 52 of the guidelines, Negotiated Procedure without Prior Publication, applies when ‘the aim of their procurement is the creation or acquisition of a unique work of art or artistic performance and can only be supplied by a particular supplier or service provider’. Exempted activities of Theatre Forum CLG include the creation and direction of artistic programmes, performances, conferences, exhibitions, events, training, artist residencies and workshops. These are arranged adhering to best practice in the performing arts sector.

Considerations about a procurement policy

Consider setting out the company’s procurement policy in Finance/Internal Controls section of the Directors’ Report.

Fundraising

Funding Agreements require companies to send a letter to the Arts Council annually, signed by the funding recipient’s chairperson, stating the company’s compliance with the Governance Transparency Scale for organisations in receipt of recurring Arts Council funding (Appendix B of Funding Conditions).  Compliance includes a commitment to comply with the Statement of Guiding Principles for Fundraising and that it should appear on the Company’s website.

Fundraising from the public

This Statement offers a set of principles and guidelines to assist fundraising practitioners, (voluntary or paid), in their efforts to raise funds from the public. It should be adopted by the boards of companies that raise funds from the public, either directly on ticket sales or indirectly by organising fundraiser events. In the event of another charity hiring the venue or organising a performance in the venue to raise funds, comprehensive financial controls around ticket sales, donations, cash and settlements should be in place.

Not fundraising from the Public

As a registered charity that does not fundraise from the public, Theatre Forum will advise the Arts Council well before its audited accounts filing date at the end of June that compliance with the ICTR Guiding Principles for Fundraising doesn’t apply or appear on the company website.

Financial controls

If the company raises funds from the public, consider if all the Guiding Principles for Fundraising, especially financial controls, are in place.

Governance Code compliance

A familiar condition of Arts Council funding is ‘a commitment to comply with the Governance Code (a code of practice for good governance of community, voluntary and charitable organisations in Ireland) or explain why the company is unable to comply’.

Theatre Forum – Governance Code compliance (draft)

As an organisation funded by the Arts Council, Theatre Forum CLG  is working to put effective internal codes of governance in place, including an adequate system of internal controls, to ensure compliance with laws and regulations. Theatre Forum is reviewing all of its governance and policies to achieve full compliance with the Governance Code and all other relevant codes.

More resources and information about governance and employment issues are available to members on the website.