The Heart of Internal Control and Governance

We continue to see instances of lack of internal control or downright fraudulent activity aimed at circumventing control in some businesses. However I take some heart from the fact that these are rare and eventually come to light for various reasons. I try to be the optimist and tell myself that this means that the remainder of the companies in our World are properly run by honest people but sometimes I have cause to pause and wonder.

There seems to be some recurring themes in some of the instances that have come to light in recent years :

: Lack of understanding of the role of Director/Trustee and lack of Financial expertise amongst the Board of Directors /Trustees or Executive Team.

                Now more than ever the Board needs to understand their fiduciary responsibilities and the significant legal onus on them to question everything and be completely aware of everything going on. Yes this is a very onerous requirement but it sometimes looks like, particularly Boards of Voluntary trustees of Charities, appear to think it’s a nice to have position and that they can add something with their experience. Of course both are true but being a Trustee also means you are responsible for the proper running of the charity and proper use of its funds within the myriad of legal and best practice processes that exist. Ignorance is no defence in this instance. The Trustee is a senior position, even if completely unpaid and carries onerous responsibilities.

It is my belief that all members of Boards of Directors or Boards of Trustees should be given in depth training as to the role and the associated responsibilities before they start. The ODCE produce a very good booklet on the role of Company Directors which should I believe be distributed to all new Directors of all Limited companies by the Company Secretary (They also have a nice booklet on the role of the Co Sec). The Charies Regulator produces a similar booklet on the role and responsibilities of a Trustee and I would hope all new Trustees receive a copy of this as a matter of course before they agree to take on the onerous and unpaid responsibilities.

When someone “volunteers” as a Trustee of a Charity that includes signing up voluntarily to all the responsibilities that come with it.

I believe that ALL members of Boards of Directors / Trustees should receive mandatory basic Finance for Non Financial Manger training. How can you question that which you do not understand , even at a rudimentary level. By being a Director you have a responsibility to understand at least the basics and again saying “I’m an Operations person and I know nothing about Finance” is not a defence. It’s like saying “I’m the Finance Director and I know nothing about safety” when Jimmy falls down the well and breaks his leg. As a Director, whatever your role on the Board you are responsible for ensuring there is a safe place of work for your employees. This applies equally to the Sales Director or Finance Director or Operations Director.

: Lack of challenge by Board members or Trustees of the CEO/Managing Director/Chief Cook and Bottle Washer

Wallflowers do not make good Directors or Trustees !

                This lack of challenge is evident in many of the debacles we have seen in recent years , not only in Ireland but globally. Boards and Trustees MUST understand that they share collective responsibility for these failings. Their failure to adequately challenge , to the point of calling things to a complete halt, is lamentable and speaks to a comfort with the status quo and a tendency to turn a blind eye, both of which have no place in a modern society that I would like to see.

We must nurture a questioning and challenging culture in our society and business World. Whistleblowers should be seen as a positive impact not a pariah to be shunned. The punishment needs to fit the crime and where wrongdoing is proven there needs to be significant custodial sentencing to deter future offenders. If we continue to deal with blatant waste of Corporate or Public monies with a slight slap on the wrist we will continue to get history repeating itself over and over ad infinitum.