Forrester Boyd Charity Newsletter for October 2011

1. charitiesgroup issue 2
news
2011
LEADING ADVISORS IN THE CHARITIES SECTOR
new pension auto-enrolment
Significant reforms to pension law salary and gradually rise to 3%. ‘essential’ if current and future
under the Pensions Acts of 2007 and resources are potentially insufficient
2008 are to affect charities within Charities operating defined benefit to meet additional contributions, or
England, Wales and Scotland from schemes (also known as final salary if the impact of funding the scheme
October 2012. schemes) are also to be subject to is to have an ‘unacceptable’ impact
the requirements of accounting on charitable activities.
Under the Acts, charities will have to standard FRS17, which requires
automatically enrol all eligible workers disclosure of the schemes’ assets or For more information go to
into a qualifying pension scheme. liabilities on the balance sheet. http://snipurl.com/240fv8
Whereas previously an employee
would not benefit from a pension Several commentators have raised
scheme unless they had opted in, concerns about the effect this
under auto-enrolment they will
automatically benefit from their
disclosure will have on the way a
charity manages its reserves (the ‘free’
public benefit
employer’s qualifying scheme unless resources available once commitments reporting
they choose to opt out. Employees have been met and expenditure
declining to opt out will have to covered). However, according to the requirements
contribute at least 5% of their earnings Charity Commission, provided a
to the scheme, while employers will charity is confident that scheme Compliance with the Public Benefit
also have to contribute a percentage. contributions can be maintained Reporting (PBR) requirements varies
with no impact on planned levels of greatly between charities, according
While these auto-enrolment provisions charitable activity, trustees are to a study carried out by Sheffield
seem onerous, they are to be unlikely to have to designate any Hallam University. Responding to this
implemented with a degree of further funds when drafting their research the Charity Commission has
flexibility. Employers’ duties under reserves policy. urged trustees to embrace PBR as a
the Acts are to be phased in, meaning chance to ‘tell the story of their
an employer will only be obliged to If the trustees are uncertain as to charity’s work and its impact.’
fulfil them once the relevant ‘staging whether increasing contributions can
date’ arrives. The staging date will be met using expected future income Less than 6% of the charities
depend upon the number of or they feel doing so would mean surveyed with an income below or
employees, with charities employing ‘significant curtailment’ of charitable equal to £500,000 clearly addressed
larger numbers having an earlier activities they are advised to seek all the PBR requirements. While
staging date than those employing ‘immediate actuarial and legal advice’. larger charities were generally more
relatively small numbers. The Seeking professional advice becomes likely to have met the requirements,
employer’s contribution levels are in some cases this was as a result of
also to be phased in. Contributions work by external advisers and
will start at 1% of an employee’s members of staff, rather than the
trustees’ themselves, with the
research claiming that in some cases
trustees’ had only a ‘vague
awareness’ of relevant guidance.
Compliance ‘general charitable
purposes’ charities being less likely
than others to satisfy the
requirements.
charities

2. Charities and the Bribery Act
The Bribery Act 2010 came into by the MoJ, which include principles
force on 1 July 2011. It created four of proportionate procedures, due
new offences, including failure by a diligence and communication.
commercial organisation to prevent
bribery, and modernised the general The MoJ is particularly clear on the
law on bribery and corruption. In issue of facilitation payments. While
‘The Bribery Act 2010 – A Quick these small payments for the
Start Guide’ the Ministry of Justice purpose of speeding up a service are
(MoJ) confirmed that the Act applies treated as the norm in some
to charities. cultures, they are nevertheless
counted as bribes under the new law exemption’ in respect of facilitation
The Charity Commission just as they are under the old law. payments, and describes
recommends that all charities adopt prosecution as usually taking place
a risk-based approach to compliance According to the Commission, the unless it is sufficiently within the
and advises them to carry out risk Government recognises that public interest to do otherwise.
assessments when faced with facilitation payments may be
situations that have the “potential to necessary to protect against ‘loss of For more information go to:
involve bribery or corruption”. When life, limb or liberty,’ and in such http://snipurl.com/1960n3
drafting anti-bribery policies and cases is likely to allow the common
procedures a charity should consider law defence of duress; however, it To view the MoJ guidance go to:
the six informing principles outlined stresses that there ‘is no general http://snipurl.com/1mlszg
grant applications – learn from rejection
A set of new guidelines has been enhance their processes to cut down the refusal of funding, as well as
published to help charities learn on the time they spend on rejected methods of providing feedback and
from and improve on unsuccessful submissions. post-refusal support.
grant applications and to assist
grant-making organisations to Jon Fitzmaurice of Cass Business Read the guide at:
support rejected applicants more School said they had found ‘a lot of http://snipurl.com/22182x
effectively. The research, published frustration on both sides’, as grant
by the Centre for Charity seekers wanted feedback even when
Effectiveness at the Cass Business applications were successful, while
School, aims to improve policy and grant makers struggled to find time
practice among grant makers and to give detailed feedback. He added
grant seekers. that ‘if both sides work harder at this
process the sector will benefit
'The Art of Refusal: Promising enormously.’
Practice for Grant Makers and Grant
Seekers' was funded by the Charities The guide provides advice to grant
Aid Foundation (CAF) and includes seekers on how to make pre-
qualitative research from around 40 application contact with the grant
grant-making and 100 grant-seeking makers, how to identify the
organisations. appropriate individual and suitable
timing for the contact. It also advises
Jane Arnott, senior advisory manager on how to gain good quality
at the CAF, explained that many feedback and how to manage the
charities that had failed to secure a communication of a grant refusal
grant were ‘puzzled as to why an within their organisation.
application failed.’ She added that as For grant makers, the guide makes
competition for grants is becoming suggestions for attracting the best
increasingly fierce, it is important to applicants, setting clear criteria
help charities improve their throughout all stages of the process,
applications and grant makers and best practice for communicating

3. in brief.. models, according to research by to make charitable donations both in
New Philanthropy Capital (NPC). their will, and during their lifetime.
The study found that social Hannah Terry of CAF explained that
Charities' independence enterprises reported an average of new incentives could "help to
could be questioned 17% annual growth over the last five establish a norm of leaving 10% of
Charities and social enterprises years, compared to just 6% growth an estate to charity" but that this tax
established by public sector in normal firms. Two thirds of social relief alone "will not have a major
employees under Government enterprises were still operating five impact." There is more on this story
reforms could be in danger of years after starting up, compared at: http://snipurl.com/20x5p
having their independence with 47% of normal businesses. A
questioned, two experts in the spokeswoman for NPC attributed Cheques to continue as long
sector have claimed. Responding to the resilience of social enterprises to as they are needed
a consultation by the Independence their "diverse sources of funding", as The Payments Council announced in
Panel, Rosie Chapman and Belinda they get income from both July that cheques would continue to
Pratten, former policy heads of the commercial activities and grants. be used, after proposals to scrap
Charity Commission and National There is more on this story at: them provoked widespread criticism.
Council for Voluntary Organisations http://snipurl.com/2i4f6 It also said that the target date of
(NCVO) respectively, said the 2018 for the closure of the cheque
reforms could cause the public to Charity Commission processing system would be
doubt a charity's independence, and publishes guidance on abandoned. The Payments Council
therefore, the extent to which it is Equality Act consulted around 600 stakeholder
working in their interest. They also The Charity Commission has groups and concluded that many,
argue that this is particularly true of published guidance on a key section particularly charities and small
charities with Government- of the Equality Act 2010 that may businesses, would suffer if the
appointed trustees and other such affect charities' activities. The guide cheque payment method was
links to Government. focuses particularly on the 'charities' removed. The Payments Council
There is more on this story exemption' in the Act, which allows Board has said that it will work on
http://snipurl.com/14h8vk charities to restrict the help they improving the security and efficiency
provide to a section of society that of all payment methods and
'Donation by default' most shares a protected characteristic, encourage innovation in payment
effective, research finds provided it can be justified as a fair, options. There is more on this story
Adding a donation to a customer's balanced and reasonable way of at: http://snipurl.com/4wos
bill and giving them the choice to carrying out a legitimate aim. A
opt out is the most effective way of spokeswoman for the Commission Guide to ethical investment
getting people to give to charity, said that “trustees must remember for charities launched
research by the Cabinet Office's that the general principle of fair and The National Ethical Investment
Behavioural Insight Team (BIT) equal treatment for all applies to Week (NEIW) Action Guide for
suggests. The research, which was charities." She added that trustees Charities has been launched in
conducted in a restaurant, found should "familiarise themselves with partnership with the Charity Finance
'donation by default' to be more this guidance to ensure that their Directors' Group (CFDG). The Guide
effective than other methods such as charity is working within the law." provides advice on how social
informing diners about a charity and There is more on this story at: impact investing and other green
leaving an envelope on the table. http://snipurl.com/1wjlz8 and ethical forms of investment can
The BIT estimated that the average help charities achieve their mission.
obtained in this way was equivalent Proposed inheritance tax Research by NEIW found that impact
to 1.2% of each diner's spend, and relief welcomed investing is becoming more popular
that if this method was rolled out The Charities Aid Foundation (CAF), with charities and 36% of private
across UK restaurants, it could Charity Finance Directors’ Group investors want to know more about
generate £50 million for charities. (CFDG) and National Council for it. Caron Bradshaw, chief executive
There is more on this story at: Voluntary Organisations (NCVO) of the CFDG, explained that green,
http://snipurl.com/1vz49o have welcomed proposals to ethical and impact investments ‘reap
introduce inheritance tax relief for significant social, mission related,
Social enterprises more charitable legacies in their joint reputational and financial benefits’
resilient in recession, report response to an HM Revenue & for charities and charitable
finds Customs (HMRC) consultation. foundations. Read more at:
Social enterprises are more likely to However, the groups have urged the http://snipurl.com/2bpefe
survive in a difficult economic Government to introduce further Read the guide at:
climate than traditional business initiatives to encourage more people http://snipurl.com/2bpenn

4. charities still fail to ‘showcase’ benefits
Charities must do more to According to the Charity Commission,
demonstrate how the public benefits which regulates charities in England
from their work, the Charity and Wales, trustees are generally
Commission has warned. Research able to describe their charity’s aims
carried out for the Commission by and describe who benefits from their
Sheffield Hallam University found work, but are less able to demonstrate
that many charities are failing to meet how people have benefited in practice.
the legal requirement to demonstrate Small charities in particular were
public benefit in their Trustees’ Annual found to be at fault. According to
Reports (TARs). Almost a third of the the research, while 26% of charities
charities included in the research did with an income of more than
not provide descriptions of the £500,000 had prepared TARs that
benefits that arise from their activities, met the requirement, only 10% of
and a further 50% provided only charities with an income of between aims to relieve poverty or advance
vague or unclear descriptions. Less £100,000 and £500,000 did so. education or religion were presumed
than 20% provided clear descriptions Among charities with an income of to provide public benefit, but were
of public benefits in their TARs. less than £100,000, only 2% not required to demonstrate this.
managed to meet the requirement. The Charities Commission has
published guidance for charities on
The requirement to demonstrate demonstrating public benefit, along
public benefit was introduced in with sample TARs, on its website.
April 2008, following the
implementation of the Charities Act For more information go to:
2006. Prior to this, charities with http://snipurl.com/1olgap
Grimsby t: 01472 350601
Louth t: 01507 606111
tougher competition for funding
Scunthorpe t: 01724 863105
High levels of demand and to benefit from their support. For
www.forrester-boyd.co.uk increasing competition for example, the Lloyds TSB Foundation
diminishing funding streams mean for England and Wales is looking to
If you would like to receive further that nearly three quarters of increase the length of time that
information on any of the articles in organisations applying for funding must elapse before an organisation
this newsletter, please contact our from BBC Children in Need are can re-apply for funding after
charities partner, Kevin Hopper, at our unsuccessful, according to chief receiving one of its grants. At present,
Grimsby office or e-mail executive David Ramsden. organisations must wait two years
k.hopper@forrester-boyd.co.uk before being eligible to apply again.
Speaking at the Action Planning
Authorised and regulated by the Financial
2011 Charity Funding Roadshow, Mr Other sources of funding are being
Services Authority.
Ramsden went on to say that fierce cut off altogether, such as the
competition meant that funding Government’s Civil Society Transition
organisations would increasingly be Fund, which was set up to help small
“using the language of outcomes” charities and social enterprises
when considering applications. struggling under public sector
independent quality assured professionals
"We’ve had to do some pretty spending cuts.
The UK200Group is a modern and proactive professional careful analysis about where we can
membership association of chartered accountants and
lawyers which provides training and business services to make the most difference," he said. According to Nick Hurd, minister for
enhance the performance of member firms. As well as
being focused on the general small to medium businesses, the civil society, no more funding
members have specialist knowledge and experience of the Mr Ramsden also commented that, will be available now that the
agriculture, healthcare, charities, legal and property and
construction sectors to provide effective support and advice of the organisations whose funding Transition Fund’s £107 million has
in the areas of tax, financial management, business planning
and legal issues.
applications were successful, many been allocated. “It’s finished, there’s
www.uk200group.co.uk were not awarded the full amount no money to do another one,” he
This newsletter has been prepared for general interest and it is important to they had requested. told delegates at the Roadshow.
obtain professional advice on specific issues. We believe the information
contained in it to be correct. While all possible care is taken in the preparation
of this newsletter, no responsibility for loss occasioned by any person acting or
refraining from acting as a result of the material contained herein can be
accepted by the UK200Group, or its member firms or the author. Other funding bodies are looking at For more information go to
UK200Group is an association of separate and independently owned and
managed chartered accountants and lawyer firms. UK200Group does not
ways of enabling more organisations http://snipurl.com/197v3o
provide client services and it does not accept responsibility or liability for the
acts or omissions of its members. Likewise, the members of UK200Group are
separate and independent legal entities, and as such each has no
responsibility or liability for the acts or omissions of other members.