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FOCUSFINANCE
The magazine for CFG members March 2015
ALSO THIS MONTH:
CHOOSING AN AUDITOR
CROWDFUNDING
PENSION DEFICITS
HOLIDAY PAY
Rebrands
Are they worth
the investment?
3
Caron Bradshaw, Chief Executive
Contents
Member matters	 04
Nick Swarbrick discusses life with crocodiles
and increasing commercial astuteness in the
sector.
On our radar	 06
We ask what’s next for social investment after
the general election.
Power of the masses	 09
Mike Huggins advises on how to make the
most of crowdfunding and social investment
platforms.
Rebrands: Are they
worth the investment?	 10
Lucy Bernstein gives advice on getting the
most from a rebrand, while Craig Duncan and
David Roberts reveal their personal experiences.
How to choose an auditor	 12
Rohan Hewavisenti and Tom Davies offer
insights charity and the auditor perspectives.
Time to review holiday pay	 14
Fudia Smartt explains the challenges
employers face after a European court ruling
on holiday pay.
A deficit of trust	 15
Peter Askins summarises the options for
charities with legacy defined-benefit pension
schemes.
CFG events	 16
We reveal the full details of this year’s Annual
Conference.
Learning to lead	 18
Martin Birch explains why good leadership
requires tougher, deeper introspection.
Production and editing: Slack Communications
Design: SteersMcGillanEves
If you have any queries about Finance Focus or
are interested in writing for us, please contact
gareth.jones@cfg.org.uk.
Neither CFG nor the authors of individual articles can
accept liability for errors, omissions or any actions taken
as a result of the content and advice contained within
Finance Focus.
© Charity Finance Group
A Company Limited by Guarantee.
Registered in England No. 3182826
Registered Charity No. 1054914
15-18 White Lion Street,
London, N1 9PG
www.cfg.org.uk
Force for good:
can profit and
social change mix?
I recently attended an interesting seminar on social ventures.
The presenters argued that the legal construct of a venture should
be irrelevant, and that it was the organisation’s ability to bring about
social change that mattered. Time constraints prevented a detailed
exploration of some of these fascinating avenues, so I’ve been
reflecting on them ever since.
The one that particularly stuck with me was the statement that if you
can get corporates’ strength focused on social good, they are “arguably
the best vehicle for social change because of their often plentiful resources
and their ability to innovate”.
Businesses as a “force for good” is not a new concept. There have always
been entrepreneurs, such as the late Anita Roddick, with a strong values-
based approach to business. But increasingly we are seeing businesses
(perhaps encouraged by politicians) entering the public and social arenas
without their motives being clear.
I am no business basher. I do not see profit as evil, but I do believe that
“motive” in this context is very important. This isn’t all about resources and
innovation, it is also about commitment to those in need. If your drive and
legal duty is to make a return to shareholders, however nice the social
change element may be, it is unlikely to trump the imperative of profit.
The pursuit of profit can also have a negative effect on competition. For
instance, what if a company is temporarily accepting risk and loss in order
to corner a market? What if such practices, instead of driving innovation
and change, actually narrow the options by killing off other organisations?
Meanwhile, there is an unhealthy relationship between profit and social
change. On the one hand, it seems acceptable for a business to generate
a return if it saves the public purse and delivers social change (and I’m afraid
I believe it’s in that order of importance). However if a socially driven venture
happens to make money on the back of delivering social change (including
paying staff decent salaries), this is somehow obscene.
Size matters?
Businesses’ “plentiful resources” mean they can often be very large,
and this is another way in which you might argue that they are the ideal social
actors. Charities are frequently told to “scale up” and that “economies of
scale” are the Holy Grail, offering the perfect balance between efficiency
and effectiveness.
Maybe that’s true. Maybe we need to accept that it could be better to
provide for the masses at the cheapest price rather than accommodating
the niche or the marginal. That it’s better to help the many than attempt to
help all. And indeed, sharing resources can be beneficial too (if you can get
around VAT challenges). However, while we must be willing to entertain
that concept, we shouldn’t kid ourselves that scale
equals efficiency any more than small equals quality.
Overall, the lines are blurring between the sectors
and, as long as social change is the primary driver
and profit is secondary, who cares what the legal
construct is? Not me. But it must be in that order –
the alternative leads to exploitation, mediocrity
and marginalisation.
CARON’S COMMENT
4 554
MEMBER MATTERS The latest updates for CFG members plus
opportunities to contribute to CFG’s policy work.
Donor benefits
review
In the Autumn Statement, the government
announced that it would be reviewing
donor benefit rules for Gift Aid. In order to
hear from members about their experience
of the rules and how they could be improved,
we have created a short survey which you
can take http://svy.mk/18lDiLI. If you
would like more information please
contact the policy team.
Tackling
irrecoverable VAT
Irrecoverable VAT is estimated to cost
charities over £1bn a year, and this could rise
should the next government decide to increase
VAT in order to reduce the deficit. Ahead of
the election, CFG is keen to hear from charities
that have been affected by the burden of
irrecoverable VAT and how it has impacted
on their work. If you would like to share your
experience, please contact the policy team.
Seeking full cost
recovery case studies
A number of charities have reported that
they are experiencing difficulties in charging
commissioners for the full cost of service
delivery. This is worrying because it threatens
their long-term sustainability. We are looking
for case studies of charities delivering public
services that have experienced difficulties
ensuring full cost recovery. If you would be
willing to share your story, please contact
the policy team.
Setting up a CFG
pensions forum
One of the biggest issues facing the
sector is how to deal with growing
pensions liabilities which have grown
significant since the financial crisis.
Last year, following the successful
publication of Navigating the Pensions
Maze, CFG announced that it would
set up a pensions forum. This will
enable members to discuss pensions-
related issues and ways that we can
improve the pensions landscape for
charities, and the proposal received
significant interest for charities.
We are now in the process of setting
up this forum. We are open to charities
of all sizes and are not limited to any
specific part of the sector. If you would
like to be involved, attend meetings or
would like to raise any policy challenges
that the forum should address, please
email the policy team.
Voice your views Visit the CFG website for more information:
Policy > Have Your Say > Consultations
CONTACT US
Email policy@cfg.org.uk
to contribute to any of
our policy work
What does a typical day look
like for you?
I cycle to work each day, so it’s normally
wake up, breakfast and out on the road by
about 6.30am, arriving by around 7.30am.
Until about 9am, I probably have my most
productive time of the day, as no one else
is around. The rest of the day is spent
meeting with the team or the wider
business, understanding and dealing
with the issues of the moment.
I have a lot of my “thinking time” on my cycle
to and from work. Some of my ideas are
good; others “need work”. Thankfully I have
a great team who are more than happy to
point out which idea fits in which category!
What inspired you to work in
the sector?
Initially, I hadn’t been specifically looking in
the not-for-profit sector; I was just attracted
by the very exciting role here as CFO at
Turning Point. But now that I am here,
I’m absolutely loving it. The sector has lots
of challenges ... but that’s what keeps
it interesting!
What do you value most about
your membership of CFG?
Whenever I go to CFG-run events, I meet
many other people who are passionate
about what they do. What I notice most
is the willingness of people to share their
experiences and learnings with each
other; much more so than in the
commercial sector.
What are the most important
skills needed for your role?
Communication – keep it simple, tell the
story behind the numbers. Also, influencing
– build relationships across the business
based on mutual respect, and be that
“critical friend” offering both support
and challenge.
What song title best sums up
your job?
“Don’t worry, be happy”, by Bobby
McFerrin.
How will the charity sector look
in 10 years’ time?
A difficult question in any sector, but even
more so in ours, given the political dynamic.
For me, the issue is less about guessing
the future, and more around building an
organisation that can respond quickly
and flexibly to changing circumstances.
What have been the biggest
changes to the charity sector
since you started working in it?
I think the sector has had to become more
commercially astute, and that is no longer a
taboo because it’s an essential prerequisite
for being sustainable into the future.
If the government could change
one thing to make your life easier,
what would it be?
One of our biggest challenges at present
is around TUPE legislation. It would be
much better if this system was made
simpler. It would also be great to see
more emphasis on pooled budgets to
allow us to better provide integrated
support for people with complex needs.
What one thing would significantly
improve your working day?
Less emails and more chocolate!
What’s the worst job you’ve done?
I worked in a restaurant near Cairns which
catered for boats going out on the Great
Barrier Reef for the day. The route there was
between two crocodile-infested lagoons,
and I had to get there at 4am in the pitch
black to start work on the meals. Not fun!
I only lasted two weeks before I decided
that I’d had enough.
Dr Who or Star Trek?
Hmmm, tricky one. Love Star Trek,
particularly the latest two films, and I am
also a keen fan of Dr Who (though still
getting used to Peter Capaldi), so I think
I’ll go for both please.
and special interest groups. To view a full
list of membership benefits, please visit
www.cfg.org.uk/benefits.
We’ve sent all the renewal details in
the post to the primary contact for your
organisation. To ensure your membership
continues uninterrupted, all you need to do
is return your organisation’s renewal form to
us along with your membership payment.
Once we have received the payment,
the primary contact in your organisation
will be sent information on how additional
people can register for benefits.
If you have any questions about the changes
to CFG charity membership, or about the
renewal process, please contact Matt
and Margaret in the membership team on
0845 345 3192 or membership@cfg.org.uk.
We’ve also put together a short FAQ about
this year’s renewals, which you can find at
www.cfg.org.uk/renew.
We hope that you’ll remain part of our
network, and we look forward to seeing
you and your organisation continue to
benefit from CFG membership.
Don’t forget – early-bird booking for CFG’s
Annual Conference ends on 27 March.
If you’re planning to attend, make sure
you renew your organisation’s membership
as soon as possible so that all staff can
take advantage of the best booking rates!
Full programme and booking information
is available at www.cfg.org.uk/ac15.
Nick Swarbrick discusses charities becoming more
commercial and life with crocodiles.
It’s that time of year again when we’d like to invite
you to renew your organisation’s CFG membership
for 2015-16. We’ve also made some changes to our
membership scheme.
Member
of the month
Nick Swarbrick,
Chief Financial Officer,
Turning Point
As you may have seen in the last issue
of Finance Focus, following feedback from
our latest members’ survey we’ve made
some changes to the structure of our
charity membership scheme. These
changes are designed to bring even
more benefits to CFG members.
From April 2015, membership will be
for your organisation as a whole, and
all staff will be able to take advantage
of CFG membership services such as
reduced ticket prices at CFG events,
free regular members’ meetings for
networking and learning opportunities,
access to our free specialist helplines,
and the opportunity to sign up to forums
It’s time
to renew!
Welcometoour
newmembers
andsubscribers!
Members
Cardboard
Citizens
LEUKA
Advocacy
Support in Cymru
Subscriber
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Technologies
Photography:HarmitKamboPhotography
www.the-snapper.com
6 766
ON OUR RADAR CFG’s policy work: representing your views to decision makers,
plus research, guidance and news from around the sector
Since the economic downturn there has been a great
deal of discussion among politicians and some charity
leaders on the need for more mergers.
The main argument is that many charities
are essentially carrying out the same work
and therefore soaking up resources that
could be better spread around the sector.
Others have voiced fears that this could
impact on people’s right to join together
to pursue a common cause, as well as
damaging innovation within the sector.
January saw these issues raised again
during a debate held by the Institute of
Fundraising to discuss the upcoming
general election.
The Charity Commission’s register of
mergers hasn’t shown a clear trend
towards more mergers. However, Eastside
Primetimers’ review last year indicated
that, when you look deeper into the sector,
there does appear to be a lot of activity.
Between January 2013 and April 2014,
The Good Merger Index found around 90
deals involving mergers, takeovers, group
restructuring, asset exchanges and
acquiring subsidiaries. Around £222.9m
of income was transferred through these
deals and more than 32,000 employees
affected (4% of the sector’s workforce).
This is a considerable amount of change,
and it wasn’t just national charities that
were involved. Over half of the mergers
involved local organisations coming
together, mostly driven by funding cuts.
The main barriers to mergers are not
motivational but financial and operational,
and a central challenge has been the
growing pension liabilities of the sector.
In the good years, many charities accrued
significant liabilities that are now
preventing them from pooling their
resources together. CFG has been
working hard to raise awareness of this
issue. Helping charities to deal with their
pension liabilities would be one way that
the government could clear some of the
obstacles facing those that wish to merge.
Another barrier is the cost of legal fees,
advice and due diligence that
organisations need to be in a position to
meet their fiduciary duties. Coupled with
this is the time it takes for mergers to go
through, with the process often taking
months and years to complete.
However, consideration also needs to
be given to the merits of mergers. It is well
known in the business world that most
mergers fail to bring the expected benefits,
whether due to financial or cultural issues,
as well as changes to the market. Similarly,
more research is needed into the success
and failures of charity mergers so that we
can learn from best practice.
We need to make sure that charities are
not prevented from merging, but equally,
mergers are not the answer for every
charity. A balanced debate focused on
the strengths and weakness of mergers,
combined with efforts to remove the
practical barriers that face charities, is
the way forward.
7
In an election
year, what’s
next for social
investment?
In one of the least surprising developments
in the run up to the general election, the
Minister for Civil Society has announced
that encouraging people to make social
investments will be included in the
Conservative manifesto. With regard to
Labour’s stance, the party has previously
said that it would like to make sure charities
can access basic loans, but has mentioned
little beyond that.
It was always likely that social investment
would feature in the Conservative manifesto,
especially when we consider that the current
government has already set up Big Society
Capital and created the social investment
tax relief. Yet the upcoming election begs the
question: what’s next for social investment?
The minister has said that the Conservatives
would try to open up social investment for
CFG supports raising
audit threshold
In a joint response with NCVO to the
Cabinet Office’s consultation on the
audit threshold, CFG has supported
the proposed increase of the threshold
from £500,000 to £1m. This should help
reduce audit burdens on several thousand
charities. However, CFG has also called
on the Charity Commission and others
to communicate the positive aspects of
auditing, which enables charities to receive
advice and to properly understand their
assets and liabilities. CFG also highlighted
the need for some aspects of the SORP
to be reviewed, such as salary disclosures
for those charities above the existing audit
threshold. You can find CFG and NCVO’s
response here: bit.ly/17gBiTn.
Local Government
Pensions Scheme
questioned
CFG has recommended that the
government reform the Local Government
Pension Scheme (LGPS) through segmenting
liabilities and providing clear guidance to
administrating authorities on repayment
periods. In response to a technical
consultation on new regulations, CFG
called on the Department for Communities
and Local Government to improve the
LGPS for charities and to reduce long-term
risks. For instance, many charities are
trapped in unsustainable schemes because
they cannot afford exit payments. You can
read CFG’s response here: bit.ly/1v4bXqV.
Government must
promote Gift Aid
In a New Year debate hosted by the
Institute of Fundraising, CFG’s Head of
Policy and Public Affairs Andrew O’Brien
called on the government to promote Gift
Aid and to reform the Gift Aid Small Donations
Scheme to support small charities. CFG
has been working closely with government
on a new wording for the Gift Aid Declaration,
but research indicates that public awareness
and understanding of the scheme needs
to be increased if claims are to rise.
CFG asks for clarity
on trustee guidance
CFG has called on the Charity
Commission to make trustee guidance
more clear regarding the difference
between legal duties and minimum
good practice, while also recognising the
diversity of the sector. In a joint response
with NCVO and the Association of
Charitable Foundations, CFG highlighted
the problems with the current “must”
and “should” guidance put forward by the
Charity Commission. CFG’s consultation
response is available on our website.
Policy progress
As the Conservatives make no secret of their
enthusiasm for social investment, what is the
future for this nascent market?
The big question
that many are avoiding
is whether there is
actually any demand
for social investment
from charities
“retail investors”. These are ordinary people
investing smaller sums of money, probably
less than £10,000 each. Many commentators
on social investment have highlighted this as
a potential growth area. This is not only
because members of the public are a big
market, but because individuals may be
likely to lend at lower interest rates than
“institutional investors” such as banks and
intermediaries. This is because individuals
may be motivated by passion for the project,
as well as pursuit of returns, when making
their investment decisions.
However, this market may be harder to
tap into than the government thinks. UK
households have one of the poorest saving
rates in the developed world, made worse
by our slow economic recovery. Also,
with wages still lagging, it is unlikely that
disposable income will rise fast enough
to enable UK households to significantly
increase their savings (although the recent
fall in inflation is a welcome breather).
There are also problems of awareness
and understanding. Mainstream banks are
still not offering social investment products
to the public. Furthermore, “sophisticated
investors” are not being advised to invest
socially by their independent financial
advisers due to a lack of awareness.
The government needs to work with
banks and advisers to make sure that
more information is made available to
the public. The next government should
also consider investing more in Good
Money Week, a campaign that seeks to
encourage the public to invest socially.
But even if we increase the supply, the
big question that many are avoiding is
whether there is actually any demand for
social investment from charities. Surveys
regularly show that while some charities
are interested in social finance, barriers
such as the caution of trustees and, most
importantly, the cost of finance, are putting
them off. This is coupled with the loss of
sources of income which hold potential for
social investment, such as public service
delivery. CFG has frequently called on
government to address these issues but it
remains to be seen if any of the parties will
provide an answer in their manifestos.
What’s the
big issue?
Mergers
8 9
Mike Huggins,
Partner, Baker Tilly
Investors should only
invest funds they can
afford to lose
8
ON OUR RADAR CFG’s policy work: representing your views to decision-makers,
plus research, guidance and news from around the sector
9
FUNDING FOCUS
Mike Huggins advises charities on how to make the most
of crowdfunding and social investment platforms.
Power of
the masses
was set at 6% and the bond had a four-year
term. The FCA’s generic warning to potential
crowdfunding investors that “it is very likely
that you will lose all your money” did not
deter the 350 investors who contributed
£1.5m within 20 hours.
Social investments
In 2012, the disability charity Scope became
the first UK charity to issue a listed bond. They
raised £2m through a three year bond, part
of a plan to raise £20m in phases, to fund
investment in their network of charity shops.
Another variation is the social impact
bond (SIB) which, rather than pay fixed
interest, pays out a proportion of the money
saved (by the government) as a result of its
social impact. The first provider-led SIB was
a £2m bond to finance “It’s All About Me”, a
ten-year project delivered via a collaboration
of 18 voluntary adoption agencies.
The investor’s perspective
Investing in charity bonds is particularly
attractive to charitable trusts with funds to
invest – it enables them to support good
causes while achieving a return, with the
potential to recycle these returns into
further charitable works. This is simply not
something permitted by a simple donation.
The returns on offer also make them
attractive to private investors. A big boost
will likely come from the Chancellor’s social
investment tax relief (SITR), which gives
individuals who invest in qualifying social
organisations a reduction of 30% of that
investment in their income tax bill.
As with any other investment, when
assessing an investment’s risk profile
investors should consider normal criteria
– whether the project to be funded is viable
and likely to be successful, and whether it
will generate the necessary cash flows,
minimise risk and maximise the prospect
of the eventual return of the sum invested.
These are not guaranteed and investors should
only invest funds they can afford to lose.
Being realistic
Even donation-based crowdfunding is not
a guaranteed panacea. Cancer Research
UK’s three campaigns at Indiegogo each
raised less than 10% of their targets in the
last months of 2014.
What all charities can do is to learn from
the successes and disappointments of
crowdfunding to date. Crowdfunding is
not confined to the charity sector but it
is a powerful way for charities to connect
with a wider base of technology-savvy
potential supporters, and it is likely to
grow exponentially over the next few
years. A well-thought-out project, a
well-presented funding case and a
well-executed marketing campaign can
build upon existing supporters through
social networks and reach a new base of
engaged supporters – a potentially
transformative experience.
“Crowdfunding” was a contender for the
Oxford English Dictionary’s Word of the
Year in 2011. Four years on, the term is
widely understood, but surprisingly few
charities have grasped its potential.
Back to basics
Crowdfunding is the practice of funding
a project or venture by raising monetary
contributions from a large number of
people. That in itself is nothing new –
Nelson’s Column was funded by public
subscriptions – but what is new is the
integral use of the internet.
Crowdfunding takes two broad forms:
• Donation-based – with or without some
form of non-monetary reward or thank you;
• Investment or loan-based – which is
regulated by the Financial Conduct
Authority (FCA).
What is common to both forms is the
use of a crowdfunding website. There
are many available and they typically levy
charges at a fixed rate, or as a percentage
of funds raised, or a combination of both.
They will also typically have a pre-screening
application processes.
New opportunities
The beauty of crowdfunding is how it can
open up new opportunities for charities of
all sizes. Last year, AH2O wanted to
raise £5,000 to start a charity in memory
of Anton Hawkins, who was killed in a
car crash in 2013. It met its target in just
19 days, and raised over £8,000 in 42
days. The appeal on Crowdfunder included
a video, allowing AH20 to connect with
potential backers in a way that, pre-internet,
was available only to the largest charities
able to fund TV campaigns.
In many crowdfunding appeals such as
this, fundraisers only ask for small donations
of £5 or £10 upwards, offering rewards such
as t-shirts, prints or opportunities to get more
involved with the projects. Yet crowdfunding
can also be used for much larger donations
to fund larger projects. In 2014, the Eden
Project sought to raise £1m by way of a
mini-bond to build an education centre.
The minimum investment was £500, interest
Two SIBs approved
for SITR
Two social investment bonds designed
to help homeless people have been given
permission to use the social investment
tax relief (SITR). These bonds, which
have raised £910,000, will be used to
fund services to help homeless people
with the government paying out if the
charities meet pre-agreed targets.
The SIBs are the first to be approved
for use of the Social Investment Tax
Relief, which enable individuals to reduce
their income tax liabilities by 30% of the
amount invested. Around 15% of the
fund was raised through individuals,
with the rest coming from a group of
social investment intermediaries such
as Big Issue Invest, CAF Venturesome
and Key Fund.
Charities funded
to help AE
The Cabinet Office has given £1.2m
in grants to Age UK, the British Red
Cross and the Royal Voluntary Service
to bring in volunteers to help 29 of the
most under-pressure accident and
emergency departments for 12 weeks.
AE departments have faced enormous
demand throughout the winter. These
charities will bring 700 volunteers to help
10,000 patients, supporting both patients
at home and assisting medical teams
with speeding up discharge times.
NCVO calls for better
public engagement
At a panel discussion during CFG’s
Risk Conference, NCVO Chief Executive
Sir Stuart Etherington said that charities
need to engage with the public to improve
how they are perceived. This means
starting a discussion on what the public
needs to know about charities, and how
they should be given this information.
Towards the end of last year, CFG, NCVO
and other charities set up the Understanding
Charities Group to look at these issues
and to consider how the sector can
better communicate with the public.
Founder of Civil
Society Media dies
Daniel Phelan, Editor-in-Chief and owner
of Civil Society Media, passed away on
11 February at the age of 58 after a long
illness. Dan was a strong supporter of
finance professionals through his
publications and was a vocal champion
of improving charity financial standards.
CFG has released a statement on its
website that you can read here:
http://bit.ly/1yKS0Rk.
News in brief...
Research
and reports
Infrastructure bodies
lack resources to adapt
NAVCA’s independent commission on the
future of infrastructure has found that local
infrastructure bodies need to adapt, but lack
the resources to be able to plan strategically.
The commission has called on funders
to provide more long-term funding for
infrastructure, and to collaborate more in
order to maximise impact. It also found that
local infrastructure organisations often lack
the skills they need to manage their resources
and demonstrate their value. You can read
the report at http://bit.ly/1EYrMD3.
Lobbying Act has
‘chilling effect’
The Commission on Civil Society and
Democratic Engagement’s inquiry into
the impact of the Lobbying Act has found
that the act has had a “chilling effect” on
charities and their ability to speak out on
politically contentious issues. The inquiry
also found that the act has consumed
significant charitable resources through
additional red tape and has made it difficult
for charities to work together due to the
added complexities. The report is available
to download at http://bit.ly/1KJdmqU.
Commission updates
guidance on tax reliefs
The Charity Commission has published
new guidance for charity trustees on the
use of tax reliefs and how to administer
them. It explains how the use of reliefs
and tax planning is both necessary and
sensible for charities, how trustees
must act prudently and not enter any
arrangements which could damage
the charity’s reputation, and how
charities must not engage in tax
evasion or fraud. The new guidance
is available at http://bit.ly/1z7UcDI.
New risk management
guide published
The Institute of Risk Management’s
Charities Special Interest Group has
created a guide to help charities of all
sizes make sense of risk management.
The guidance is based on the approach
set out in ISO 31000 and is entirely
consistent with Charity Commission
requirements. The new guidance
is available on CFG’s website at
http://bit.ly/16TLktV.
SITR overview
published
Charity Finance Group has produced a
short slide pack for charities and social
enterprises that are considering using
the new social investment tax relief to
access finance. The pack includes useful
links and case studies on some of the
early adopters of the relief. You can find
it here: http://bit.ly/1AuffGl.
Guidance
and support
10 11
Lucy Bernstein,
independent
creative director
Your brand should be analysed and
managed every bit as rigorously as any
other major asset. It’s the foundation of
your charity’s creative and strategic capital,
and remains the responsibility of the entire
organisation, whatever your size.
The UK charity market is extraordinarily
competitive, and the need to differentiate
is vital. If your brand is healthy you will thrive.
If not, you may need to consider a rebrand.
Let’s tackle the basics:
1) What is a brand?
A brand is so much more than your
name and logo. It’s who you are as an
organisation, what you do and what you
stand for. Get this right and your brand will
succeed on your organisational ambitions.
2) Why rebrand?
Any commitment to a rebrand must start
by ensuring all stakeholders have a shared
view of what a brand is. Then, apply this to
your own organisation. Given that finance
directors play a pivotal role in monitoring
and harnessing a charity brand’s health,
your financial instincts should be honed on
any rebranding business case. Ask the right
questions and the financial risks are
substantially mitigated.
Here are some of the challenges that
serve as an answer to “why rebrand?”
• Your existing and potential audiences lack
knowledge of your charity’s specific aims,
policies and achievements and need to
be engaged;
• An impending merger with a new
organisation requires an articulation of
the joint brand proposition;
• By redefining or re-articulating your
overarching brand promise, you’ve noted
an opportunity to extend your brand into
different arenas (for example, easyJet moving
into the fitness market with easyGym);
1110
COVER STORY
• You lack a brand identity which fulfils the
need for long-running conversations with
supporters beyond asking for donations;
• You require a shift in focus to talk positively
about the solutions your charity offers
rather than solely on the problems it
strives to tackle;
• You’ve discovered that what you stood
for has got lost in the proliferation of
new contenders.
3) How do you rebrand?
If the brand isn’t fit for purpose, you
must help drive the taskforce that will tackle
the difficult challenge of which brand
elements to retain and which to jettison.
The top considerations during the process
should be to:
• Conduct a comprehensive brand audit
of all your collateral – internal and external.
Use this to conduct a thorough review
of what works and what doesn’t;
• Involve your appointed branding agency,
staff, donors, trustees, sponsors
and partners in thorough research.
Additionally, access those that don’t
currently engage with your brand,
allowing you to future proof your income
by identifying potential new donor
audiences or service users;
• Utilise the audit and research to (a)
identify elements of the rebrand
that can be handled in-house and
thus maximise your internal capabilities,
and (b) formulate an agreed brief for
your external agency for areas you
need help with. This will help you in
keeping to agreed costs;
• Avoid emotional subjectivity and allow
your data to drive decision-making.
Leverage it to define objectives and
success-criteria from the start;
• Be realistic about timeframes and agree
parameters to avoid “project creep”
and associated costs;
• Secure employee buy-in from the start.
Brands strive to attract and create a
community around their purpose and
values, so commit to a taskforce of
cross-functional stakeholders. The more
you reach all areas of your organisation,
the more fluid and cost-effective the
rebrand will be.
• Invest in resources for the rebrand roll-out
across the whole of the organisation
and factor this into your costs upfront;
• Acknowledge the financial investment.
A rebrand which covers research,
recommendations, implementation and
ongoing monitoring can cost between
£5,000-£500,000 depending on the mix
of internal and external resource.
Rebranding isn’t without risk and may
appear prohibitively expensive if calculated
within one financial year, but successful
rebranding, in the long term, will repay
the investment multiple times.
Rebrands: are
they worth the
investment?
Branding expert Lucy Bernstein gives advice on
how to get the most from a rebrand, while opposite,
Craig Duncan and David Roberts reveal their
personal experiences.
reviewed regularly throughout the whole
process by our finance team, which helped
ensure it was delivered on budget. As a
relatively small charity, we are particularly
keen to drive cost efficiency and achieve
value for money, so our finance team has
input at strategic level to all our key projects
from the outset.
The main costs for the rebrand arose
from developing our new website. It is still
evolving, but we are very pleased with how
it looks and functions. It is more streamlined
in terms of content, easier to navigate and
more visually appealing.
The rebrand was developed by digital
marketing agency Itineris and project-
managed throughout by a small team
overseen by our chief executive. The
process was fairly smooth as we had
done a fair amount of groundwork in
advance and were very clear about
what we wanted to achieve.
Stronger bonds
We feel our new name and brand more
accurately reflects our leadership role as the
national charity for hospice care, and also
seeks to embody the breadth and flexibility
of modern hospice care.
So far, we have also had very positive
feedback from our members. One of the main
observations was how the rebrand has helped
create a stronger sense of shared identity
between the different organisations we
represent, aligned to one cause.
officially ended in 2009, there wasn’t
anything taking its place.
This vacuum had an impact on the NSPCC,
and it was becoming increasingly difficult to
sustain our regular giving base as the cost
to acquire new regular givers was
increasing. Furthermore, while the NSPCC
is a trusted brand, our research
demonstrated that there is a lack of
understanding about what we actually do.
Only 30% of the public can spontaneously
give the name of a service that we provide,
and 80% of the public don’t know that
Childline is part of the NSPCC.
Public support is fundamental to what
we can achieve, and in an era of charity
scepticism, austerity and institutional
mistrust, we need to be more transparent
and show demonstrable impact. We believe
that the rebrand will help to build a greater
understanding of the ways in which children
can be protected.
Return on investment
The easiest way to make a return on your
investment is to keep the cost of the
Rebranding helped the
NSPCC get back in touch
with supporters
When undertaking a rebrand it is
important to know why you are doing it,
and to reassure yourself that you’re going
to get a return on your investment.
The NSPCC’s Full Stop campaign
was launched in 1999 as a fundraising
appeal, with the line “Cruelty to children
must stop. Full Stop”. This became
the brand platform for all NSPCC
communications. When the campaign
Hospice UK explore the
value of updating their
30-year-old image.
Last year, following widespread
consultation with our members and key
stakeholders, we embarked on a rebrand
where we changed our name to Hospice
UK, refreshed our logo and launched a
new website. The name under which we
were originally founded (Help the
Hospices) had become rather dated after
30 years. We wanted to rejuvenate our
brand, amplify our collective voice and
further increase public awareness about
hospice care at a national level.
Holding the purse strings
We were on a strict budget and keen to
minimise costs. Total spend for the
rebrand was just under £100,000. We
received a grant of £26,000 towards the
costs of the website from one of our
funders. Costs for the rebrand were
Craig Duncan,
Finance Director,
Hospice UK
David Roberts,
Director of Finance
and Corporate
Services, NSPCC
investment as low as possible, whilst
ensuring that it will deliver the outcomes
you are looking for. If the aim of our
rebranding was to increase the relevance
of the NSPCC to existing and potential
supporters, then the sensible place to
spend money was in engaging with them.
Two-thirds of the £150,000 investment in
our rebrand was the cost of research with
the general public, including people who
donate, volunteer and campaign for us.
We also talked with the adults, children
and young people we help through our
national helpline and our face-to-face
services. Finally, we spoke to professionals,
such as social workers and teachers,
who refer children and families to our
services and come to us for advice.
Are we getting a return from our
investment? Our Christmas campaign was
our best ever. Was that because of a new
TV ad, an improved economic outlook, our
re-branding, or a bit of all of them? We’ll
need some econometrics to unpick all
that, but I feel pretty confident that our
£150,000 investment is paying back.
However, there were some changes
along the way. The month before we
were due to launch our new rebrand, we
were contacted by the Cabinet Office to
administer a new grant scheme for social
action projects led by end-of-life care
organisations. As this was due to be widely
promoted to media and key stakeholders,
we felt it made sense to bring the rebrand
launch forward.
Things were pretty busy in the run-up
to launch day. However, we had already
done a lot of preparatory work and the
different teams working on the rebrand
all pulled together, so we managed to
rise to the challenge.
Advice for others
For other charities considering a rebrand, I
would advise that it is very important to
have your key stakeholders on board from
the outset. We undertook an extensive
consultation process with our members
throughout our annual regional roadshows,
and also consulted external stakeholders
– from funding partners to policy makers.
Also, establish a fixed maximum spend
early on and do not deviate from this. We
had a strict budget and stuck to it.
It is still early days but we are very pleased
with the results, and believe it has been a
worthwhile investment. We are confident
it will enhance our efforts to champion
hospice care at a national level and are
excited about how it will evolve and grow
in the future.
Changing
the narrative
Branding
on a budget
12
AUDIT FOCUS
12
Tom Davies extols the benefits of face-to-face meetings
and asking the right questions.
Choosing
an auditor
13
As well as getting
references from existing
clients, it is worth
scanning a few of
their annual reports
During this time, the finance and audit
teams got to know and trust each other
well. Yet despite these successes,
10 years was probably too long. You
may well have procurement guidelines
that state otherwise, but I suspect three
years is too short for professional services.
It should probably be reviewed after five
years, and potentially extended for a
further two or three years, at which
point there should definitely be an
open market tender.
The tender process can take three to six
months. The process should be kicked off
shortly after the year-end audit has been
completed. This will allow time to send out
the invitations to tender, receive the firms’
tenders covering their experience and
approach, shortlist and interview
candidates, appoint the candidates,
and enable handover prior to the start
of the next audit.
Selection criteria
My preference has been to appoint
firms with partners specialising in charities.
Audit partners that deal with just one or two
charity clients will not have the necessary
in-depth expertise or breadth of knowledge
to support most charities.
As well as getting references from existing
clients, it is worth scanning a few of their
annual reports. Shortlisted candidates
should ideally have clients of a similar size,
and some working in the same sector.
As well as the technical expertise, there
also needs to be a fit with the culture of
your organisation.
Ongoing monitoring
We measure the effectiveness of auditors
against several criteria:
• Timeliness in meeting deadlines;
• Quality of reports;
• Constructive challenge;
• Usefulness and practicality of
recommendations;
• Quality of assurance received by the
board and audit committee;
• Level of thoroughness in their work;
• Quality of training provided;
• Reasonableness of fees.
Some organisations may want an audit
that is as cheap as possible to meet the
minimum statutory requirements. At the
British Red Cross, we took the view that
we needed a more proactive and
strategic approach.
Internal audit
One frustration with the external audit
landscape is that statutory auditors are
not allowed to place reliance on the work
of internal audit without carrying out due
diligence on the internal audit function. With
most charities, that due diligence work is
not cost effective. However, internal and
external audit should work together closely;
for example, internal audit should follow
up on external audit findings to ensure
recommendations are implemented quickly.
In my days as an auditor, I performed an
audit in Ghana and visited two areas which
had been agreed with the client. At the
end of the audit, the client told me that there
had been suspicions of fraud in an entirely
different area, and asked if I had discovered
anything. Unfortunately, auditors don’t have
telepathic powers. They need to be given full
and open access to information – including
the internal problems and issues you are
facing. The lesson learned here is that
auditors can only perform as well as
you allow them to perform.
thus enabling them to hit the ground
running upon appointment.
Who is who?
Increasingly, audit firms will now include
two directors or partners alongside the
overall manager in their proposed audit
teams. While one will be the audit partner/
director, the other will typically be
introduced as a “relationship partner”.
Under auditing standards, there can only
be one individual responsible for an audit,
and it is they who are required to have
performed all of the necessary reviews
of the audit file. Accordingly, it is important
that you understand who will be signing
your auditor’s opinion. Where an audit firm
is proposing a relationship partner, be sure
to enquire about what they expect to be
doing and how often you will see them.
This said, never underestimate the
importance of the manager. She or
he will act as your first point of contact
during the audit and will be responsible
for its smooth delivery. During the tender
meetings and presentation, be sure
to direct questions specifically to the
manager so that they have a chance to
respond and so that you can learn more
about the individual. As a manager, I will
never forget being asked by an audit
partner on a selection panel: “If I was to
review your audit files, what would be my
main criticism?” – a tough question but one
where the answer can be quite revealing!
Check what’s included
As auditors, we are all guilty of highlighting
in our audit proposals a range of different
services that our firms can provide. It is
important for you to have absolute clarity
on what is included in the price and what
isn’t. At the present time, for example, it is
important to confirm whether the increased
costs of transition to the new FRS 102
SORP are included in the fee or not.
Finally, I would stress that in choosing your
auditors you should ultimately select the
team and individuals you can see yourself
and your organisation working with – the
team with the personalities that will have the
best fit with your organisation and whose
experiences of, and interest in, the sector
will ensure that their engagement with you
goes beyond simply giving an audit opinion.
Tom Davies,
Not for Profit,
Grant Thornton UK
Tips on
the tender
process
Rohan Hewavisenti,
Director of Finance and
Business Development,
British Red Cross
There may be concerns over issues such
as fee levels, conflicts over accounting
policies, timeliness (although there is
nearly always fault on both sides), high staff
turnover or lack of team continuity, and not
enough (or too much) advice on non-audit
matters. These should be discussed openly
during the planning stage and post-audit
evaluation stage, rather than trying to
achieve a resolution by going out to
tender and appointing a new auditor.
Tender process
The British Red Cross went through a
tender process after more than 10 years
with the same auditor. In that time we had
brought our year-end timetable for signing
off the accounts down from over seven
months to under three, and won two annual
report awards. We had sharpened the
timetable by shifting more work to the
interim audit, and by ensuring changes were
implemented and disagreements resolved
before the final audit. We also made sure
writing of the narrative report began before
the year-end, as most of the content could
be written well in advance.
Having the right auditor is critical for your
financial strategy. Your external auditor
needs to provide constructive challenge and
assurance on your financial and management
controls. This, in turn, will provide a strong
foundation for your organisation’s financial
management, reporting and analysis.
Auditors should also provide an overview of
what’s happening in the sector, changes in
regulations, benchmarking with similar
organisations, and insight gained from
dealing with a range of clients.
But if you have a strong working relationship
with your existing auditor, why bother
changing? The answer is that things may
have become too comfortable. The finance
team and auditors may not be challenging
each other enough.
However, there may also be reasons not
to change. A disagreement over a particular
accounting treatment, for example, is not
a good reason. You should not look to
shop around in order to get a favourable
accounting treatment – any new auditor
should have been forewarned by the
outgoing auditor.
Ask them to prepare a draft
audit plan as part of their
proposal. This enables you
to assess whether they
really understand your
organisation
Without doubt, the most fruitful and
(dare I say it) enjoyable audit tenders
I have been involved in are where both
parties have been able to invest time in
the tender and have, as a result, had the
chance to learn more about each other
and how they work.
For example, while most charities
will now give prospective auditors the
chance to have at least one meeting with
representatives of the charity, there are
still occasions when no such opportunity
is given and organisations simply request
a proposal to be submitted without a
face-to-face meeting.
I have to be honest and say that this can
be fairly disheartening, and I would urge
you to provide the opportunity to hold these
meetings – including the option of meeting
with at least one trustee (for example, the
chair of the audit committee). It is always
interesting to have the trustee’s perspective
and to hear what they are looking for
from their auditor. Not surprisingly, such
meetings regularly highlight different
priorities, and it’s important for us as
auditors to understand these.
These meetings also provide the opportunity
for you to learn more about the proposed
audit team, and especially the dynamic
between the responsible individual (the
partner or director) and the manager.
From these meetings you will develop
a feeling about what it would be like to
work with them, their knowledge of charity
sector issues (rather than just their firm’s
knowledge), and whether there is a good
“fit” between them and your organisation.
Genuine understanding
In return for this investment of your
time, you should rightly expect the firms
tendering to be able to demonstrate
a real understanding of your organisation
and how they will tailor their audit
approach accordingly, adding value
to your organisation.
An excellent way of doing this is to ask
them to prepare a draft audit plan as part
of their proposal. This not only enables you
to assess whether they really understand
your organisation, but also gives you a taste
of the quality and nature of the reports they
will be presenting to you going forward.
I have found that, where we have been
asked to prepare an audit plan, it has
resulted in some very interesting and
engaging dialogue with the tender panel.
Importantly, having both parties putting
in effort at this stage will help with any
transition process, as the newly appointed
auditor will have already performed an
element of their initial planning activities,
An auditor can be a key financial partner, but what you get
out depends on what you put in, says Rohan Hewavisenti.
14 151514
HR FOCUS PENSIONS FOCUS
Fudia Smartt explains the challenges employers face
after a European court ruling on holiday pay.
A deficit
of trust
Peter Askins summarises the options for charities with
legacy defined-benefit pension schemes.
Fudia Smartt,
Senior Associate,
Russell-Cooke LLP
Peter Askins, Director,
Independent Trustee
Services Limited
approved by both the Pensions Regulator
and the Department for Work and Pensions.
When taken in the context of the Budget
2014 changes to defined contribution
schemes, which allow access to pension
savings, it is incumbent on DB pension
scheme trustees to make their members
aware of these changes, as taken together,
they may be in the beneficiaries’ interest.
The requirement from April 2015 that
trustees of DB schemes satisfy themselves
that any member requesting a cash
equivalent transfer has taken appropriate
financial advice chimes with the practice
in the ETV code of practice. The recent
announcement that regulators are to review
their guidance to trustees and financial
advisers in the light of the budget changes
also provides further confidence that where
properly implemented, ETV exercises can
benefit both the sponsor and the individual
beneficiary. Issues such as these and the
inherent conflicts of interest for charity
trustees who also sit as pension scheme
trustees, make up-to-date knowledge and
experience of an evolving regulatory and
governance landscape on the pensions
side an imperative.
The respective liabilities and fiduciary
duties of charity trustees and pension
scheme trustees are very different. For
instance, whilst a charity trustee may invest
charitable funds without taking professional
advice, if a pension fund trustee did so they
commit a criminal offence punishable by
two years in prison and an unlimited fine.
Although that is an extreme example, there
are many more nuanced differences
between the two types of trustee.
Increasingly, our experience is that trustees
fulfilling both roles are recognising the need
to remove conflict and professionalise the
pension trustee element. Our two most
recent appointments to charity DB schemes
have been on a sole corporate trustee
basis, having the effect of removing the risks
associated with conflict of interest from the
trustees and leaving them free to concentrate
on the objects of the charity, and where
appropriate, their obligations as an employer.
There is a growing awareness, in both the
private and the third sectors, that extending
repayment periods in the hope that deficit
contributions and investment returns will
match valuation assumptions and eliminate
technical provision deficits is to a degree
wishful thinking. Even if successful, that is
the very lowest hurdle that has to be
cleared. Sponsors still have the liability to
fund ongoing pension commitments in an
uncertain financial and regulatory climate.
Without a forward-looking strategy and
actions to manage the position proactively,
there is an increasing danger that putting
off decisions today will lead to catastrophic
outcomes in the future.
Time to review
holiday pay
Employers should
consider changing their
holiday and overtime
arrangements now
ETV standards
have improved
in the calculation of their holiday pay,
such as pay to reflect seniority.
Positives
In accordance with the Employment Rights
Act 1996, a claim for a series of unlawful
deductions from wages for underpayment
of holiday pay normally needs to be brought
within three months of the last in the
series of deductions (subject to certain
exceptions). The EAT has now held that if
there is a gap of more than three months
during which there is no underpayment of
holiday pay, then an employee cannot argue
that a further underpayment forms part of
the same series of deductions. This is a
very helpful concession to employers in
limiting their liabilities.
Furthermore, presumably in response
to the furore following the judgment, the
government unexpectedly laid before
parliament the Deduction from Wages
(Limitation) Regulations 2014 (DWLR) on
18 December 2014. Broadly speaking,
the DWLR introduces a two-year limitation
period so that employment tribunals will
only be able to consider certain unlawful
deductions, including in respect of holiday
pay, which have occurred in the two-year
period ending with the date on which
the claim is presented.
DWLR will only apply to claims presented
on or after 1 July 2015, which will leave a
transitional period during which workers
will be able to bring claims for unlawful
deductions, potentially stretching back
longer than two years. This will, however,
remain subject to a worker’s ability to
establish there has been a series of
deductions and, following the judgment
in Bear, that no more than three months
has elapsed between each one. In addition,
DWLR makes clear that the Working Time
Regulations 1998 (regulation 16) do not
confer any contractual right to paid leave,
thereby preventing employees from bringing
claims for underpayment of statutory holiday
in the civil courts, in order to avoid the
shorter limitation period in the tribunal.
Next steps
As it now seems unlikely that Bear will
be appealed, employers should consider
changing their holiday and overtime
arrangements now. For instance, employers
may wish to provide time off in lieu instead
of overtime to avoid the difficulties in
calculating normal remuneration.
Furthermore, employers will also have to
consider whether the Bear Scotland case
will impact other matters such as workplace
pensions where an individual is an “eligible
jobholder” subject to their “qualifying
earnings”. An unintended consequence of
the Bear Scotland case could be to increase
an individual’s holiday pay (particularly in
periods of high seasonal overtime) to the
extent that they could be above the
automatic enrolment threshold.
Last year employers were left reeling from
the European Court of Justice (ECJ)
judgment in Lock v British Gas Trading
Limited (Case C-539/12), where it was held
that for the purposes of the Working Time
Directive, the “normal remuneration” to
be paid to a worker while on annual leave
should include the commission the worker
would have earned had he or she not
taken annual leave. The ECJ stated that the
method for calculating normal remuneration
in these circumstances will be left for the
national courts or tribunals to determine,
and the case has been remitted to the
Employment Appeal Tribunal (EAT).
For employers who pay staff commission
payments, the Lock case will have
significant (and costly) ramifications,
and may require them to change the way
in which some staff are paid. However,
the impact of the co-joined cases of Bear
Scotland and others v Fulton and others,
Hertel (UK) Ltd v Wood and other, and
Ameck Group Ltd v Law and others are
of greater concern to those in the charity
sector. In these cases, the EAT held that
all elements of a worker’s normal
remuneration, including payments in
respect of non-guaranteed overtime,
must be taken into account when
calculating holiday pay under the Working
Time Directive.
The Bear Scotland v Fulton judgment is very
much in line with the current judicial trend to
ensure that workers receive all elements of
pay they receive while on annual leave. For
example, the ECJ held in Williams v British
Airways plc that pilots’ holiday pay had
to include any element of pay which was
intrinsically linked to the performance of the
tasks that they were required to carry out
under their contracts of employment.
In addition, they were also entitled to all
components of remuneration relating to
their “professional and personal status”
For those CFG members with legacy
defined-benefit (DB) pension schemes,
the increase in scheme funding deficits
is a growing cause for concern, not just
for the sponsoring charity but increasingly
for donors. As we have seen in one or two
extreme cases, the deficit can threaten
the continuing viability of the charity.
Several have been brought low in these
very circumstances.
The similarities between the problems faced
by small and medium-sized charities with
legacy schemes and small and medium-
sized employers in the private sector is
marked. Both wanted to do the right thing
by their employees but now find themselves
burdened with regulatory and funding
requirements that were unimaginable
when they set up their schemes.
Determining the strength of the sponsoring
employer’s covenant presents difficulties
for trustees and sponsors in both sectors,
but is particularly noticeable in the third
sector. The same applies to minimising
the impact of the scheme deficit on
delivering the aims and objectives of
the sponsoring organisation.
Increasingly in the private sector, sponsors
are looking to develop strategies designed
to lead to the eventual wind up of the
schemes. Generally, this means looking
at ways to reduce scheme liabilities and
alternative funding arrangements; there
is a general acceptance that you cannot
“invest your way out of a deficit”. These
are legitimate aims but present issues for
pension fund trustees in ensuring that
beneficiaries’ interests are protected.
The recent Budget changes relating to trivial
commutation and small pots are welcome
as they help to reduce the administrative
burden on schemes, and provide
beneficiaries with meaningful amounts of
capital when they might otherwise receive
very small pension amounts. By definition,
the effect on scheme funding is not great
but in liability reduction terms can be seen
as a step in the right direction.
Enhanced transfer values
Enhanced transfer values (ETVs) have been
the subject of criticism in the past and have
attracted an element of reputational risk.
However, standards have improved
following the introduction of an industry
code of practice, which covers the process
and provision of advice and which was
16 171716
CFG EVENTS Keeping you ahead in your career: highlights of upcoming CFG events
across England, Scotland and Wales. Book now at www.cfg.org.uk/events.
CFG Annual
Conference
Driving performance and growth
CFG’s flagship event, the Annual Conference,
will return to the QEII Centre in May, and we’ve
put together an exciting and engaging programme
for 2015 featuring a great line up of speakers.
This popular event provides a fantastic
opportunity to hear from inspirational
speakers on the issues that impact
your charity.
The Children’s Trust’s Chief Executive
Dalton Leong and Director of Finance John
Tranter will open the conference by looking
at the role of the finance function and business
partnering. We are also thrilled to announce
Dame Stephanie Shirley, businesswoman
and entrepreneur, as our closing keynote
speaker. Dame Stephanie will be in
conversation with Pesh Framjee, Head of
Non Profits at Crowe Clark Whitehill and
CFG Special Adviser, sharing her experience
and taking questions from the floor.
This year’s five-stream programme covers
income and investment, reporting and
inspiring, management and strategy,
governance and risk, and leadership and
change. We’ll be joined by speakers from
both the corporate and charity world,
covering topics such as impact reporting,
internal audit, KPIs and benchmarking,
strategy, business continuity, decision-
making and much more.
Programme highlights include:
A wolf from Wall Street?
A banker moved to charity
Steve Harris, Scope
Having moved from a job in banking to the
world of charity, Steve Harris will explore
how charities can learn from other
industries, and what other sectors can
learn from charities.
Ethical investments
Helen Wright, Finance Director, Comic
Relief, and Clare Brown, Finance
Director, The Elders
In this session, Comic Relief will share
how they went about reviewing and
implementing a new investment strategy.
Impact reporting
Sam Coutinho, Partner, haysmacintyre
and Helga Edwards, The Woodland Trust
Last year haysmacintyre worked with the
Woodland Trust to find a solution to
reporting impact within their statutory
accounts. This case-study session will
provide an overview of the approach
used, the method and the outcomes.
CLIC Sargent: Better by design
Lorraine Clifton, Chief Executive,
and Sherine Wheeler, Assistant Director
of Services, Innovation and Change,
CLIC Sargent
In this session, CLIC Sargent will show
how they successfully adapted models
and methodologies from the private sector
in order to make large efficiency savings,
drive performance and prepare for growth.
All change please! – the role of
accountants in a restructure
Liz Hazell, Saffery Champness, and
Mike Fowler, Brook Young People
This session will discuss the importance of
involving the finance team in all steps of
restructuring a charity, including how
management information and accounts
should be used as a communication tool
internally and externally, the difficulties of
managing teams in a period of change, and
how to motivate the finance team.
Two nations divided by a common
language: finance and fundraising
working together
Mark Astarita, Director of Fundraising,
and Rohan Hewavisenti, Director of
Finance and Business Development,
British Red Cross
Despite sharing common goals, an
organisation’s finance and fundraising
teams are often not on the same page.
Mark Astarita and Rohan Hewavisenti will
share their experiences of working together,
the problems they’ve faced, and how
they’ve made it work.
The latest on pensions
Richard Soldan, Partner, Lane Clark
 Peacock, and Kevin Barnes,
Finance Director, Barnardo’s
Following the Charity Commission’s recent
concerns about the disclosure of pension
risks in charity accounts, this session will
provide a wide-ranging explanation of the
impact of defined-benefit pensions
schemes on charities, the actions charities
can take to manage the risks and what
steps other charities are taking.
Ways to better decision-making
Kate Sayer, Partner, Sayer Vincent
This session will provide new insights into
how we process information that is presented
to us, and will make you think again about
how to present decisions to the board.
This new half-day conference will explore the importance of effective performance
measurement when evaluating the success of change, and the role finance plays in
identifying, recording and reporting on the key issues. If you’re a charity trustee or
member of the senior management team and have responsibility for financial
leadership and management during times of change, this is the event for you.
The sessions will focus on relevant tactics and solutions for change management,
and you’ll have the opportunity to hear from organisations that have successfully
responded to changing expectations and more challenging environments.
The aim of the event is not only to increase awareness of change management
concepts, but also to help attendees understand better how to apply them for
the best results and to drive performance in their organisations.
Confirmed speakers include:
• Simon Gillespie, Chief Executive, British Heart Foundation
• Peter Cheese, Chief Executive, CIPD
• John Drew, Partner, McKinsey  Co and Ian Causebrook,
Head of Corporate Strategy, Tearfund
• Pesh Framjee, Head of Non Profits, Crowe Clark Whitehill
Naziar Hashemi, Partner, Crowe Clark Whitehill, will be chairing the event.
To view the event programme and book your place, please visit
www.cfg.org.uk/managingperformanceandchange.
This event is supported by Crowe Clark Whitehill.
In challenging times, driving performance and
successfully managing change is more important than
ever. It is vital that charities are adept at planning for
and implementing change and at achieving results.
Bookonline!1 May 2015
London
Managing Performance
and Change
Don’t miss out!
Our early-bird rates for members
are available until 27 March 2015!
Book your place at
www.cfg.org.uk/ac15.
13 May 2015
QEII Centre,
London
Don’t miss the opportunity to hear from
inspirational speakers, gain practical
advice, browse the conference
exhibition, and network with your peers.
Delegates attending the event are also
invited to join us for the drinks reception
following the closing plenary session.
Visit www.cfg.org.uk/ac15 to view the
full programme and to book your place.
The 2015 Annual Conference is kindly
sponsored by Grant Thornton.
New dates have been announced
for key training courses to support
you and your team. Whether you’re
new to the charity sector or well
established in your role, there’s
a range of training available that
can contribute to your continuing
professional development.
Foundation charity finance
7 May 2015 London
15 July 2015 London
17 September 2015 Manchester
A popular one-day introductory course
providing a valuable overview of key
aspects of charity finance. The main
sessions focus on accounting under the
SORP, and the direct tax and VAT regimes.
Other topics include the annual report,
audit, handling investments and charity
sector financials. Run in association with
BDO (London) and Saffery Champness
(Manchester).
Advanced charity finance
14 April 2015 London
14 April 2015 Manchester
This course is a mix of interactive group
sessions and plenary teaching, covering
financial reporting, management and tax.
Run in association with BDO (London) and
Saffery Champness (Manchester).
Foundation investment training
3 June 2015 London
3 September 2015 London
Delivered in association with Sarasin 
Partners, this half-day course is designed
to provide participants with a greater
understanding of charity finance, legal
obligations and how to make responsible
decisions regarding investments.
Advanced investment training
17 June 2015 London
20 October 2015 London
Increase your knowledge of investment
strategy, projecting returns and portfolio
management at this half-day course.
Run in association with Sarasin  Partners.
Trading and the law
11 June 2015 London
Explore the main legal considerations
impacting the trading activities of charities
– with a particular focus on governance,
funding, resource-sharing and VAT.
Delivered in association with Hempsons
and haysmacintyre.
In addition to our core training courses,
we are also exploring and developing new
courses to include in our calendar of events
for 2015/16. Keep an eye on our events
pages in Finance Focus, on our website
at www.cfg.org.uk/training and on your
regular CPD e-update.
Dates for your diary:
essential training
courses
1818
CPD Further your professional development with expert advice
and a round-up of CFG events and training.
Events at a glance For further information on all CFG events or to book, please
visit www.cfg.org.uk/events or email events@cfg.org.uk.
Conferences
Managing
Performance
and Change:
half-day
conference
1 May 2015
London
Annual
Conference
13 May 2015
QEII, London
Northern
Conference
1 July 2015
Manchester
Members’
meetings
NORTHERN
ENGLAND
OPEN MEETING
– Tax update and
the new Budget
19 May 2015
Leeds
Recognising and
managing risk
17 November 2015
Leeds
SOUTH WEST
 WALES
OPEN MEETING
– Tax update and
the new Budget
10 June 2015
Bristol
Recognising and
managing risk
10 September 2015
Exeter
MIDLANDS
OPEN MEETING
– Tax update and
the new Budget
4 June 2015
Birmingham
Recognising and
managing risk
8 September 2015
Birmingham
LONDON  THE
SOUTH EAST
HR focus
19 March 2015
London
Tax update and
the new Budget
22 April 2015
London
OPEN MEETING –
Small charities
focus
19 May 2015
London
Governance and
regulation update
24 June 2015
London
Partnerships
best practices
16 July 2015
London
Recognising and
managing risk
17 September 2015
London
Leadership and
thefinancefunction
13 October 2015
London
OPEN MEETING –
Governance: audit
committees and
the role of trustees
19 November 2015
London
Planning and
budgeting
15 December 2015
London
Training
Advanced
investment
training
17 March 2015
London
Preparing for
SORP 2015: an
essential overview
for charities
2 April 2015
London
Advanced
charity finance
14 April 2015
London
Advanced
charity finance
14 April 2015
Manchester
Foundation
charity finance
7 May 2015
London
Foundation
investment
training
3 June 2015
London
Trading and
the law
11 June 2015
London
Advanced
investment
training
17 June 2015
London
Foundation
charity finance
15 July 2015
London
Foundation
investment
training
3 September 2015
London
Foundation
charity finance
17 September 2015
Manchester
Advanced
investment
training
20 October 2015
London
Leadership is a moment-by-moment choice
in our attitude: of where, with whom and on
what we focus our inward and outward
energies. In order to ensure we at Christian
Aid have the organisational capability to do
this, we have recognised the following
drivers for change:
• The need to better prioritise our work in
order to have the greatest impact;
• The need to tackle the discrepancies
between the values we hold as an
organisation and our individual and
collective behaviours;
• The need to address a level of silo-
working and duplication of effort;
• The need to tackle inefficiencies in the
use of our limited resources;
• The need to ensure staff are well
supported and have the opportunity
for personal development and the
space to reflect and innovate;
• The need to establish strong relationships
and partnerships with fellow staff and
others with whom we work.
We want to nurture and inspire our staff to
be the very best they can. Ensuring that the
efforts of all our colleagues are focused
requires leadership that is firmly aligned
to our values and commitments.
This requires us, as leaders, to first look
inside ourselves to develop our own
self-awareness before generating the
choices we need to make to improve our
overall effectiveness. Yet modern life does
not lend itself to asking deep questions.
There is so much to do, and so many
conflicting needs to balance. In such
conditions it is easy to neglect, indeed
avoid, the less urgent but deeper,
more important questions. Within this
inherent paradox, we could better balance
conflicting priorities if we stopped long
enough to ask ourselves – as individuals,
as teams, as organisations – these
deeper questions.
At a practical level, this has meant
investment in Myers Briggs assessments
(the classic psychological test) for our
senior staff, the introduction of 360-
degree feedback mechanisms, and the
development of action learning sets
and coaching trios.
As finance leaders, if we are to get the
best out of our staff we need to build trust.
In an age when we have to produce more
with less, we need high-trust working
environments to retain highly skilled
and motivated people. Taking time to
understand colleagues, keeping
commitments, clarifying goals, acting
with integrity and apologising when we
make mistakes all help to build trust.
Attending to the little things will get
the best out of us and our staff.
Martin Birch explains why good leadership
requires tougher, deeper introspection.
Learning
to lead
SEND USA TWEET!
Have you attended
any recent events?
Let us know your
thoughts, tweet
@CFGtweets
Martin Birch,
Director – Finance and
Operations, Christian Aid
Charity Finance Group - Finance Focus

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Charity Finance Group - Finance Focus

  • 1. 1 FOCUSFINANCE The magazine for CFG members March 2015 ALSO THIS MONTH: CHOOSING AN AUDITOR CROWDFUNDING PENSION DEFICITS HOLIDAY PAY Rebrands Are they worth the investment?
  • 2. 3 Caron Bradshaw, Chief Executive Contents Member matters 04 Nick Swarbrick discusses life with crocodiles and increasing commercial astuteness in the sector. On our radar 06 We ask what’s next for social investment after the general election. Power of the masses 09 Mike Huggins advises on how to make the most of crowdfunding and social investment platforms. Rebrands: Are they worth the investment? 10 Lucy Bernstein gives advice on getting the most from a rebrand, while Craig Duncan and David Roberts reveal their personal experiences. How to choose an auditor 12 Rohan Hewavisenti and Tom Davies offer insights charity and the auditor perspectives. Time to review holiday pay 14 Fudia Smartt explains the challenges employers face after a European court ruling on holiday pay. A deficit of trust 15 Peter Askins summarises the options for charities with legacy defined-benefit pension schemes. CFG events 16 We reveal the full details of this year’s Annual Conference. Learning to lead 18 Martin Birch explains why good leadership requires tougher, deeper introspection. Production and editing: Slack Communications Design: SteersMcGillanEves If you have any queries about Finance Focus or are interested in writing for us, please contact gareth.jones@cfg.org.uk. Neither CFG nor the authors of individual articles can accept liability for errors, omissions or any actions taken as a result of the content and advice contained within Finance Focus. © Charity Finance Group A Company Limited by Guarantee. Registered in England No. 3182826 Registered Charity No. 1054914 15-18 White Lion Street, London, N1 9PG www.cfg.org.uk Force for good: can profit and social change mix? I recently attended an interesting seminar on social ventures. The presenters argued that the legal construct of a venture should be irrelevant, and that it was the organisation’s ability to bring about social change that mattered. Time constraints prevented a detailed exploration of some of these fascinating avenues, so I’ve been reflecting on them ever since. The one that particularly stuck with me was the statement that if you can get corporates’ strength focused on social good, they are “arguably the best vehicle for social change because of their often plentiful resources and their ability to innovate”. Businesses as a “force for good” is not a new concept. There have always been entrepreneurs, such as the late Anita Roddick, with a strong values- based approach to business. But increasingly we are seeing businesses (perhaps encouraged by politicians) entering the public and social arenas without their motives being clear. I am no business basher. I do not see profit as evil, but I do believe that “motive” in this context is very important. This isn’t all about resources and innovation, it is also about commitment to those in need. If your drive and legal duty is to make a return to shareholders, however nice the social change element may be, it is unlikely to trump the imperative of profit. The pursuit of profit can also have a negative effect on competition. For instance, what if a company is temporarily accepting risk and loss in order to corner a market? What if such practices, instead of driving innovation and change, actually narrow the options by killing off other organisations? Meanwhile, there is an unhealthy relationship between profit and social change. On the one hand, it seems acceptable for a business to generate a return if it saves the public purse and delivers social change (and I’m afraid I believe it’s in that order of importance). However if a socially driven venture happens to make money on the back of delivering social change (including paying staff decent salaries), this is somehow obscene. Size matters? Businesses’ “plentiful resources” mean they can often be very large, and this is another way in which you might argue that they are the ideal social actors. Charities are frequently told to “scale up” and that “economies of scale” are the Holy Grail, offering the perfect balance between efficiency and effectiveness. Maybe that’s true. Maybe we need to accept that it could be better to provide for the masses at the cheapest price rather than accommodating the niche or the marginal. That it’s better to help the many than attempt to help all. And indeed, sharing resources can be beneficial too (if you can get around VAT challenges). However, while we must be willing to entertain that concept, we shouldn’t kid ourselves that scale equals efficiency any more than small equals quality. Overall, the lines are blurring between the sectors and, as long as social change is the primary driver and profit is secondary, who cares what the legal construct is? Not me. But it must be in that order – the alternative leads to exploitation, mediocrity and marginalisation. CARON’S COMMENT
  • 3. 4 554 MEMBER MATTERS The latest updates for CFG members plus opportunities to contribute to CFG’s policy work. Donor benefits review In the Autumn Statement, the government announced that it would be reviewing donor benefit rules for Gift Aid. In order to hear from members about their experience of the rules and how they could be improved, we have created a short survey which you can take http://svy.mk/18lDiLI. If you would like more information please contact the policy team. Tackling irrecoverable VAT Irrecoverable VAT is estimated to cost charities over £1bn a year, and this could rise should the next government decide to increase VAT in order to reduce the deficit. Ahead of the election, CFG is keen to hear from charities that have been affected by the burden of irrecoverable VAT and how it has impacted on their work. If you would like to share your experience, please contact the policy team. Seeking full cost recovery case studies A number of charities have reported that they are experiencing difficulties in charging commissioners for the full cost of service delivery. This is worrying because it threatens their long-term sustainability. We are looking for case studies of charities delivering public services that have experienced difficulties ensuring full cost recovery. If you would be willing to share your story, please contact the policy team. Setting up a CFG pensions forum One of the biggest issues facing the sector is how to deal with growing pensions liabilities which have grown significant since the financial crisis. Last year, following the successful publication of Navigating the Pensions Maze, CFG announced that it would set up a pensions forum. This will enable members to discuss pensions- related issues and ways that we can improve the pensions landscape for charities, and the proposal received significant interest for charities. We are now in the process of setting up this forum. We are open to charities of all sizes and are not limited to any specific part of the sector. If you would like to be involved, attend meetings or would like to raise any policy challenges that the forum should address, please email the policy team. Voice your views Visit the CFG website for more information: Policy > Have Your Say > Consultations CONTACT US Email policy@cfg.org.uk to contribute to any of our policy work What does a typical day look like for you? I cycle to work each day, so it’s normally wake up, breakfast and out on the road by about 6.30am, arriving by around 7.30am. Until about 9am, I probably have my most productive time of the day, as no one else is around. The rest of the day is spent meeting with the team or the wider business, understanding and dealing with the issues of the moment. I have a lot of my “thinking time” on my cycle to and from work. Some of my ideas are good; others “need work”. Thankfully I have a great team who are more than happy to point out which idea fits in which category! What inspired you to work in the sector? Initially, I hadn’t been specifically looking in the not-for-profit sector; I was just attracted by the very exciting role here as CFO at Turning Point. But now that I am here, I’m absolutely loving it. The sector has lots of challenges ... but that’s what keeps it interesting! What do you value most about your membership of CFG? Whenever I go to CFG-run events, I meet many other people who are passionate about what they do. What I notice most is the willingness of people to share their experiences and learnings with each other; much more so than in the commercial sector. What are the most important skills needed for your role? Communication – keep it simple, tell the story behind the numbers. Also, influencing – build relationships across the business based on mutual respect, and be that “critical friend” offering both support and challenge. What song title best sums up your job? “Don’t worry, be happy”, by Bobby McFerrin. How will the charity sector look in 10 years’ time? A difficult question in any sector, but even more so in ours, given the political dynamic. For me, the issue is less about guessing the future, and more around building an organisation that can respond quickly and flexibly to changing circumstances. What have been the biggest changes to the charity sector since you started working in it? I think the sector has had to become more commercially astute, and that is no longer a taboo because it’s an essential prerequisite for being sustainable into the future. If the government could change one thing to make your life easier, what would it be? One of our biggest challenges at present is around TUPE legislation. It would be much better if this system was made simpler. It would also be great to see more emphasis on pooled budgets to allow us to better provide integrated support for people with complex needs. What one thing would significantly improve your working day? Less emails and more chocolate! What’s the worst job you’ve done? I worked in a restaurant near Cairns which catered for boats going out on the Great Barrier Reef for the day. The route there was between two crocodile-infested lagoons, and I had to get there at 4am in the pitch black to start work on the meals. Not fun! I only lasted two weeks before I decided that I’d had enough. Dr Who or Star Trek? Hmmm, tricky one. Love Star Trek, particularly the latest two films, and I am also a keen fan of Dr Who (though still getting used to Peter Capaldi), so I think I’ll go for both please. and special interest groups. To view a full list of membership benefits, please visit www.cfg.org.uk/benefits. We’ve sent all the renewal details in the post to the primary contact for your organisation. To ensure your membership continues uninterrupted, all you need to do is return your organisation’s renewal form to us along with your membership payment. Once we have received the payment, the primary contact in your organisation will be sent information on how additional people can register for benefits. If you have any questions about the changes to CFG charity membership, or about the renewal process, please contact Matt and Margaret in the membership team on 0845 345 3192 or membership@cfg.org.uk. We’ve also put together a short FAQ about this year’s renewals, which you can find at www.cfg.org.uk/renew. We hope that you’ll remain part of our network, and we look forward to seeing you and your organisation continue to benefit from CFG membership. Don’t forget – early-bird booking for CFG’s Annual Conference ends on 27 March. If you’re planning to attend, make sure you renew your organisation’s membership as soon as possible so that all staff can take advantage of the best booking rates! Full programme and booking information is available at www.cfg.org.uk/ac15. Nick Swarbrick discusses charities becoming more commercial and life with crocodiles. It’s that time of year again when we’d like to invite you to renew your organisation’s CFG membership for 2015-16. We’ve also made some changes to our membership scheme. Member of the month Nick Swarbrick, Chief Financial Officer, Turning Point As you may have seen in the last issue of Finance Focus, following feedback from our latest members’ survey we’ve made some changes to the structure of our charity membership scheme. These changes are designed to bring even more benefits to CFG members. From April 2015, membership will be for your organisation as a whole, and all staff will be able to take advantage of CFG membership services such as reduced ticket prices at CFG events, free regular members’ meetings for networking and learning opportunities, access to our free specialist helplines, and the opportunity to sign up to forums It’s time to renew! Welcometoour newmembers andsubscribers! Members Cardboard Citizens LEUKA Advocacy Support in Cymru Subscriber Bottomline Technologies Photography:HarmitKamboPhotography www.the-snapper.com
  • 4. 6 766 ON OUR RADAR CFG’s policy work: representing your views to decision makers, plus research, guidance and news from around the sector Since the economic downturn there has been a great deal of discussion among politicians and some charity leaders on the need for more mergers. The main argument is that many charities are essentially carrying out the same work and therefore soaking up resources that could be better spread around the sector. Others have voiced fears that this could impact on people’s right to join together to pursue a common cause, as well as damaging innovation within the sector. January saw these issues raised again during a debate held by the Institute of Fundraising to discuss the upcoming general election. The Charity Commission’s register of mergers hasn’t shown a clear trend towards more mergers. However, Eastside Primetimers’ review last year indicated that, when you look deeper into the sector, there does appear to be a lot of activity. Between January 2013 and April 2014, The Good Merger Index found around 90 deals involving mergers, takeovers, group restructuring, asset exchanges and acquiring subsidiaries. Around £222.9m of income was transferred through these deals and more than 32,000 employees affected (4% of the sector’s workforce). This is a considerable amount of change, and it wasn’t just national charities that were involved. Over half of the mergers involved local organisations coming together, mostly driven by funding cuts. The main barriers to mergers are not motivational but financial and operational, and a central challenge has been the growing pension liabilities of the sector. In the good years, many charities accrued significant liabilities that are now preventing them from pooling their resources together. CFG has been working hard to raise awareness of this issue. Helping charities to deal with their pension liabilities would be one way that the government could clear some of the obstacles facing those that wish to merge. Another barrier is the cost of legal fees, advice and due diligence that organisations need to be in a position to meet their fiduciary duties. Coupled with this is the time it takes for mergers to go through, with the process often taking months and years to complete. However, consideration also needs to be given to the merits of mergers. It is well known in the business world that most mergers fail to bring the expected benefits, whether due to financial or cultural issues, as well as changes to the market. Similarly, more research is needed into the success and failures of charity mergers so that we can learn from best practice. We need to make sure that charities are not prevented from merging, but equally, mergers are not the answer for every charity. A balanced debate focused on the strengths and weakness of mergers, combined with efforts to remove the practical barriers that face charities, is the way forward. 7 In an election year, what’s next for social investment? In one of the least surprising developments in the run up to the general election, the Minister for Civil Society has announced that encouraging people to make social investments will be included in the Conservative manifesto. With regard to Labour’s stance, the party has previously said that it would like to make sure charities can access basic loans, but has mentioned little beyond that. It was always likely that social investment would feature in the Conservative manifesto, especially when we consider that the current government has already set up Big Society Capital and created the social investment tax relief. Yet the upcoming election begs the question: what’s next for social investment? The minister has said that the Conservatives would try to open up social investment for CFG supports raising audit threshold In a joint response with NCVO to the Cabinet Office’s consultation on the audit threshold, CFG has supported the proposed increase of the threshold from £500,000 to £1m. This should help reduce audit burdens on several thousand charities. However, CFG has also called on the Charity Commission and others to communicate the positive aspects of auditing, which enables charities to receive advice and to properly understand their assets and liabilities. CFG also highlighted the need for some aspects of the SORP to be reviewed, such as salary disclosures for those charities above the existing audit threshold. You can find CFG and NCVO’s response here: bit.ly/17gBiTn. Local Government Pensions Scheme questioned CFG has recommended that the government reform the Local Government Pension Scheme (LGPS) through segmenting liabilities and providing clear guidance to administrating authorities on repayment periods. In response to a technical consultation on new regulations, CFG called on the Department for Communities and Local Government to improve the LGPS for charities and to reduce long-term risks. For instance, many charities are trapped in unsustainable schemes because they cannot afford exit payments. You can read CFG’s response here: bit.ly/1v4bXqV. Government must promote Gift Aid In a New Year debate hosted by the Institute of Fundraising, CFG’s Head of Policy and Public Affairs Andrew O’Brien called on the government to promote Gift Aid and to reform the Gift Aid Small Donations Scheme to support small charities. CFG has been working closely with government on a new wording for the Gift Aid Declaration, but research indicates that public awareness and understanding of the scheme needs to be increased if claims are to rise. CFG asks for clarity on trustee guidance CFG has called on the Charity Commission to make trustee guidance more clear regarding the difference between legal duties and minimum good practice, while also recognising the diversity of the sector. In a joint response with NCVO and the Association of Charitable Foundations, CFG highlighted the problems with the current “must” and “should” guidance put forward by the Charity Commission. CFG’s consultation response is available on our website. Policy progress As the Conservatives make no secret of their enthusiasm for social investment, what is the future for this nascent market? The big question that many are avoiding is whether there is actually any demand for social investment from charities “retail investors”. These are ordinary people investing smaller sums of money, probably less than £10,000 each. Many commentators on social investment have highlighted this as a potential growth area. This is not only because members of the public are a big market, but because individuals may be likely to lend at lower interest rates than “institutional investors” such as banks and intermediaries. This is because individuals may be motivated by passion for the project, as well as pursuit of returns, when making their investment decisions. However, this market may be harder to tap into than the government thinks. UK households have one of the poorest saving rates in the developed world, made worse by our slow economic recovery. Also, with wages still lagging, it is unlikely that disposable income will rise fast enough to enable UK households to significantly increase their savings (although the recent fall in inflation is a welcome breather). There are also problems of awareness and understanding. Mainstream banks are still not offering social investment products to the public. Furthermore, “sophisticated investors” are not being advised to invest socially by their independent financial advisers due to a lack of awareness. The government needs to work with banks and advisers to make sure that more information is made available to the public. The next government should also consider investing more in Good Money Week, a campaign that seeks to encourage the public to invest socially. But even if we increase the supply, the big question that many are avoiding is whether there is actually any demand for social investment from charities. Surveys regularly show that while some charities are interested in social finance, barriers such as the caution of trustees and, most importantly, the cost of finance, are putting them off. This is coupled with the loss of sources of income which hold potential for social investment, such as public service delivery. CFG has frequently called on government to address these issues but it remains to be seen if any of the parties will provide an answer in their manifestos. What’s the big issue? Mergers
  • 5. 8 9 Mike Huggins, Partner, Baker Tilly Investors should only invest funds they can afford to lose 8 ON OUR RADAR CFG’s policy work: representing your views to decision-makers, plus research, guidance and news from around the sector 9 FUNDING FOCUS Mike Huggins advises charities on how to make the most of crowdfunding and social investment platforms. Power of the masses was set at 6% and the bond had a four-year term. The FCA’s generic warning to potential crowdfunding investors that “it is very likely that you will lose all your money” did not deter the 350 investors who contributed £1.5m within 20 hours. Social investments In 2012, the disability charity Scope became the first UK charity to issue a listed bond. They raised £2m through a three year bond, part of a plan to raise £20m in phases, to fund investment in their network of charity shops. Another variation is the social impact bond (SIB) which, rather than pay fixed interest, pays out a proportion of the money saved (by the government) as a result of its social impact. The first provider-led SIB was a £2m bond to finance “It’s All About Me”, a ten-year project delivered via a collaboration of 18 voluntary adoption agencies. The investor’s perspective Investing in charity bonds is particularly attractive to charitable trusts with funds to invest – it enables them to support good causes while achieving a return, with the potential to recycle these returns into further charitable works. This is simply not something permitted by a simple donation. The returns on offer also make them attractive to private investors. A big boost will likely come from the Chancellor’s social investment tax relief (SITR), which gives individuals who invest in qualifying social organisations a reduction of 30% of that investment in their income tax bill. As with any other investment, when assessing an investment’s risk profile investors should consider normal criteria – whether the project to be funded is viable and likely to be successful, and whether it will generate the necessary cash flows, minimise risk and maximise the prospect of the eventual return of the sum invested. These are not guaranteed and investors should only invest funds they can afford to lose. Being realistic Even donation-based crowdfunding is not a guaranteed panacea. Cancer Research UK’s three campaigns at Indiegogo each raised less than 10% of their targets in the last months of 2014. What all charities can do is to learn from the successes and disappointments of crowdfunding to date. Crowdfunding is not confined to the charity sector but it is a powerful way for charities to connect with a wider base of technology-savvy potential supporters, and it is likely to grow exponentially over the next few years. A well-thought-out project, a well-presented funding case and a well-executed marketing campaign can build upon existing supporters through social networks and reach a new base of engaged supporters – a potentially transformative experience. “Crowdfunding” was a contender for the Oxford English Dictionary’s Word of the Year in 2011. Four years on, the term is widely understood, but surprisingly few charities have grasped its potential. Back to basics Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people. That in itself is nothing new – Nelson’s Column was funded by public subscriptions – but what is new is the integral use of the internet. Crowdfunding takes two broad forms: • Donation-based – with or without some form of non-monetary reward or thank you; • Investment or loan-based – which is regulated by the Financial Conduct Authority (FCA). What is common to both forms is the use of a crowdfunding website. There are many available and they typically levy charges at a fixed rate, or as a percentage of funds raised, or a combination of both. They will also typically have a pre-screening application processes. New opportunities The beauty of crowdfunding is how it can open up new opportunities for charities of all sizes. Last year, AH2O wanted to raise £5,000 to start a charity in memory of Anton Hawkins, who was killed in a car crash in 2013. It met its target in just 19 days, and raised over £8,000 in 42 days. The appeal on Crowdfunder included a video, allowing AH20 to connect with potential backers in a way that, pre-internet, was available only to the largest charities able to fund TV campaigns. In many crowdfunding appeals such as this, fundraisers only ask for small donations of £5 or £10 upwards, offering rewards such as t-shirts, prints or opportunities to get more involved with the projects. Yet crowdfunding can also be used for much larger donations to fund larger projects. In 2014, the Eden Project sought to raise £1m by way of a mini-bond to build an education centre. The minimum investment was £500, interest Two SIBs approved for SITR Two social investment bonds designed to help homeless people have been given permission to use the social investment tax relief (SITR). These bonds, which have raised £910,000, will be used to fund services to help homeless people with the government paying out if the charities meet pre-agreed targets. The SIBs are the first to be approved for use of the Social Investment Tax Relief, which enable individuals to reduce their income tax liabilities by 30% of the amount invested. Around 15% of the fund was raised through individuals, with the rest coming from a group of social investment intermediaries such as Big Issue Invest, CAF Venturesome and Key Fund. Charities funded to help AE The Cabinet Office has given £1.2m in grants to Age UK, the British Red Cross and the Royal Voluntary Service to bring in volunteers to help 29 of the most under-pressure accident and emergency departments for 12 weeks. AE departments have faced enormous demand throughout the winter. These charities will bring 700 volunteers to help 10,000 patients, supporting both patients at home and assisting medical teams with speeding up discharge times. NCVO calls for better public engagement At a panel discussion during CFG’s Risk Conference, NCVO Chief Executive Sir Stuart Etherington said that charities need to engage with the public to improve how they are perceived. This means starting a discussion on what the public needs to know about charities, and how they should be given this information. Towards the end of last year, CFG, NCVO and other charities set up the Understanding Charities Group to look at these issues and to consider how the sector can better communicate with the public. Founder of Civil Society Media dies Daniel Phelan, Editor-in-Chief and owner of Civil Society Media, passed away on 11 February at the age of 58 after a long illness. Dan was a strong supporter of finance professionals through his publications and was a vocal champion of improving charity financial standards. CFG has released a statement on its website that you can read here: http://bit.ly/1yKS0Rk. News in brief... Research and reports Infrastructure bodies lack resources to adapt NAVCA’s independent commission on the future of infrastructure has found that local infrastructure bodies need to adapt, but lack the resources to be able to plan strategically. The commission has called on funders to provide more long-term funding for infrastructure, and to collaborate more in order to maximise impact. It also found that local infrastructure organisations often lack the skills they need to manage their resources and demonstrate their value. You can read the report at http://bit.ly/1EYrMD3. Lobbying Act has ‘chilling effect’ The Commission on Civil Society and Democratic Engagement’s inquiry into the impact of the Lobbying Act has found that the act has had a “chilling effect” on charities and their ability to speak out on politically contentious issues. The inquiry also found that the act has consumed significant charitable resources through additional red tape and has made it difficult for charities to work together due to the added complexities. The report is available to download at http://bit.ly/1KJdmqU. Commission updates guidance on tax reliefs The Charity Commission has published new guidance for charity trustees on the use of tax reliefs and how to administer them. It explains how the use of reliefs and tax planning is both necessary and sensible for charities, how trustees must act prudently and not enter any arrangements which could damage the charity’s reputation, and how charities must not engage in tax evasion or fraud. The new guidance is available at http://bit.ly/1z7UcDI. New risk management guide published The Institute of Risk Management’s Charities Special Interest Group has created a guide to help charities of all sizes make sense of risk management. The guidance is based on the approach set out in ISO 31000 and is entirely consistent with Charity Commission requirements. The new guidance is available on CFG’s website at http://bit.ly/16TLktV. SITR overview published Charity Finance Group has produced a short slide pack for charities and social enterprises that are considering using the new social investment tax relief to access finance. The pack includes useful links and case studies on some of the early adopters of the relief. You can find it here: http://bit.ly/1AuffGl. Guidance and support
  • 6. 10 11 Lucy Bernstein, independent creative director Your brand should be analysed and managed every bit as rigorously as any other major asset. It’s the foundation of your charity’s creative and strategic capital, and remains the responsibility of the entire organisation, whatever your size. The UK charity market is extraordinarily competitive, and the need to differentiate is vital. If your brand is healthy you will thrive. If not, you may need to consider a rebrand. Let’s tackle the basics: 1) What is a brand? A brand is so much more than your name and logo. It’s who you are as an organisation, what you do and what you stand for. Get this right and your brand will succeed on your organisational ambitions. 2) Why rebrand? Any commitment to a rebrand must start by ensuring all stakeholders have a shared view of what a brand is. Then, apply this to your own organisation. Given that finance directors play a pivotal role in monitoring and harnessing a charity brand’s health, your financial instincts should be honed on any rebranding business case. Ask the right questions and the financial risks are substantially mitigated. Here are some of the challenges that serve as an answer to “why rebrand?” • Your existing and potential audiences lack knowledge of your charity’s specific aims, policies and achievements and need to be engaged; • An impending merger with a new organisation requires an articulation of the joint brand proposition; • By redefining or re-articulating your overarching brand promise, you’ve noted an opportunity to extend your brand into different arenas (for example, easyJet moving into the fitness market with easyGym); 1110 COVER STORY • You lack a brand identity which fulfils the need for long-running conversations with supporters beyond asking for donations; • You require a shift in focus to talk positively about the solutions your charity offers rather than solely on the problems it strives to tackle; • You’ve discovered that what you stood for has got lost in the proliferation of new contenders. 3) How do you rebrand? If the brand isn’t fit for purpose, you must help drive the taskforce that will tackle the difficult challenge of which brand elements to retain and which to jettison. The top considerations during the process should be to: • Conduct a comprehensive brand audit of all your collateral – internal and external. Use this to conduct a thorough review of what works and what doesn’t; • Involve your appointed branding agency, staff, donors, trustees, sponsors and partners in thorough research. Additionally, access those that don’t currently engage with your brand, allowing you to future proof your income by identifying potential new donor audiences or service users; • Utilise the audit and research to (a) identify elements of the rebrand that can be handled in-house and thus maximise your internal capabilities, and (b) formulate an agreed brief for your external agency for areas you need help with. This will help you in keeping to agreed costs; • Avoid emotional subjectivity and allow your data to drive decision-making. Leverage it to define objectives and success-criteria from the start; • Be realistic about timeframes and agree parameters to avoid “project creep” and associated costs; • Secure employee buy-in from the start. Brands strive to attract and create a community around their purpose and values, so commit to a taskforce of cross-functional stakeholders. The more you reach all areas of your organisation, the more fluid and cost-effective the rebrand will be. • Invest in resources for the rebrand roll-out across the whole of the organisation and factor this into your costs upfront; • Acknowledge the financial investment. A rebrand which covers research, recommendations, implementation and ongoing monitoring can cost between £5,000-£500,000 depending on the mix of internal and external resource. Rebranding isn’t without risk and may appear prohibitively expensive if calculated within one financial year, but successful rebranding, in the long term, will repay the investment multiple times. Rebrands: are they worth the investment? Branding expert Lucy Bernstein gives advice on how to get the most from a rebrand, while opposite, Craig Duncan and David Roberts reveal their personal experiences. reviewed regularly throughout the whole process by our finance team, which helped ensure it was delivered on budget. As a relatively small charity, we are particularly keen to drive cost efficiency and achieve value for money, so our finance team has input at strategic level to all our key projects from the outset. The main costs for the rebrand arose from developing our new website. It is still evolving, but we are very pleased with how it looks and functions. It is more streamlined in terms of content, easier to navigate and more visually appealing. The rebrand was developed by digital marketing agency Itineris and project- managed throughout by a small team overseen by our chief executive. The process was fairly smooth as we had done a fair amount of groundwork in advance and were very clear about what we wanted to achieve. Stronger bonds We feel our new name and brand more accurately reflects our leadership role as the national charity for hospice care, and also seeks to embody the breadth and flexibility of modern hospice care. So far, we have also had very positive feedback from our members. One of the main observations was how the rebrand has helped create a stronger sense of shared identity between the different organisations we represent, aligned to one cause. officially ended in 2009, there wasn’t anything taking its place. This vacuum had an impact on the NSPCC, and it was becoming increasingly difficult to sustain our regular giving base as the cost to acquire new regular givers was increasing. Furthermore, while the NSPCC is a trusted brand, our research demonstrated that there is a lack of understanding about what we actually do. Only 30% of the public can spontaneously give the name of a service that we provide, and 80% of the public don’t know that Childline is part of the NSPCC. Public support is fundamental to what we can achieve, and in an era of charity scepticism, austerity and institutional mistrust, we need to be more transparent and show demonstrable impact. We believe that the rebrand will help to build a greater understanding of the ways in which children can be protected. Return on investment The easiest way to make a return on your investment is to keep the cost of the Rebranding helped the NSPCC get back in touch with supporters When undertaking a rebrand it is important to know why you are doing it, and to reassure yourself that you’re going to get a return on your investment. The NSPCC’s Full Stop campaign was launched in 1999 as a fundraising appeal, with the line “Cruelty to children must stop. Full Stop”. This became the brand platform for all NSPCC communications. When the campaign Hospice UK explore the value of updating their 30-year-old image. Last year, following widespread consultation with our members and key stakeholders, we embarked on a rebrand where we changed our name to Hospice UK, refreshed our logo and launched a new website. The name under which we were originally founded (Help the Hospices) had become rather dated after 30 years. We wanted to rejuvenate our brand, amplify our collective voice and further increase public awareness about hospice care at a national level. Holding the purse strings We were on a strict budget and keen to minimise costs. Total spend for the rebrand was just under £100,000. We received a grant of £26,000 towards the costs of the website from one of our funders. Costs for the rebrand were Craig Duncan, Finance Director, Hospice UK David Roberts, Director of Finance and Corporate Services, NSPCC investment as low as possible, whilst ensuring that it will deliver the outcomes you are looking for. If the aim of our rebranding was to increase the relevance of the NSPCC to existing and potential supporters, then the sensible place to spend money was in engaging with them. Two-thirds of the £150,000 investment in our rebrand was the cost of research with the general public, including people who donate, volunteer and campaign for us. We also talked with the adults, children and young people we help through our national helpline and our face-to-face services. Finally, we spoke to professionals, such as social workers and teachers, who refer children and families to our services and come to us for advice. Are we getting a return from our investment? Our Christmas campaign was our best ever. Was that because of a new TV ad, an improved economic outlook, our re-branding, or a bit of all of them? We’ll need some econometrics to unpick all that, but I feel pretty confident that our £150,000 investment is paying back. However, there were some changes along the way. The month before we were due to launch our new rebrand, we were contacted by the Cabinet Office to administer a new grant scheme for social action projects led by end-of-life care organisations. As this was due to be widely promoted to media and key stakeholders, we felt it made sense to bring the rebrand launch forward. Things were pretty busy in the run-up to launch day. However, we had already done a lot of preparatory work and the different teams working on the rebrand all pulled together, so we managed to rise to the challenge. Advice for others For other charities considering a rebrand, I would advise that it is very important to have your key stakeholders on board from the outset. We undertook an extensive consultation process with our members throughout our annual regional roadshows, and also consulted external stakeholders – from funding partners to policy makers. Also, establish a fixed maximum spend early on and do not deviate from this. We had a strict budget and stuck to it. It is still early days but we are very pleased with the results, and believe it has been a worthwhile investment. We are confident it will enhance our efforts to champion hospice care at a national level and are excited about how it will evolve and grow in the future. Changing the narrative Branding on a budget
  • 7. 12 AUDIT FOCUS 12 Tom Davies extols the benefits of face-to-face meetings and asking the right questions. Choosing an auditor 13 As well as getting references from existing clients, it is worth scanning a few of their annual reports During this time, the finance and audit teams got to know and trust each other well. Yet despite these successes, 10 years was probably too long. You may well have procurement guidelines that state otherwise, but I suspect three years is too short for professional services. It should probably be reviewed after five years, and potentially extended for a further two or three years, at which point there should definitely be an open market tender. The tender process can take three to six months. The process should be kicked off shortly after the year-end audit has been completed. This will allow time to send out the invitations to tender, receive the firms’ tenders covering their experience and approach, shortlist and interview candidates, appoint the candidates, and enable handover prior to the start of the next audit. Selection criteria My preference has been to appoint firms with partners specialising in charities. Audit partners that deal with just one or two charity clients will not have the necessary in-depth expertise or breadth of knowledge to support most charities. As well as getting references from existing clients, it is worth scanning a few of their annual reports. Shortlisted candidates should ideally have clients of a similar size, and some working in the same sector. As well as the technical expertise, there also needs to be a fit with the culture of your organisation. Ongoing monitoring We measure the effectiveness of auditors against several criteria: • Timeliness in meeting deadlines; • Quality of reports; • Constructive challenge; • Usefulness and practicality of recommendations; • Quality of assurance received by the board and audit committee; • Level of thoroughness in their work; • Quality of training provided; • Reasonableness of fees. Some organisations may want an audit that is as cheap as possible to meet the minimum statutory requirements. At the British Red Cross, we took the view that we needed a more proactive and strategic approach. Internal audit One frustration with the external audit landscape is that statutory auditors are not allowed to place reliance on the work of internal audit without carrying out due diligence on the internal audit function. With most charities, that due diligence work is not cost effective. However, internal and external audit should work together closely; for example, internal audit should follow up on external audit findings to ensure recommendations are implemented quickly. In my days as an auditor, I performed an audit in Ghana and visited two areas which had been agreed with the client. At the end of the audit, the client told me that there had been suspicions of fraud in an entirely different area, and asked if I had discovered anything. Unfortunately, auditors don’t have telepathic powers. They need to be given full and open access to information – including the internal problems and issues you are facing. The lesson learned here is that auditors can only perform as well as you allow them to perform. thus enabling them to hit the ground running upon appointment. Who is who? Increasingly, audit firms will now include two directors or partners alongside the overall manager in their proposed audit teams. While one will be the audit partner/ director, the other will typically be introduced as a “relationship partner”. Under auditing standards, there can only be one individual responsible for an audit, and it is they who are required to have performed all of the necessary reviews of the audit file. Accordingly, it is important that you understand who will be signing your auditor’s opinion. Where an audit firm is proposing a relationship partner, be sure to enquire about what they expect to be doing and how often you will see them. This said, never underestimate the importance of the manager. She or he will act as your first point of contact during the audit and will be responsible for its smooth delivery. During the tender meetings and presentation, be sure to direct questions specifically to the manager so that they have a chance to respond and so that you can learn more about the individual. As a manager, I will never forget being asked by an audit partner on a selection panel: “If I was to review your audit files, what would be my main criticism?” – a tough question but one where the answer can be quite revealing! Check what’s included As auditors, we are all guilty of highlighting in our audit proposals a range of different services that our firms can provide. It is important for you to have absolute clarity on what is included in the price and what isn’t. At the present time, for example, it is important to confirm whether the increased costs of transition to the new FRS 102 SORP are included in the fee or not. Finally, I would stress that in choosing your auditors you should ultimately select the team and individuals you can see yourself and your organisation working with – the team with the personalities that will have the best fit with your organisation and whose experiences of, and interest in, the sector will ensure that their engagement with you goes beyond simply giving an audit opinion. Tom Davies, Not for Profit, Grant Thornton UK Tips on the tender process Rohan Hewavisenti, Director of Finance and Business Development, British Red Cross There may be concerns over issues such as fee levels, conflicts over accounting policies, timeliness (although there is nearly always fault on both sides), high staff turnover or lack of team continuity, and not enough (or too much) advice on non-audit matters. These should be discussed openly during the planning stage and post-audit evaluation stage, rather than trying to achieve a resolution by going out to tender and appointing a new auditor. Tender process The British Red Cross went through a tender process after more than 10 years with the same auditor. In that time we had brought our year-end timetable for signing off the accounts down from over seven months to under three, and won two annual report awards. We had sharpened the timetable by shifting more work to the interim audit, and by ensuring changes were implemented and disagreements resolved before the final audit. We also made sure writing of the narrative report began before the year-end, as most of the content could be written well in advance. Having the right auditor is critical for your financial strategy. Your external auditor needs to provide constructive challenge and assurance on your financial and management controls. This, in turn, will provide a strong foundation for your organisation’s financial management, reporting and analysis. Auditors should also provide an overview of what’s happening in the sector, changes in regulations, benchmarking with similar organisations, and insight gained from dealing with a range of clients. But if you have a strong working relationship with your existing auditor, why bother changing? The answer is that things may have become too comfortable. The finance team and auditors may not be challenging each other enough. However, there may also be reasons not to change. A disagreement over a particular accounting treatment, for example, is not a good reason. You should not look to shop around in order to get a favourable accounting treatment – any new auditor should have been forewarned by the outgoing auditor. Ask them to prepare a draft audit plan as part of their proposal. This enables you to assess whether they really understand your organisation Without doubt, the most fruitful and (dare I say it) enjoyable audit tenders I have been involved in are where both parties have been able to invest time in the tender and have, as a result, had the chance to learn more about each other and how they work. For example, while most charities will now give prospective auditors the chance to have at least one meeting with representatives of the charity, there are still occasions when no such opportunity is given and organisations simply request a proposal to be submitted without a face-to-face meeting. I have to be honest and say that this can be fairly disheartening, and I would urge you to provide the opportunity to hold these meetings – including the option of meeting with at least one trustee (for example, the chair of the audit committee). It is always interesting to have the trustee’s perspective and to hear what they are looking for from their auditor. Not surprisingly, such meetings regularly highlight different priorities, and it’s important for us as auditors to understand these. These meetings also provide the opportunity for you to learn more about the proposed audit team, and especially the dynamic between the responsible individual (the partner or director) and the manager. From these meetings you will develop a feeling about what it would be like to work with them, their knowledge of charity sector issues (rather than just their firm’s knowledge), and whether there is a good “fit” between them and your organisation. Genuine understanding In return for this investment of your time, you should rightly expect the firms tendering to be able to demonstrate a real understanding of your organisation and how they will tailor their audit approach accordingly, adding value to your organisation. An excellent way of doing this is to ask them to prepare a draft audit plan as part of their proposal. This not only enables you to assess whether they really understand your organisation, but also gives you a taste of the quality and nature of the reports they will be presenting to you going forward. I have found that, where we have been asked to prepare an audit plan, it has resulted in some very interesting and engaging dialogue with the tender panel. Importantly, having both parties putting in effort at this stage will help with any transition process, as the newly appointed auditor will have already performed an element of their initial planning activities, An auditor can be a key financial partner, but what you get out depends on what you put in, says Rohan Hewavisenti.
  • 8. 14 151514 HR FOCUS PENSIONS FOCUS Fudia Smartt explains the challenges employers face after a European court ruling on holiday pay. A deficit of trust Peter Askins summarises the options for charities with legacy defined-benefit pension schemes. Fudia Smartt, Senior Associate, Russell-Cooke LLP Peter Askins, Director, Independent Trustee Services Limited approved by both the Pensions Regulator and the Department for Work and Pensions. When taken in the context of the Budget 2014 changes to defined contribution schemes, which allow access to pension savings, it is incumbent on DB pension scheme trustees to make their members aware of these changes, as taken together, they may be in the beneficiaries’ interest. The requirement from April 2015 that trustees of DB schemes satisfy themselves that any member requesting a cash equivalent transfer has taken appropriate financial advice chimes with the practice in the ETV code of practice. The recent announcement that regulators are to review their guidance to trustees and financial advisers in the light of the budget changes also provides further confidence that where properly implemented, ETV exercises can benefit both the sponsor and the individual beneficiary. Issues such as these and the inherent conflicts of interest for charity trustees who also sit as pension scheme trustees, make up-to-date knowledge and experience of an evolving regulatory and governance landscape on the pensions side an imperative. The respective liabilities and fiduciary duties of charity trustees and pension scheme trustees are very different. For instance, whilst a charity trustee may invest charitable funds without taking professional advice, if a pension fund trustee did so they commit a criminal offence punishable by two years in prison and an unlimited fine. Although that is an extreme example, there are many more nuanced differences between the two types of trustee. Increasingly, our experience is that trustees fulfilling both roles are recognising the need to remove conflict and professionalise the pension trustee element. Our two most recent appointments to charity DB schemes have been on a sole corporate trustee basis, having the effect of removing the risks associated with conflict of interest from the trustees and leaving them free to concentrate on the objects of the charity, and where appropriate, their obligations as an employer. There is a growing awareness, in both the private and the third sectors, that extending repayment periods in the hope that deficit contributions and investment returns will match valuation assumptions and eliminate technical provision deficits is to a degree wishful thinking. Even if successful, that is the very lowest hurdle that has to be cleared. Sponsors still have the liability to fund ongoing pension commitments in an uncertain financial and regulatory climate. Without a forward-looking strategy and actions to manage the position proactively, there is an increasing danger that putting off decisions today will lead to catastrophic outcomes in the future. Time to review holiday pay Employers should consider changing their holiday and overtime arrangements now ETV standards have improved in the calculation of their holiday pay, such as pay to reflect seniority. Positives In accordance with the Employment Rights Act 1996, a claim for a series of unlawful deductions from wages for underpayment of holiday pay normally needs to be brought within three months of the last in the series of deductions (subject to certain exceptions). The EAT has now held that if there is a gap of more than three months during which there is no underpayment of holiday pay, then an employee cannot argue that a further underpayment forms part of the same series of deductions. This is a very helpful concession to employers in limiting their liabilities. Furthermore, presumably in response to the furore following the judgment, the government unexpectedly laid before parliament the Deduction from Wages (Limitation) Regulations 2014 (DWLR) on 18 December 2014. Broadly speaking, the DWLR introduces a two-year limitation period so that employment tribunals will only be able to consider certain unlawful deductions, including in respect of holiday pay, which have occurred in the two-year period ending with the date on which the claim is presented. DWLR will only apply to claims presented on or after 1 July 2015, which will leave a transitional period during which workers will be able to bring claims for unlawful deductions, potentially stretching back longer than two years. This will, however, remain subject to a worker’s ability to establish there has been a series of deductions and, following the judgment in Bear, that no more than three months has elapsed between each one. In addition, DWLR makes clear that the Working Time Regulations 1998 (regulation 16) do not confer any contractual right to paid leave, thereby preventing employees from bringing claims for underpayment of statutory holiday in the civil courts, in order to avoid the shorter limitation period in the tribunal. Next steps As it now seems unlikely that Bear will be appealed, employers should consider changing their holiday and overtime arrangements now. For instance, employers may wish to provide time off in lieu instead of overtime to avoid the difficulties in calculating normal remuneration. Furthermore, employers will also have to consider whether the Bear Scotland case will impact other matters such as workplace pensions where an individual is an “eligible jobholder” subject to their “qualifying earnings”. An unintended consequence of the Bear Scotland case could be to increase an individual’s holiday pay (particularly in periods of high seasonal overtime) to the extent that they could be above the automatic enrolment threshold. Last year employers were left reeling from the European Court of Justice (ECJ) judgment in Lock v British Gas Trading Limited (Case C-539/12), where it was held that for the purposes of the Working Time Directive, the “normal remuneration” to be paid to a worker while on annual leave should include the commission the worker would have earned had he or she not taken annual leave. The ECJ stated that the method for calculating normal remuneration in these circumstances will be left for the national courts or tribunals to determine, and the case has been remitted to the Employment Appeal Tribunal (EAT). For employers who pay staff commission payments, the Lock case will have significant (and costly) ramifications, and may require them to change the way in which some staff are paid. However, the impact of the co-joined cases of Bear Scotland and others v Fulton and others, Hertel (UK) Ltd v Wood and other, and Ameck Group Ltd v Law and others are of greater concern to those in the charity sector. In these cases, the EAT held that all elements of a worker’s normal remuneration, including payments in respect of non-guaranteed overtime, must be taken into account when calculating holiday pay under the Working Time Directive. The Bear Scotland v Fulton judgment is very much in line with the current judicial trend to ensure that workers receive all elements of pay they receive while on annual leave. For example, the ECJ held in Williams v British Airways plc that pilots’ holiday pay had to include any element of pay which was intrinsically linked to the performance of the tasks that they were required to carry out under their contracts of employment. In addition, they were also entitled to all components of remuneration relating to their “professional and personal status” For those CFG members with legacy defined-benefit (DB) pension schemes, the increase in scheme funding deficits is a growing cause for concern, not just for the sponsoring charity but increasingly for donors. As we have seen in one or two extreme cases, the deficit can threaten the continuing viability of the charity. Several have been brought low in these very circumstances. The similarities between the problems faced by small and medium-sized charities with legacy schemes and small and medium- sized employers in the private sector is marked. Both wanted to do the right thing by their employees but now find themselves burdened with regulatory and funding requirements that were unimaginable when they set up their schemes. Determining the strength of the sponsoring employer’s covenant presents difficulties for trustees and sponsors in both sectors, but is particularly noticeable in the third sector. The same applies to minimising the impact of the scheme deficit on delivering the aims and objectives of the sponsoring organisation. Increasingly in the private sector, sponsors are looking to develop strategies designed to lead to the eventual wind up of the schemes. Generally, this means looking at ways to reduce scheme liabilities and alternative funding arrangements; there is a general acceptance that you cannot “invest your way out of a deficit”. These are legitimate aims but present issues for pension fund trustees in ensuring that beneficiaries’ interests are protected. The recent Budget changes relating to trivial commutation and small pots are welcome as they help to reduce the administrative burden on schemes, and provide beneficiaries with meaningful amounts of capital when they might otherwise receive very small pension amounts. By definition, the effect on scheme funding is not great but in liability reduction terms can be seen as a step in the right direction. Enhanced transfer values Enhanced transfer values (ETVs) have been the subject of criticism in the past and have attracted an element of reputational risk. However, standards have improved following the introduction of an industry code of practice, which covers the process and provision of advice and which was
  • 9. 16 171716 CFG EVENTS Keeping you ahead in your career: highlights of upcoming CFG events across England, Scotland and Wales. Book now at www.cfg.org.uk/events. CFG Annual Conference Driving performance and growth CFG’s flagship event, the Annual Conference, will return to the QEII Centre in May, and we’ve put together an exciting and engaging programme for 2015 featuring a great line up of speakers. This popular event provides a fantastic opportunity to hear from inspirational speakers on the issues that impact your charity. The Children’s Trust’s Chief Executive Dalton Leong and Director of Finance John Tranter will open the conference by looking at the role of the finance function and business partnering. We are also thrilled to announce Dame Stephanie Shirley, businesswoman and entrepreneur, as our closing keynote speaker. Dame Stephanie will be in conversation with Pesh Framjee, Head of Non Profits at Crowe Clark Whitehill and CFG Special Adviser, sharing her experience and taking questions from the floor. This year’s five-stream programme covers income and investment, reporting and inspiring, management and strategy, governance and risk, and leadership and change. We’ll be joined by speakers from both the corporate and charity world, covering topics such as impact reporting, internal audit, KPIs and benchmarking, strategy, business continuity, decision- making and much more. Programme highlights include: A wolf from Wall Street? A banker moved to charity Steve Harris, Scope Having moved from a job in banking to the world of charity, Steve Harris will explore how charities can learn from other industries, and what other sectors can learn from charities. Ethical investments Helen Wright, Finance Director, Comic Relief, and Clare Brown, Finance Director, The Elders In this session, Comic Relief will share how they went about reviewing and implementing a new investment strategy. Impact reporting Sam Coutinho, Partner, haysmacintyre and Helga Edwards, The Woodland Trust Last year haysmacintyre worked with the Woodland Trust to find a solution to reporting impact within their statutory accounts. This case-study session will provide an overview of the approach used, the method and the outcomes. CLIC Sargent: Better by design Lorraine Clifton, Chief Executive, and Sherine Wheeler, Assistant Director of Services, Innovation and Change, CLIC Sargent In this session, CLIC Sargent will show how they successfully adapted models and methodologies from the private sector in order to make large efficiency savings, drive performance and prepare for growth. All change please! – the role of accountants in a restructure Liz Hazell, Saffery Champness, and Mike Fowler, Brook Young People This session will discuss the importance of involving the finance team in all steps of restructuring a charity, including how management information and accounts should be used as a communication tool internally and externally, the difficulties of managing teams in a period of change, and how to motivate the finance team. Two nations divided by a common language: finance and fundraising working together Mark Astarita, Director of Fundraising, and Rohan Hewavisenti, Director of Finance and Business Development, British Red Cross Despite sharing common goals, an organisation’s finance and fundraising teams are often not on the same page. Mark Astarita and Rohan Hewavisenti will share their experiences of working together, the problems they’ve faced, and how they’ve made it work. The latest on pensions Richard Soldan, Partner, Lane Clark Peacock, and Kevin Barnes, Finance Director, Barnardo’s Following the Charity Commission’s recent concerns about the disclosure of pension risks in charity accounts, this session will provide a wide-ranging explanation of the impact of defined-benefit pensions schemes on charities, the actions charities can take to manage the risks and what steps other charities are taking. Ways to better decision-making Kate Sayer, Partner, Sayer Vincent This session will provide new insights into how we process information that is presented to us, and will make you think again about how to present decisions to the board. This new half-day conference will explore the importance of effective performance measurement when evaluating the success of change, and the role finance plays in identifying, recording and reporting on the key issues. If you’re a charity trustee or member of the senior management team and have responsibility for financial leadership and management during times of change, this is the event for you. The sessions will focus on relevant tactics and solutions for change management, and you’ll have the opportunity to hear from organisations that have successfully responded to changing expectations and more challenging environments. The aim of the event is not only to increase awareness of change management concepts, but also to help attendees understand better how to apply them for the best results and to drive performance in their organisations. Confirmed speakers include: • Simon Gillespie, Chief Executive, British Heart Foundation • Peter Cheese, Chief Executive, CIPD • John Drew, Partner, McKinsey Co and Ian Causebrook, Head of Corporate Strategy, Tearfund • Pesh Framjee, Head of Non Profits, Crowe Clark Whitehill Naziar Hashemi, Partner, Crowe Clark Whitehill, will be chairing the event. To view the event programme and book your place, please visit www.cfg.org.uk/managingperformanceandchange. This event is supported by Crowe Clark Whitehill. In challenging times, driving performance and successfully managing change is more important than ever. It is vital that charities are adept at planning for and implementing change and at achieving results. Bookonline!1 May 2015 London Managing Performance and Change Don’t miss out! Our early-bird rates for members are available until 27 March 2015! Book your place at www.cfg.org.uk/ac15. 13 May 2015 QEII Centre, London Don’t miss the opportunity to hear from inspirational speakers, gain practical advice, browse the conference exhibition, and network with your peers. Delegates attending the event are also invited to join us for the drinks reception following the closing plenary session. Visit www.cfg.org.uk/ac15 to view the full programme and to book your place. The 2015 Annual Conference is kindly sponsored by Grant Thornton. New dates have been announced for key training courses to support you and your team. Whether you’re new to the charity sector or well established in your role, there’s a range of training available that can contribute to your continuing professional development. Foundation charity finance 7 May 2015 London 15 July 2015 London 17 September 2015 Manchester A popular one-day introductory course providing a valuable overview of key aspects of charity finance. The main sessions focus on accounting under the SORP, and the direct tax and VAT regimes. Other topics include the annual report, audit, handling investments and charity sector financials. Run in association with BDO (London) and Saffery Champness (Manchester). Advanced charity finance 14 April 2015 London 14 April 2015 Manchester This course is a mix of interactive group sessions and plenary teaching, covering financial reporting, management and tax. Run in association with BDO (London) and Saffery Champness (Manchester). Foundation investment training 3 June 2015 London 3 September 2015 London Delivered in association with Sarasin Partners, this half-day course is designed to provide participants with a greater understanding of charity finance, legal obligations and how to make responsible decisions regarding investments. Advanced investment training 17 June 2015 London 20 October 2015 London Increase your knowledge of investment strategy, projecting returns and portfolio management at this half-day course. Run in association with Sarasin Partners. Trading and the law 11 June 2015 London Explore the main legal considerations impacting the trading activities of charities – with a particular focus on governance, funding, resource-sharing and VAT. Delivered in association with Hempsons and haysmacintyre. In addition to our core training courses, we are also exploring and developing new courses to include in our calendar of events for 2015/16. Keep an eye on our events pages in Finance Focus, on our website at www.cfg.org.uk/training and on your regular CPD e-update. Dates for your diary: essential training courses
  • 10. 1818 CPD Further your professional development with expert advice and a round-up of CFG events and training. Events at a glance For further information on all CFG events or to book, please visit www.cfg.org.uk/events or email events@cfg.org.uk. Conferences Managing Performance and Change: half-day conference 1 May 2015 London Annual Conference 13 May 2015 QEII, London Northern Conference 1 July 2015 Manchester Members’ meetings NORTHERN ENGLAND OPEN MEETING – Tax update and the new Budget 19 May 2015 Leeds Recognising and managing risk 17 November 2015 Leeds SOUTH WEST WALES OPEN MEETING – Tax update and the new Budget 10 June 2015 Bristol Recognising and managing risk 10 September 2015 Exeter MIDLANDS OPEN MEETING – Tax update and the new Budget 4 June 2015 Birmingham Recognising and managing risk 8 September 2015 Birmingham LONDON THE SOUTH EAST HR focus 19 March 2015 London Tax update and the new Budget 22 April 2015 London OPEN MEETING – Small charities focus 19 May 2015 London Governance and regulation update 24 June 2015 London Partnerships best practices 16 July 2015 London Recognising and managing risk 17 September 2015 London Leadership and thefinancefunction 13 October 2015 London OPEN MEETING – Governance: audit committees and the role of trustees 19 November 2015 London Planning and budgeting 15 December 2015 London Training Advanced investment training 17 March 2015 London Preparing for SORP 2015: an essential overview for charities 2 April 2015 London Advanced charity finance 14 April 2015 London Advanced charity finance 14 April 2015 Manchester Foundation charity finance 7 May 2015 London Foundation investment training 3 June 2015 London Trading and the law 11 June 2015 London Advanced investment training 17 June 2015 London Foundation charity finance 15 July 2015 London Foundation investment training 3 September 2015 London Foundation charity finance 17 September 2015 Manchester Advanced investment training 20 October 2015 London Leadership is a moment-by-moment choice in our attitude: of where, with whom and on what we focus our inward and outward energies. In order to ensure we at Christian Aid have the organisational capability to do this, we have recognised the following drivers for change: • The need to better prioritise our work in order to have the greatest impact; • The need to tackle the discrepancies between the values we hold as an organisation and our individual and collective behaviours; • The need to address a level of silo- working and duplication of effort; • The need to tackle inefficiencies in the use of our limited resources; • The need to ensure staff are well supported and have the opportunity for personal development and the space to reflect and innovate; • The need to establish strong relationships and partnerships with fellow staff and others with whom we work. We want to nurture and inspire our staff to be the very best they can. Ensuring that the efforts of all our colleagues are focused requires leadership that is firmly aligned to our values and commitments. This requires us, as leaders, to first look inside ourselves to develop our own self-awareness before generating the choices we need to make to improve our overall effectiveness. Yet modern life does not lend itself to asking deep questions. There is so much to do, and so many conflicting needs to balance. In such conditions it is easy to neglect, indeed avoid, the less urgent but deeper, more important questions. Within this inherent paradox, we could better balance conflicting priorities if we stopped long enough to ask ourselves – as individuals, as teams, as organisations – these deeper questions. At a practical level, this has meant investment in Myers Briggs assessments (the classic psychological test) for our senior staff, the introduction of 360- degree feedback mechanisms, and the development of action learning sets and coaching trios. As finance leaders, if we are to get the best out of our staff we need to build trust. In an age when we have to produce more with less, we need high-trust working environments to retain highly skilled and motivated people. Taking time to understand colleagues, keeping commitments, clarifying goals, acting with integrity and apologising when we make mistakes all help to build trust. Attending to the little things will get the best out of us and our staff. Martin Birch explains why good leadership requires tougher, deeper introspection. Learning to lead SEND USA TWEET! Have you attended any recent events? Let us know your thoughts, tweet @CFGtweets Martin Birch, Director – Finance and Operations, Christian Aid