Toni Hunter's SuperBlog

The designatory letters DChA are used by holders of a Diploma in Charity Accounting, a qualification awarded by The Institute of Chartered Accountants (ICAEW) who hope that it will inspire confidence that the holder of the Diploma has the knowledge to make a real difference to the prosperity of an organisation through understanding of charity accounting and financial management.

Prior to 2007 the diploma could be achieved through study and examination or by submitting evidence of experience in advising the 3rd sector.  The ‘experience’ route is no longer available.

At the time of writing this post, around 700 accountants in the UK hold this diploma (listed here) and just over half of these working in practice as auditors / independant examiners and advisers.   The remaining mainly being financial managers working with in the sector itself.

As a trustee, what does using an accountant with the Diploma mean to you?

• Confidence to trust them to provide specialist financial care with knowledge of your sector and its inherent challenges
• Reassurance that they understand the complexities of Charity Accounting
• Non-financial matters such as governance are addressed with practical solutions
• Information is presented in a straightforward and understandable manner
• Value for Money services with fixed fees and experienced resources to keep fees to a minimum
• You can get on with running your charity knowing that you are in safe hands!

In my opinion providing services to not-for-profit organisations takes additional expertise as the sector has specific accounting requirements as well as a different type environment in terms of targets, principles, reporting and management needs.  Often the people working within this sector do so for low or no monetary reward and do not necessarily have the same skills of someone who has been involved in a corporate environment.  Therefore the level of support and the approach taken to professional advice should be different.

To get the most value from your professional advisers, it is essential that they have carried out adequate and relevant professional development (CPD) and have experience in your industry.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Media Trust, a function of the Community Voices program at Charities Aid Foundation (CAF), was organised to provide charities and volunteer organisations across the UK with resources, training, and assistance with communications and the distribution and broadcast of their current events news.

New Grant Program

Their new £250,000 grant program aims to inspire, engage and support disadvantaged and isolated communities to get their voices heard through digital media, and promises to be a boon to the many wonderful efforts of a wide variety of social enterprises.

The initiative offers grants from £1,500 to £61,000 for such assistance to programs based in England.

Two-Phased Approach

The two-phased approach begins with grants offered during the next few weeks ending 28 February 2010, and continues toward the end of this year with a second phase of funding. A total of 27 grants will be offered as of this writing.

At the launch of the program, Media Trust Marketing and Communications Services Director Gavin Sheppard said:
We are extremely excited to begin the process of allocating grants to communities where a fully interactive and inclusive digital project could have a real impact on the lives of individuals and on the wider communities in which they live.

Enhancement of Communications in the 3rd Sector

Funding will advance Media Trust’s vision that everyone should have a voice and the opportunity to be heard, and their mission to work with media organisations and charities to enhance their communications and enable communities to find their voice and make it heard. CAF, Community Voices and Media Trust can all be found at Facebook and Twitter.

This post was written by valued twitterbuddy Nathalie Allard of Raspberry Frog.

 The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

If 2009 had one defining moment it was Social Media moving from buzzword into the mainstream conscious, with everyone from celebrities to politicians embracing the power of social content and conversation to drive actions.

Big brands were of course at the forfront often driven by a desire to have a first mover advantage in the press or reacting to some PR disaster that overtook their traditional PR and Marketing teams.

For my mind the big winners of 2009 were not the politicians or the big brands but charities small and large right across the world who were able to get awareness of their campaigns or services in front of a whole new Social Audience people who love to talk about and share the work of good causes with their own audiences.

Social Media has create an explosion of good will, from Pro-bono services to fundraising all driven by the open lines of communication created by sites like Facebook and Twitter.

The Social Dynamic Duo

There’s no denying that Facebook and Twitter have become the must use Social Age tools and should form the core part of any Social Strategy, together they create a powerful team and can feed each other and reach into different demographics creating unique social interactions.

Ask and you shall receive

In the Social Age asking for help is more than acceptable it’s expected, got a cool new project and need an expert to give you some advice? Ask your Social Supporters on Facebook and Twitter if they can’t help,they will usually pass the message along or flag it to their community if they can’t help personaly.

This dosen’t stop at just pro-bono services but also fundraising if you have positions to fill on events, ask your Social Networks to help fill the spaces.

In the social age the conversation is king.

The organisations that find the most value and worth from Social Media not to mention create the most powerful social actions are the ones that talk, and not necessarily about just their own cause.

Go off topic from time to time, talk about the weather or TV events that have captured the public imagination, shows like Doctor Who or sporting events (Olympics, World Cup) that cut across the usual demographic divides are a great way to build relationships with existing supporters and bring in entirely new supporters to your cause.

Team up with other organisations on Twitter and Facebook that have broad or similar goals to your own, cross promote each others social messages to encourage supporters to cross the divide.

Don’t look at others orgs as competition instead look on them as a way to build even more relevant networks and share in Social Success.

2010 is the year for your Charity / Non-profit to embrace Social Media and become part of the age of Social conversation, make a start today and setup a Facebook Fan Page and a Twitter Profile

With thanks to valued twitterbuddy and BullyingUK ambassador, John Carnell of TechnicaVita for allowing me to reproduce this post.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

One of the key roles of the Charity Commission is to encourage charities to adopt good practice.  They have set out six clear principles to communicate their definition of an effective charity in their guidance booklet CC10.

For a full copy of this guidance click here.  In brief, these ‘hallmarks’ suggest that a charity that is effective and well governed

• Is clear about its purposes, mission and values
• Has a strong, clearly identifiable board or trustee body that has the right balance of skills and experience
• Is fit for purpose i.e. is structured appropriately to deliver efficient services
• Is continuously learning and developing to maximise the impact of its work
• Is financially sound and prudent.  It controls the use of valuable resources to maximise its potential
• Is accountable to the public and its operations are transparent and understandable to all stakeholders.

It is the Trustees’ responsibility to ensure these hallmarks are in place.

If your organisation needs assistance in developing these key principles or would like an audit of its effectiveness, please get in touch.  I use my own experiences as an accountant and auditor working in the 3rd sector in conjunction with sourcing highly skilled professionals from my business network to create a bespoke solution.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

History and culture has fuelled belief that Trustees can not be paid for their time, expertise or services rendered.  Whilst they should not be paid simply for acting as a Trustee, Chapter 9 of the Charities Act 2006 includes a statutory power that allows trustees and connected persons to be remunerated for goods and services they provide to the charity, subject to specific safeguards being in place to prevent abuse.

The biggest stumbling block is the governing document. 

As many charities were formed prior to the 2006 Act, standard clauses are often included in incorporation documents, constitutions or trust deeds that specifically prohibit trustee remuneration.  Obviously, this needs to be overcome before any further consideration can take place.  Amendments to governing documents are often complicated and time consuming due to their ‘public’ nature and may need to be approved by the Charity Commission.  Read guidance.

Safeguards

Assuming such a clause does not exist, the safeguards specifically mentioned by the 2006 Act are:

• The trustees must demonstrate that they have consulted Charity Commission guidance and have decided that it would be in the charity’s best interest for the services to be provided by the trustee/connected person.
• There must be a written agreement between the individual and the charity recording the terms of the arrangement and specifically the amount of remuneration agreed.  The individual being remunerated must not be involved in any decisions or other matters related to this agreement.
• The amount of remuneration agreed to be paid by the Trustees must be reasonable for the level of service being provided.  In other words, there needs to be evidence that the Trustees are utilising resources in a commercial manner.  This is a key principle of Trusteeship.
• Only a minority of Trustees can be remunerated in any form.  So if there is a small Board, take care.

A charity trustee should not be in a position where any personal interest may conflict with their role as a trustee.  They should not benefit directly or indirectly from their position whether through payment in money or benefits in kind.

A working example

A small charity has a part time bookkeeper who reports to a practicing accountant on the Board of Trustees. 

In order to qualify for a grant, the charity has been asked to put together a departmental cash flow forecast and some projected profit and loss accounts.  Obviously the person best placed to do this would be the Trustee as they understand the organisation and the requirements of the grant making body and have the relevant competancies, but they do not have the time.  They are in business full-time and offer their experience and personal time as a Trustee, for emotional motives. 

In the past, the Charity would have no choice but to engage an accountant to carry out this task, incurring professional fees, probably at full market rate as well as investing time to properly seek out, appoint and brief the professional.

The 2006 Act, acknowledges that it would make sense to engage the practice that their Trustee is involved with as this would be efficient and fees may well be negotiable.

In my view, this is a positive step towards making the 3rd sector more commercially aware, something I am passionate about.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

This is a very short post just to let you know that the easy-to-read guidance offered by H M Revenue & Customs on the Gift Aid scheme has been updated.

If you are, or are thinking of running a gift aid scheme for your deserving cause, I highly recommend you read this http://www.hmrc.gov.uk/charities/gift_aid/basics.htm

I would particularly like to highlight the fact that the time limit for making a claim has reduced to 4 years.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

When working with charities, the question I get asked the most is “is our TAR detailed enough?” as they naturally do not want to expose all, yet they appreciate that this is a key document that is clearly defined by the SORP 2005 and is crucial in demonstrating compliance with the public benefit tests (see previous blog post ‘Public benefit – your best defence…’)

To answer the question directly the report should:

• be about 4-6 pages of A4 print, font 11 for a small to medium sized organisation
• clearly explain how the organisation fulfils it’s objects and adheres to it’s governing document
• use plain English and refer to the accounts to which it is attached, but not regurgitate the accounting information
• use the prescribed format set out in the SORP.  i.e. use the 7 key headings.

For those who are not familiar with the SORP 2005, these prescribed headings are:

1. References and administrative details of the Charity, its Trustees and advisers
2. Structure, Governance and Management
3. Objectives and Activities
4. Achievements and Performance
5. Financial Review
6. Plans for future periods
7. Funds held as a Custodian Trustee (if appropriate)

Model reports are available on the Charity Commission Website  http://www.charity-commission.gov.uk/

Some key points that are often missed

• In paragraph 2 explain how trustees are recruited and outline the policies for induction/training of trustees.  Mapping the skills of the board and recruiting to fill skills gaps is a sign of great governance.  If your organisation has carried out this exercise, brag!
• When explaining to the reader your objectives, paragraph 3, focus on the positive impact significant activities have had and explain how they have contributed to the achievement of the stated objectives.  If the organisation is grant making, ensure the policies are explained and if volunteers are utilised, readers need to understand their role and contribution.  If possible, quantify this in terms of hours, locations etcetera
• Performance, paragraph 4, should identify milestones and KPI’s so that achievements can be benchmarked against objectives.  The public are keen to know the percentage of resources allocated to overheads, they need to understand the ROI i.e. impact per pound of funds raised.  This is obviously difficult to quantify as many of the aims are emotional, not financial, but trustees should not shy away from trying.  I have often seen larger, national charities measure their impact in terms of taxpayers money saved.
• The financial review needs to look at each fund and state the principle financial policies adopted.  Take time to clearly explain the reserves policy in particular as the Charity Commission will be monitoring this.  Make comment on how the current years performance and the current activities effect reserves.  Also, outline any financial commitments such as borrowing or obligatory grants.

This list is not exhaustive, but I hope I have set out the key points, please call me if you would like to discuss your TAR or would like me to review your draft.  Please note however, that an auditor can not write this report for you so please don’t ask!

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Governance

When a member of the public pledges their support they rightly expect their donation to be utilised in an efficient manner which will create the most impact for the cause.

It is the responsibility of those charged with governance (trustees, directors, board members etc) to deliver this by acting with integrity, financial prudence, reasonable care and skill to ensure the organisation is managed effectively. 

When reviewing the expenses of an organisation, it is difficult to ignore the costs of professional advice.  I strongly believe that all managers of organisations whether achieving profits or not, need counsel. It would be foolish to believe that governors have the time, expertise and experience to deal with all aspects of the operation.

To ensure the best value from key professionals, I recommend an audit of costs every two or three years.  I am not advocating that advisers are changed this regularly as this in itself could prove to be inefficient, but a review and perhaps a tendering process is required to confirm the governors are taking adequate care over how they spend valuable resources.

Since for most third sector organisations an independent examiner or an auditor is a requirement and I myself am an accountant, I will focus on this profession.

The role of an accountant has changed

Long gone are the days when accountants were merely ‘bean counters’ or ‘tax calculators’.  The needs of businesses in general have changed and accountants have had to morph in to business advisers; budget, productivity and risk managers and strategic board members amongst other things.  Softer skills such as communication, team leadership and to some extent client coaching have become just as important, so if your accountant simply regurgitates the bookkeeping rather than providing constructive advice, you are being sold short; they have a lot more to offer you and your organisation.

Choosing an accounting professional

Providing services to not-for-profit organisations takes expertise as the sector has specific accounting requirements as well as a different type environment in terms of targets, principles, reporting and management needs.  Often the people working within this sector do so for low or no monetary reward and do not necessarily have the same skills of someone who has been involved in a corporate environment.  Therefore the level of support and the approach taken to professional advice should be different.

Obviously it is essential that you can get on with your chosen accountant as you need to be able to trust and confide in them, so take the time to interview them and look at their website and publications.  Ask them to explain how their firm operates, what type of clients they service, who would create the team that would service you and what ideas they have for adding value to your organisation.

Ensuring your choice of accountant is competent is imperative to getting best value for accounting or audit services and the advice you need to operate effectively and implement your strategic vision.

Members of the main accounting bodies such as ICAEW and ACCA undergo rigorous examinations and must demonstrate many years practical experience before they are licensed to offer services.  They also must submit a detailed log of ‘Continued Professional Development’ to satisfy their supervisory body that they remain competent.

Less than 700 accountants in the UK currently hold a diploma in Charity Accounting.  To be honoured with the letters DChA by the ICAEW is an achievement I am very proud of. 

Both the ACCA and ICAEW maintain registers of licensed members, but do not be ashamed to ask for proof of qualifications and experience.  If you are still unsure, request references from their satisfied clients in your sector.

The right price for good quality services

It would be naïve to think that you always get what you pay for, so to make sure you are paying a ‘fair’ value for the services you are receiving you need to

(i)  Research appropriate firms in your region using websites, other professional recommendations and personal contacts.

(ii)  Be open about the scope of the work involved and your expectations and invite other tenders for comparison.

(iii) Ensure the firm you are using are the right size and have the right type of staff to service you properly.  Using a big name firm may provide kudos, but are you getting irregular contact from a newly qualified because you can not afford an experienced decision maker.

(iv) Make sure you read the terms of engagement carefully, this is your contract with them

(v)  Most accountants operate on an hourly fee, but this does not preclude you from knowing the rates involved or requesting a quotation.  Some accountants are happy to provide a fixed annual fee.

(vi) Ask whether there are any internal systems that should be improved to ensure that their time is used effectively.  Good quality management information and supervisory controls can save an auditor a significant amount of time.

(vii) Make sure their fee notes clearly define what you are being charged for and make sure you discuss these on a regular basis.

(viii) Do not avoid contacting your accountant for fear of incurring charges.  Regular communication is an essential part of making both your job and that of your accountant as efficient and effective as it can be.

For further advice or to discuss your accounting needs, contact Toni Hunter FCCA DChA at George Hay Chartered Accountants on 01480 426500  www.georgehay.co.uk

George Hay are registered to carry on audit work and regulated for a range of investment business activities by The Institute of Chartered Accountants in England and Wales. George Hay are members of the UK200 group of professionals. 

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post

Please see below a message sent from the Executive Director of Charity Services on 23rd October 2009 about the importance of meeting deadlines despite the current postal disruption.

At George Hay we endeavour to file as much as possible online to the Commission, Companies House and H M Revenue & Customs and have done for many years.  We believe this provides a better quality service to our clients as well as mitigating costs by reducing resources.  www.georgehay.co.uk

Dear Sir

Online Service and Postal Disruption

I am contacting to you as a professional advisor of charities.  In light of the postal strike the Commission is reminding all our key customers of the services that can now be carried out on line and to strongly encourage you to use e-mail when contacting us.

The Commission has conducted research which indicates that approximately one-quarter of all its ‘hard copy’ post emanates from a professional adviser. In the majority of instances this post could have been sent to us by e-mail or through our website. We have to arrange for letters and documents to be scanned and this inevitably increases our administration costs and causes delay.

The Commission has been growing its online services in recent years and there has been an increasing uptake by our customers who value the swift service this can guarantee. The following services are offered online as an alternative to submitting hard copy:

•  Filing of Annual Returns;
• Filing of accounts and Trustee Annual Reports;
• Registering changes to the composition of a trustee body;
• Applying for registration online. It currently takes an average of 12 days to register a charity over the internet, with the same process via postal applications taking around twice as long on average.
• Online publications. The online versions of our publications are the most current whereas some hard copy may not have been recently revised.

Using the Commission’s online services speeds processes up for our customers, and even where the enquiry does not relate to an online service we are generally able to act upon an e-mail more quickly than with ‘hard copy’. We can reply to most e-mail enquiries inside 5 days. This means that you can provide a quicker service to your clients.

Finally the Commission also offers template forms for a variety of actions your clients might take. These include amending their governing document; applying for authority to pay trustees; vesting land in the Official Custodian and dissolving a charity. Because the information requested is standardised we can consider applications on these forms more quickly than when they are contained in a letter alone.

The following link will take you to the landing page where these forms are housed: http://www.charity-commission.gov.uk/common/applyforit.asp

If you have documentation to send the Commission, you can attach this to your e-mail and send to the Commission at:   enquiries@charitycommission.gsi.gov.uk

I hope that this information is of help to you

With best wishes,

Yours sincerely  

David Locke

Executive Director of Charity Services

Charity Commission for England and Wales

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

The Charity Commissioners have been quite public about their detailed and sometime rigorous reviews of registered charities’ compliance with their public benefit tests.

The two key principles of this imperative test being:

1. There must be an identifiable benefit (or benefits)

It must be clear what the benefits are, how they relate to the aims of the organisation and they bust be balanced against any detriment or harm.

2. The benefit must be to the public (or section of the public) 

The beneficiaries must be appropriate to the aims.  If a section of the public is the target, the opportunity to benefit must not be unreasonably restricted by geography or ability to afford fees etc.  People in poverty specifically must not be precluded from the opportunity to benefit and any non-public benefit should be incidental.

The implications of losing charitable status are huge.  Not only would the loss affect public confidence and therefore the ability to raise funds, but H M Revenue & Customs have the right to ‘unwind’ tax exemptions claimed in the past six years which could create liabilities that would simply end the organisation’s ability to continue.

If you would like to see some of the Commission’s “Emerging Findings” reports, take a look at their website.  http://www.charity-commission.gov.uk/publicbenefit  You will notice that they seem to be targeting fee charging schools as they are suggesting that offering a few bursaries to good students that can not afford to attend, does not constitute ‘public’ and is not going far enough to remove restrictions, but all charities are susceptible to this review.

Any charity with annual income above £25,000 (effective for accounting periods commencing 1^st April 2009) must attach a Trustees’ Report to their financial statements and file these with the Commission with in 10 months of the accounting year end.  For incorporated charities this is in addition to the required Directors report.

This report is in my view, the best defence against a review as it gives the Trustees the chance to explain the activities of the organisation in both financial and non-financial terms as well as stating the aims, objectives and policies of those charged with governance.  It should tell the ‘story’ of the charity for the year giving those who are not trained in business the ability to understand how the charity is performing and the impact it is having on the public.

Much of my time spent working with trustees of charities revolves around this key report, guiding and advising them on structure, essential disclosures and helping them to explain the accounts and performance of their organisation.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.