Posts tagged ‘Charitable Organisations’

The legislation enabling charities to use the “new” Charitable Incorporated Organisation (CIO) structure was laid before Parliament last October and is being slowly implemented during 2013.

The journey

Houses of Parliament, London, EnglandThe concept of a “simple” corporate structure was identified and debated when the Charities Act 1992 was first published and the CIO proposal developed during the late 1990’s.

The Home Office submitted a white paper entitled “Charities and Not-for-Profits: A Modern Legal Framework” in 2003 and the CIO structure finally became law as part of the Charities Act 2006, but it wasn’t until Lord Hodgson published his five year review of the Charities Act 2006 in 2012 and the Charities Act 2011 was issued that Parliament passed the CIO regulations for England & Wales and the Charity Commission could begin registering CIOs.

Still relevant?

The length of time taken to get to the current “implementation phase” has however dampened the initial enthusiasm for this new structure that enables Trustees to manage the activities and assets of the charity as a separate legal entity and benefit from limited liability, in the same way as a corporate entity, but without the need to comply with Company law.  I can see that this may be a reasonable option for a new organisation, but for existing charitable organisations (registered or not) I have yet to be convinced that the benefits outweigh the hassle, and if any form of finance is required, I don’t see it as an option at all.

Luton airport queues noticeSo far…

During January to May 2013 a mere 200 CIO’s have been registered, which I believe is partly due to the rather extended phased implementation, set out to assist the Charity Commission in dealing with the anticipated workload, but more likely the confusion over the tangible benefits of the new structure.

The future…

In 2014, Charitable Companies and Community Interest Companies (CICs) will be able to apply for CIO status, but considering the painful conversion process and the lack of understanding, particularly for those with debt finance, I doubt that the Commission will be dealing with a huge rush.

 

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 you found this post interesting/useful please share it with your social network and/or bookmark it.  Also, your comments are always valued and will help me to write new posts that are relevant to readers of this blog.

Fraud is often associated with loss of assets, but the non-financial impact can be far more damaging particularly in the 3rd sector where trust is paramount.

In a previous post I wrote about indicators of fraud, in this post I would like to address the impact it can have on an organisation, with particular emphasis on the not-for-profit sector.

Breach of Trust

Morale and trust can be severly altered by the discovery of fraud.  In a charity environment where income and assets are donated rather than earned through commercial activity, reputation and trust in paramount to survival. 

Vulnerability

Charities are often considered to be more vulnerable, but are they?  In fact the incidence of fraud amoung the 3rd sector remains very low in comparison to commercial sectors.  In a survey conducted by The Fraud Advisory Panel, just 7% of respondents reported that their charitable organisations have been the victim of fraud within the previous two years.  In my opinion this incredibly low figure could be as a result of less fraud being detected or a culture that discourages whistleblowing, but never-the-less, 7% is remarkably low.

So why the perception?

  • Reliance on goodwill, generally being too trusting allows less ethical individuals to take advantage
  • Lack of supervision, particularly where the public are involved, for example during small fundraising events
  • Lower levels of management expertise or financial control
  • Less frequent or indepth training of staff and volunteers
  • Lower levels of remuneration

In my experience, many of these views are unfounded in most organisations, as the survey results confirm.

Financial Impact

Obviously the loss of assets is the easiest way to measure fraud, but have you considered the following?

  • The cost of management time dealing with the event and the resulting communications
  • The possible increase in insurance premiums, warranties etcetera
  • The cost of replacing the assets/cash
  • The loss of donations/sales resulting from the damage to goodwill
  • The cost of recruiting and training the staff/volunteers to replace those that have been removed due to their association with the event and those who have chosen to leave because of the emotional impact of the event.

Non-Financial Impact

Clearly the impact is difficult to quantify but should not be underestimated

  • Increased stress and negative affect on morale of internal and external stakeholders
  • Less favourable and/or negative messages in the Media
  • Loss of public trust, inherent goodwill and general interest in supporting the organisation
  • Lack of committment by volunteers and/or decline in numbers willing to volunteer
  • Exposure to further incidences of fraud as the organisation may be seen as vulnerable –  ‘an easy target’

I hope this information has provoked thought, in the next of this ‘fraud’ series, I intend to look at ways to reduce the risk of fraud occuring.

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.