Toni Hunter's SuperBlog

The Finance Act 2010 introduced a new definition which Charities (and Community Amateur Sports Clubs) will need to adopt in order to ensure it remains entitled to tax relief.

Management Condition

The new definition introduces the term ‘management condition’ and states that managers must be deemed to be fit and proper persons to manage the charity.  The term manager is deemed to relate to any person who has day to day control over the running of the charity and any persons who can assert influence over its running. 

Fit and Proper Declaration

An individual is considered ‘fit and proper’ if they ensure that charity funds and tax reliefs are used only for charitable purposes.  HMRC have advised that all managers should sign a declaration as to whether they are ‘fit and proper’ they suggest a person declares the following:

1. I am not disqualified from acting as a charity trustee
2. I have not been convicted of an offence involving deception or dishonesty
3. I have not been involved in tax fraud
4. I am not an undischarged bankrupt
5. I have not made compositions or arrangements with my creditors from which I have not been discharged
6. I have not been removed from serving as a charity trustee or been stopped from acting in a management position within a charity
7. I have not been disqualified from serving as a Company Director
8. I will at all times ensure the charity’s funds and charity tax reliefs received by this organisation are used only for charitable purposes

More paperwork….

For most people this will be no too onerous a declaration and will only be a question of form filling to ensure you have the paperwork in place should it ever be requested. Red tape that could prevent your charitable status from being challenged, which could have catastrophic tax consequences.

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.

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.

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.

In May 2010 the Scottish Charities Regulator reported that Charities with fewer trustees are more likely to fail.  Obviously quality of Trustees is a more important issue than quantity, but effective recruitment and retention of skilled and dedicated Trustees is imperative.

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.

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.

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.