BHP Charity Conference 2013
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BHP Charity Conference 2013



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In formation on:
 the charity SORP exposure draft including initial feedback from the consultation process
 an update on VAT & tax matters
 collaborative working together – exploring the options
 impact reporting



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  • The retail Gift Aid scheme has been reviewed with the aim of simplifying the process
  • Budget 2013 announced a consultation would tae place which has now happened and the responses have been published. Nothing too radical is happening at the moment but the main change is that the processing time is to be halved. Charities will have certainty that they will be able to access their donations quicker
  • The rate of relief is to be announced by the Chancellor in Budget 2014. There have been suggestions that this measure may lead to a reduction in Gift Aid donations as individuals switch their donations to investments. This will be impacted by the rate of the relief bearing in mind that higher and additional rate tax payers receive 20% and 25% tax relief under Gift Aid.

BHP Charity Conference 2013 BHP Charity Conference 2013 Presentation Transcript

  • BHP Charity Conference 2013 5 November 2013 © Barber Harrison & Platt 2013. All rights reserved.
  • Welcome & introduction Jane Marshall, Head of Charities & Not for Profit Barber Harrison & Platt © Barber Harrison & Platt 2013. All rights reserved.
  • Our chairman Paul McCay, Chief Executive, The Wilf Ward Family Trust © Barber Harrison & Platt 2013. All rights reserved.
  • The Wilf Ward Family Trust • Est. 1986 • Current income of £19m p.a • 1100 staff • 80 schemes across Yorkshire, Middlesbrough, Humbe rside • Providing social care, respite care, holiday lets and domiciliary care
  • SORP Exposure draft – July 2013 Major changes from SORP 2005 Jane Marshall– Head of Charities and Not for Profit © Barber Harrison & Platt 2013. All rights reserved.
  • The New Financial Reporting Framework Options FRSSE FRS102  Gross income < £6.5m  Total assets not exceeding £3.26m  Average number of employees not exceeding 50  Unincorporated charities apply the same limits
  • SORP has been developed to support both standards  Modular in format  Identifies recommendations that apply:  to all charities  only to those charities preparing accounts under FRSSE  only to those charities preparing accounts under FRS102
  • Major changes  Trustees’ Annual Report  Statement of Financial Activities (SoFA)  Balance sheet  Statement of cash flows  Accounting policies and definitions
  • Trustees’ Annual Report  Clear distinction  what all charities must report  matters which are required of larger charities only  additional information which is good practice  Information relevant to the charity’s stakeholders  Achievements in relation to objectives – all charities  Impact of a charity’s activities – good practice  Larger charity – one that needs an audit
  • Trustees’ Annual Report  Going concern   Reserves policy   Where there is uncertainty – explain the nature of this Disclosure reasons for not having one Risk management statement is expanded – larger charities    Explanation of major risks faced How these risks are managed Names of trustees
  • Statement of Financial Activities (SoFA)  Number of headings reduced INCOME SORP 2005 ED Incoming resources Income and endowments Voluntary income Donations Incoming resources from charitable activities Income earned from charitable activities Activities for generating funds Earned from other activities Investment income Investment and other income
  • Statement of Financial Activities (SoFA) EXPENDITURE SORP 2005 Resources expended Costs of generating voluntary funds Fundraising trading: cost of goods sold and other costs Investment management costs Charitable activities ED Expenditure Cost of raising funds Expenditure on charitable activities Governance costs Other resources expended Other expenditure
  • Statement of Financial Activities (SoFA) Net gains/losses on investments  To comply with FRS102 SORP 2005 ED Net incoming resources/(resources expended) before investment gains/(losses) Net gains/(losses) on investments Net incoming resources/(resources expended) Net incoming resources/(resources expended) Transfers between funds Transfers between funds Other recognised gains/(losses)  Gains/(losses) on investments  Gains/(losses) on valuation of fixed assets  Actuarial gains/(losses) on defined benefit pension schemes Other recognised gains/(losses)   Gains/(losses) on valuation of fixed assets Actuarial gains/(losses) on defined benefit pension schemes Other gains/(losses) Net movement in funds Net movement in funds
  • Other primary statements  Balance sheet no substantive changes   Statement of cash flows  must for charities applying FRS102  those under FRSSE can choose  3 mandatory headings   investing activities   operating activities financing activities Reconciles opening and closing cash on the face
  • Accounting policies and definitions  In preparing accounts the charity must   apply the recommendations of the SORP   apply FRSSE or FRS102 select accounting policies that comply with FRSSE, FRS102 and SORP FRSSE  must retain existing accounting policies  if undertaking a new transaction  adopt treatment in FRS102 and SORP  FRS102 – policies consistent with FRS102  SORP supplements the relevant accounting standard
  • Accounting policies and definitions SORP 2005 Listed the most common accounting policies ED Consideration of the selection of accounting policies Accounting policies considered in the modules No wholesale change Significant changes regarding particular charities
  • Fund accounting  Net amount of transfers between funds must net to £nil  Cannot be used for:  acquisitions  transfers of trusts from the charity to another  Instead recognise a gain = net assets acquired; or  Adopt merger accounting where relevant  Reference to loans between funds is dropped
  • Going concern  Disclose material uncertainties that cast doubt  If no material uncertainties should also be stated  Makes it clear it is the trustees’ responsibility  Trustees should take into account at least 12 months from date of approval
  • Income recognition  Income should be recognised  entitlement  measurement  probable – new concept  Contingent assets recognised as income when virtually certain  Income receivable discounted for time value of money  settlement more than 12 months  effect is material  applies to all charities
  • Income from donated goods, facilities and services including volunteers  Receipt of donated goods for sale or distribution  recognised when received at fair value  if impractical recognise when sold or distributed  major change from SORP 2005  impracticality of measurement anticipated  therefore always recognise income at point of sale or distribution
  • Recognition of expenditure  Settlement delayed for > 12 months  liability discounted  if material  applies to all charities  likely to affect charities recognising multi-year grants
  • Mixed use investment properties  In the balance analyse    part used operationally part held for investment purposes If undue cost or effort   analyse as tangible fixed assets SORP 2005 classified on main use
  • Financial instruments  Basic financial assets and liabilities  Recognise at amount receivable or payable  includes transaction costs if material  if not material - expense
  • More complex financial instruments  Concessionary loans  Advance fee schemes  Buying and selling foreign currency and derivatives  Refer to FRS 102
  • Post employment benefits  Defined benefit multi-employer plan  cannot identify your pot  account for as a defined contribution plan   i.e. just contributions paid Change  recognise liability to make payments to fund any deficit  if the charity has entered into an agreement
  • Total return (investments)  Applies to charities  invest permanently endowed funds on a total return basis  addresses issues in more detail than SORP 2005  table 16 module 20 shows the layout
  • Accounting for social investments  Programme related investments (SORP 2005)  Mixed motive investments  generate an investment return  to further charitable purposes Measurement FRSSE Loan FRS102 Cost less impairment Cost less impairment Or amortised cost Shares Cost less impairment Fair value Or Or Fair value Cost less impairment
  • Accounting for branches Excluded from the ED definition of branches are  Charities that are independently governed by a separate board of trustees  Groups of people who raise funds for a charity or number of different charities  Special interest groups – affiliated – but do not undertake charitable or fundraising activities  Excludes incorporated entities administered  by or on behalf of reporting charity  funds held for purposes of the charity
  • Charity mergers Detailed guidance  Criteria that must be met  How to merger account  Circumstances where changes to form e.g. incorporation can allow merger accounting
  • Accounting for joint ventures  Equity accounting in consolidated accounts    SoFA – one line – share of income or expenditure Balance sheet – share of net assets SORP 2005 required gross equity method  makes a nonsense of the SOFA
  • Definition of related parties  Alignment with   Charities Act 2011 section 118   FRS 102 section 33 Charities and Trustee Investment (Scotland) Act 2005 Detailed guidance in the ED glossary
  • So what is next  Consultation ended yesterday  SORP committee will consider  Final SORP will be issued next year  Effective accounting periods commencing 1 January 2015  Not that far away
  • Thank you This presentation and any accompanying notes are provided as information only and should not be relied upon as advice, or treated as such. No liability is accepted for any errors of fact or opinion they may contain. Professional advice should always be sought before making any decisions. Jane Marshall Head of Charities and Not for Profit 0114 266 7171
  • Charity Finance Group Katherine Smithson Policy and public affairs officer Charity SORP Exposure Draft: Feedback on the consultation process
  • Charity Finance Group (CFG) • • • Membership organisation with over 2200 members, all responsible for financial management in charities ‘Inspiring financial leadership’ Promoting best practice and ensuring a proportionate and effective regulatory environment
  • Getting charity views on the SORP consultation • • • • • SORP briefing events Printed copy of the SORP for all CFG member charities CFG briefing paper with questions for charities on what they want reflected in the SORP Consultation events across the country with the Charity Commission CFG Technical Accounting Forum
  • Technical Accounting Forum • • • • A group of CFG members and auditors from professional firms Chaired by CFG member Rui Domingues, Friends of the Elderly During the SORP consultation there was a huge increase in numbers of CFG members engaging in the forum The forum met twice and helped to develop our response by email
  • What were the things we couldn’t change? • New UK GAAP – FRS 102 • Treatment of repayment agreements for multiemployer defined benefit pension schemes Income recognition is based on ‘probable’ not ‘almost certain’ Income will include unrealised investment gains Staff remuneration disclosures Valuing volunteer time and donated goods • • • • • There is a charity concession on the latter point
  • What were the hot topics and key issues for charities?
  • FRSSE: To include or not to include? Pros: • Vast majority of the sector is technically able to follow the FRSSE • Keeping it will enable many charities to keep their current accounting policies • Easier for smaller charities to adapt to new SORP • No cash flow statements required Cons: • Based on old UK GAAP and fast becoming outdated • Has not been consulted on as a whole standard – little assurance that it is fit for purpose for charities • Developments elsewhere • BIS consultation following EU Directive • Likely to be FRC consultation on FRSSE in near future
  • FRSSE days are numbered… But; CFG has proposed that the option to apply the FRSSE is maintained in the new SORP, why? • Dis-applying the FRSSE would impact most on the smallest charities
  • Income recognition Now based on ‘probability’, ‘entitlement’, and ‘measurement’ • • Previously based on ‘virtual certainty’ Not too much difference expected from this change
  • Treatment of legacy income has always been inconsistent across the sector We asked charities… • Do we base these criteria on legal events – such as ‘probate’, ‘notification by the executor’? • Do we leave it to judgement of individual charities based on principled approach? They said… All sorts of different things!
  • Grants • Should charities be disclosing a list of all their grants in the notes to the accounts? What charities told us… • This will probably take up a lot of space! • Detract from other activities • Against ‘cutting clutter’? • Already make available elsewhere • CFG has taken this view in our response as long as the information is made available elsewhere
  • Salaries • • • Charities already disclose number of individuals in salary bands increasing by £10,000 above £60,000 FRS 102 introduces concept of ‘key management personnel’ and asks for more information on the salaries of these individuals SORP ED proposed that charities disclose the salary and job title of top paid employee Drive to increase transparency • But, fairly arbitrary information CFG has taken the view that the current treatment is actually more useful to the user of the accounts and should suffice but could recommend: • Disclosure of remuneration policy • More detailed information on salaries if it supports user to understand staff costs
  • SoFA
  • What we said… • Charities want to keep the columnar format • Costs of managing investments should be separated when material • Remove words like ‘cost’
  • Other areas covered • • • • • Treatment of grants – matching and performance based approaches Social investments – How do we treat Mixed Motive Investments? Groups and branches Presentation Performance reporting – Keep it simple!
  • Contact details: 0207 250 8347
  • Questions © Barber Harrison & Platt 2013. All rights reserved.
  • VAT update Simon Buchan – Head of VAT Services © Barber Harrison & Platt 2013. All rights reserved.
  • Contents  Investment management fees  Cultural exemption  Charity annexes  Listed places of worship grant scheme  Thomas Fuchs  The future
  • Mechanics of VAT recovery
  • Investment management fees
  • Investment management fees Facts and issues  Recovery of VAT on costs of managing endowment fund  Whether the operation of the fund was an economic activity  Income from fund used to support activities of the University generally  Whether cost of managing the fund was overhead expenditure?
  • Investment management fees Outcome  Win for the university  Costs regarded as overheads  VAT recovery according to partial exemption position
  • Investment management fees Is this the final position?  Probably not  TLLC Ltd – Travel Lodge Tribunal decision has muddied the waters  HMRC may appeal  Watch this space
  • Investment management fees What now?  Review how VAT treatment on investment management costs and submit claims to HMRC if necessary for the last four years  If HMRC appeal – claims will not be paid but your position will be protected
  • Cultural exemption
  • Cultural exemption HMRC have lost two cases recently in the First Tier Tax Tribunal British Film Industry  The issue was whether the cinema is cultural? Wildlife and wetlands Trust  The issue was whether sites operated by the trust were zoo’s? Implications  Cultural exemption may need to be amended?  Potential VAT refund opportunities for bodies not currently within the exemption
  • Charity annexes
  • Charity annexes – Chelmsford College Case The issues  Could construction of annexe be zero-rated? Facts  Annexe constructed  Relevant charitable purpose  Building contained some of its own facilities  Not capable of independent operation because  Shared admin services with main college building  Did not have own heating facility Implications  Has created more uncertainty  Appears to raise bar to obtain zero-rating  Appears to contradict HMRC guidance  An appeal likely?
  • Listed Places of Worship Grant Scheme
  • Listed Places of Worship Grant Scheme  Originally set up to provide grants to religious organisations  to compensate them for VAT on repairs and maintenance works
  • Listed Places of Worship Grant Scheme 2012 changes  From 1 October 2012 the LPWGS was extended to include   alteration works to listed places of worship increased funds available to compensate for the withdrawal of VAT zero-rating on alterations to listed buildings
  • Listed Places of Worship Grant Scheme  Further changes to LPWGS now allow claims to be made for   works to pipe organs, turret clocks, bells and bell ropes professional fees eg architects incurred in relation to eligible building works Provided the works are supplied from 1 October 2013 onwards  Religious organisations and charities   whose main purpose is to conserve, repair and maintain redundant churches may also claim under LPWGS from 1 October 2013  Changes were announced to simplify the claims process For full details visit
  • Thomas Fuchs
  • Thomas Fuchs Facts  Cost - €38,500  VAT - €6,500  No storage capacity  Electricity sold – 11,000 kWh  Electricity purchased – 44,500 kWh  Sale price = purchase price - €0.18
  • Thomas Fuchs Art 4.1, 6th Directive  “The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis.” Outcome  “Income” obtained because electricity sold to network for consideration  “Continuing basis” because contract with network was for “an indefinite duration”  But  economic reality?  consequences for UK cases on business?  wider relevance for input tax recovery (ie need for profit)?
  • Implications for the charity sector  Taxable activity – counts towards VAT threshold  Reinforces HMRC’s views on business activities other  Trading activity for tax purposes  Consider trading subsidiary
  • The future
  • The future EU VAT developments  EU Commission is looking at VAT treatment of public bodies including charities  Consultation released on 14 October 2013  4 options being considered  full taxation option  refund system  abolition of Article 13  an option to tax
  • The future UK VAT developments  Increased VAT recovery for search and rescue charities?  Fair playing field review   recommended that VAT recovery on the non business activity of charitable providers of NHS Services should be on the same basis as the NHS any change unlikely to be in the 2014 budget
  • The future Submission of VAT returns  Must be submitted electronically from 1 April 2010  very limited exclusions – insolvency, religious beliefs  First Tier Tax Tribunal recently ruled this potentially discriminates against certain sections of society including  disabled  the elderly  residents in rural areas  No response from HMRC yet
  • Tax update Rachelle Rowbottom – Senior Tax Manager © Barber Harrison & Platt 2013. All rights reserved.
  • Tax update  Gift Aid Small Donations Scheme  Charities Online  Retail Gift Aid  Digital Giving  Payroll Giving  Social investment tax relief  Employment allowance  Business rates  Other developments
  • Gift Aid Small Donation Scheme (GASDS) – the basics  Top-up payments  Small donations - £20 or less  From 6 April 2013  eg street collections  No declarations  Limit - £5k donations per tax year – receipt of £1,250  Not a tax relief  Charities Online  Two years from end of tax year to claim
  • GASDS – more detail  Cash not cheque  Banked  Eligibility conditions  Special rules for mergers/changes to legal form  Gift Aid claims 1:10  Connected charities – share the £5k
  • GASDS – community buildings  Charitable activities in community buildings  Possibility of additional £5k per community building  Similar allowance for different structures  At least 10 beneficiaries  At least 6 occasions in year  Participation/Interaction  Eg religious service, support group  Not counselling on one-one basis  Subject to matching rule  Detailed guidance/examples published by HMRC  Opportunity
  • Charities Online  Launched 22 April 2013  Compulsory from 1 October  Replaced the R68i form  Three ways to make claims 1. 2. Online form and spread sheet 3.  New form ChR1 In-house or third party software Act now  Decide which option is best for you  Need to register for online options  Need to order ChR1’s
  • Retail Gift Aid  System has been reviewed  Simplification  Effective from 6 April 2013  Existing method can be used  New methods – Method A and Method B optional  Standard letters updated  Rationale for commission charges
  • Retail Gift Aid  Where donor agrees  Providing total sales proceeds:  Less than £100 where charity operates shop; or  Less than £1,000 where trading subsidiary operates shop  If exceed limits, letter needed to confirm excess  Donor can request for tax relief purposes
  • Digital giving  Consultation closed on 20 September 2013  Increase take up on digital donations eg online, text message  Concern that due to technological developments, HMRC always catching up  Single declaration through same channel  Universal Gift Aid Database  Wording of Gift Aid declarations  Possibly staged implementation  Finance Bill 2014 and 2015
  • Payroll giving  Take up been low – 2% of employers, 3% of employees  Consultation responses published in September  To reduce processing time – 60 days to 35 days  PGA’s to remain charitable only  Terms of service level agreements  Online resource at
  • Social investment tax relief  Announced budget 2013  Consultation – now closed  Income Tax relief for investment into social enterprises (charities/CIC’s/CBS’s) by individuals  Similar to EIS relief  Rate of relief to be announced by Chancellor in Budget 2014  New way of raising funds  £150k in any 3 year period per social enterprise  At a cost to Gift Aid donations?  Draft legislation December
  • Employment allowance  Bill introduced to Parliament  April 2014  £2,000 tax cut  Reduction to employer NIC bill  Delivered through payroll software and RTI  To be claimed  Yes/No indicator
  • Business rates  Funding changed  Responsibility being shared between central government and local authorities  Taking harder line  Mixed use properties are an issue  Eg used by charity and trading subsidiary  Mandatory relief at risk
  • Other developments Gift Aid – benefit limits  HMRC has agreed to look at them  CTG are establishing a working group – eg’s Tainted Charity Donations  Updated guidance published by HMRC  Under continuous review  Where donors enter into arrangements to obtain a financial advantage
  • Conclusion  Progress on recent announcements  Watch this space  Charities online – make sure in hand  GASDS – review rules and claim what you can
  • Thank you This presentation and any accompanying notes are provided as information only and should not be relied upon as advice, or treated as such. No liability is accepted for any errors of fact or opinion they may contain. Professional advice should always be sought before making any decisions. Rachelle Rowbottom Senior Tax Manager 0114 266 7171
  • Questions © Barber Harrison & Platt 2013. All rights reserved.
  • Breakout sessions Option 1 - An update of the cost sharing exemption Box room 3, third floor Option 2 - Auto-enrolment – are you on the journey? Box room 2, third floor Option 3 - Trustee responsibilities and decision making Remain in the main conference room © Barber Harrison & Platt 2013. All rights reserved.
  • Legal Structures for Collaborative Working Malcolm Lynch, Partner Charities and Social Economy Team Tel: 0113 244 6100
  • Introduction Spectrum of collaboration Structure points to consider Key issues Collaborative structures Pros and Cons Next Steps
  • Spectrum of Collaboration Flexible Volunteer Agency Sub Contractors Joint Venture Partnership Employment Restricted/Controlling Corporate Less Control
  • Collaborative Working An Overview – 3 principal forms Consortium (Lead Partner) Principal (Prime) Contractor New Legal Structure implications advantages disadvantages
  • Collaborative Working – Consortium – Assume charitable trading The ABC Consortium A Co B Co C Co Lead Partner
  • Collaborative Working Consortium A brand separate from its components Bind with a Memorandum of Understanding Lead partner for bid submission Other partners agree to work with lead partner Other partners pay contribution from successful bid to lead partners
  • Collaborative Working Contracts with Procurer Procurer contract contract A Co C Co On behalf of ABC Consortium contract B Co
  • Collaborative Working Responsive, but success will depend upon joint planning Retain company independence, but contractual commitments do exist A first step Problem if bids are not successful, is lead party’s bidding costs covered?
  • Collaborative Working Consortium Procurer knows several parties in consortium Each party has specified role set out in bid to Procurer Works well if all members pull their weight Procurer expects all will deliver if one fails
  • Collaborative Working Procurer contract Lead Partner/Principal (Prime) Contractor contract Contractor contract Contractor contract Contractor
  • Collaborative Working Lead Partner/Principal (Prime) Contractor No formalities, but a written agreement is recommended Leadership or domination? Retain independence, but contractual commitments do exist Risk apportionment and liability (How much of main contact is contractor responsible for)
  • Collaborative Working Prime Contractor - Contractor Costs and reward apportionment Can Prime pay you in advance? Is fee for contract too little? Does being a Prime or Contractor damage reputation?
  • Collaborative Working New Legal Structure Procurer contract New Legal Structure membership Charity Charity Charity
  • Collaborative Working New Legal Structure Formal Choice of structure Allows flexibility around independence, but contractual commitments do exist Risk apportionment & liability Risks of reverse takeover of members?
  • Legal Structures Which legal form? Risk – unincorporated -v- incorporated Finance Grants Trading Share capital Loans Profit/surplus Voting/democracy
  • Collaborative Working Charitable or trading activity? Assumptions to date charitable If non-charitable trading activity then consortium member is trading company
  • Collaborative Working Non-Charitable Trading Activity LLP Structure Trading Trading company company Charity A Co Trading company Charity B Co Trading company Charity C Co
  • Legal Structures Trusts/Unincorporated Associations X Partnerships X Industrial & Provident Societies ? Companies  Community Interest Companies ? Limited Liability Partnerships  Charitable Incorporated Organisations
  • Legal Structures Partnership Act 1890 Business in common with a view to profit No formalities Partnership Agreement No separate legal personality No limited liability Flexibility
  • Legal Structures Companies Act 2006 Guarantee or Share & CIC models Memorandum and Articles of Association Shareholders Agreement Separate legal personality Limited liability Flexibility
  • Legal Structures Limited Liability Partnerships Act 2000 Notice of Incorporation Members Agreement Separate legal personality Limited liability Flexibility Transparent tax treatment Is a trading activity created in charity?
  • Collaborative Working Why Collaborate? Pros and cons Forms of collaboration The spectrum of collaboration Flexibility and freedom to contract Rigid structures and legislative compliance degrees of control
  • Collaborative Working Advantages Sharing information resources Savings economies of scale Spreading risk Strength reputation
  • Collaborative Working Disadvantages Loss of autonomy Costs time and resources Reputation supporters staff Aspirations mission drift objectives
  • Collaborative Working Fundamental relationship requirements Are you ready? your values, aims & objectives Are your partners ready? their values, aims & objectives Risk Management financial due diligence management systems Insurance
  • Collaborative Working Fundamental relationship requirements Legal Issues legal due diligence objects Purpose/area of benefit powers authority duty of care/conflicts of interest Usual Contract Terms
  • Collaborative Working Fundamental contract requirements Binding agreement Fit for purpose Clear Capable of addressing contingent circumstances
  • Collaborative Working Some contract principles The requirement for written terms The impact of implied terms Business ethics Custom and practice Statutory terms Default provisions Partnership Act 1890 Limited Liability Partnership Act 2000 Companies Act 2006
  • Collaborative Working What do you expect to see? Usual terms Particular contractual issues Confidentiality Data Protection Freedom of Information Price Fixing Competition Intellectual Property
  • Resources Charity Commission Collaborative Working and Mergers ations/cc34.asp NCVO Collaborative Working Cabinet Office Working in a Consortium
  • Legal Structures for Collaborative Working Questions? Malcolm Lynch, Partner Charities and Social Economy Team Tel: 0113 244 6100
  • Economic Evaluation for Charities Sue Holloway, Director November 2013
  • PBE aims to match professional economists with charities; providing pro bono help to measure performance and understand charity impact, and fostering a culture of volunteering within the economics profession © Pro Bono Economics 126
  • Established March 2009 146 charities -50% 33 completed projects UK analysis 265 active economist volunteers Vfm of interventions 30 129 106 Data collection advice Other economic advice Barnado’s © Pro Bono Economics Academics Public sector/ charity Private sector STAFF F/T Director F/T Operations Manager P/T Economist managing 40 projects
  • What questions can economic analysis answer?
  • Which intervention is cheaper? Compare two interventions with known outcomes: Cost minimisation analysis identical outcomes e.g. 2 providers of sheltered housing compare total costs Cost effectiveness analysis different amounts of the same outcome e.g. 2 different employment programmes compare unit costs – cost per job © Pro Bono Economics 129
  • Is the intervention worth it? Cost benefit analysis Compare value of costs with value of benefits Positive benefit cost ratio – it’s worth it! Social cost benefit analysis CBA including wider benefits Social return on investment particular methodology for social CBA emphasising role and input of stakeholders Break even analysis No control © Pro Bono Economics 130
  • Key steps for carrying out economic analysis
  • Estimating impact Measure outcomes Best estimate of what would have happened anyway (the counterfactual) Outcomes minus counterfactual = impact A measurement minus an estimate = an estimate © Pro Bono Economics 132
  • Control Groups National average PBE: Foundation Training Company Before PBE: MEAM pilots – adults with multiple needs Matched records in admin dataset Peterborough Social Impact Bond/MoJ datalab Natural experiment in charity data PBE: Barnardos RCT Education Endowment Foundation/Social Research Unit © Pro Bono Economics 133
  • Whose perspective? Value to society won’t include transfer payments e.g. tax and benefits Value to Exchequer Increase in tax receipts (+) or increase in benefit payments (-) Potential costs avoided Cashable savings Value to individuals change in income including benefits (+) © Pro Bono Economics 134
  • Which benefits? Hard outcomes Qualifications → employment → lifetime earnings Costs avoided by public services Soft outcomes Early stages of econometric work in this area Related to income, so only for those who are earning SROI uses stakeholders to identify proxies © Pro Bono Economics 135
  • Which costs and values? Input costs Programme costs Volunteer input Other activities Benefit values Average costs Marginal costs © Pro Bono Economics 136
  • How useful would it be for my organisation?
  • Making Every Adult Matter pilots - what FTI measured Service use Join pilot Without the pilots Impact With the pilots Time − 138 −
  • Before and After? Clients had had their needs for a number of years Average age of first involvement Homelessness services Drug or alcohol services Mental health services Prison / offender services Average length of involvement 23 9 years 19 7 years 15 8 years 23 11 years − 139 −
  • Costs of multiple needs - data collected Criminal justice system Health and mental health             Arrests Other police contact Magistrates court attendance Crown court attendance Nights in prison Nights in police custody Visits to GP Visits to A&E Nights in hospital Nights in mental health hospital Outpatient appointment CMHT appointment Drugs and alcohol Housing  One-to-one contact with drug and alcohol team  Group contact with drug and alcohol team  Weeks on substitute prescriptions  Nights in inpatient rehab and detox  Rough sleeping  Direct access hostel  Room in shared private rented sector property  Own private rented sector tenancy  Second stage supported accommodation  Own social tenancy − 140 −
  • Findings – varied over three pilot areas Cambridgeshire (15 clients) £600,000 Total cost of service provision £500,000 Housing services £400,000 Mental health services £300,000 Increases in housing, health, and drug and alcohol costs to help clients address their multiple needs Healthcare services £200,000 Drug and alcohol services £100,000 Criminal justice system £0 Estimated service Actual service use use without the pilot − 141 − Large savings in crime costs resulted in an overall cost saving
  • How was this used? • In combination with well-being data and an assessment of the process • To highlight that interventions with certain beneficiaries will not necessarily save money in the short term • To support the case for further data collection “We knew that we wanted a really strong economic evaluation of the MEAM pilots and we knew what we wanted to measure; … it is attracting a lot of positive interest from across the sectors in which we work.” Ollie Hilbery, Project Director, MEAM © Pro Bono Economics 142
  • Panel questions © Barber Harrison & Platt 2013. All rights reserved.
  • BHP Charity Conference 2013 5 November 2013 © Barber Harrison & Platt 2013. All rights reserved.