Top tips for charities in an economic downturn


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Slides from TPP Not for Profit's Nov 2012 finance seminar on "Top tips for charities in an economic downturn". Presented by Wellers accountants

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Top tips for charities in an economic downturn

  1. 1. Top tips for charities inan economic downturnNorma Stewart21 November 2012
  2. 2. 1. London’s 2012 legacy• Power of the volunteer ‒ over 70,000 “Game makers” - one of the successes of the Olympic Games Partnership• 800,000 UK trustees to the country’s 250,000 charitable organisations• It is their time, enthusiasm and commitment that powers the voluntary sector
  3. 3. 2. Reporting issues• Trustees reporting responsibilities• Common reporting areas where trustees fail to meet their obligations• Why high quality reporting is important• 2 key areas of income recognition• Contracts and multi year grant commitments
  4. 4. 3. Role of the Trustee3 Broad Responsibilities:• Compliance• Prudence• Duty of CareReporting what the charity has achieved andwhat has been done with the money providedby funders, donors and financial supporters
  5. 5. 4. Legal requirement• Trustees annual report and accounts• Requirements for the trustees’ annual report are set by S45 of Charities Act 1993 and Regulations made under the Act• Regulations set out minimum requirements and the Charities SORP provides the structure and recommended practice for meeting those requirements
  6. 6. 5. Annual Reporting: An Opportunity• Accountable to your stakeholders• Tell your charity story• Influence funding decisions
  7. 7. 6. Legal compliance• Provide stakeholders with information they need to inform their decisions• Enable trustees to provide an account of their stewardship
  8. 8. 7. Are Charities reporting well?• Sea change in the quality of charity reporting since 1995 SORP• Narrative reporting has edge in terms of development and focus• 80% sampled reported well
  9. 9. 7. Are Charities reporting well?• Many struggled to articulate reserve policy clearly• 1 in 7 reports remained formulaic and minimalistic• Late filing remains an issue
  10. 10. 8. Coping with government funding cuts & the recession• Move away from the grants culture to the contract culture• Charities will need to demonstrate the impact of their work• Importance of performance reporting and explaining what is done and what is achieved with the money it is given
  11. 11. 9. Categories of income2 key categories:• Voluntary income• Income generated from charitable activities ‒ Performance related grants
  12. 12. 10. Recognition of incomePerformance related grants• Restriction to use to which money can be put, therefore usually be restricted incomeContracts• Not gifts, recognised with performanceGeneral grant• Nothing in return, accounted for when receivable or received, whichever earlier
  13. 13. 11. Overheads• Common misunderstanding that only direct costs can be charged against a grant• Trust law allows not only the ability to charge the direct costs but a reasonable and fair proportion of overheads and administrative costs
  14. 14. 12. How Charities can make the most of their reserves• Unrestricted reserves - funds not allocated to a specific area but can be used for any purpose deemed appropriate by the charity.• UK charities in the past have been over cautious about proactively using there unrestricted funds.• Reserves policy – understanding what you need to hold and what that figure represents. Historically a round figure.
  15. 15. 12. How Charities can make the most of their reserves• Accurate budgets and up to date management accounts are crucial if a charity is to understand its financial position and reserve needs• Concentrate on doing what you do best, core activities – dipping into reserves to invest in improvement or enhancement
  16. 16. 12. How Charities can make the most of their reserves• Action plan to rebuild reserves• Do not be afraid to make bold decisions with a sound understanding of reserves needs
  17. 17. 13. Tips• Good accounting records and good management information is vital as it informs internal decisions but forms the bedrock for good financial reporting.• Quality financial reporting matters - affect funding decisions
  18. 18. 13. Tips• Changing environment, cannot rely on general grants and general giving. Private donors and government funders are going to look more and more at the impact of your work and that it what your accounts need to demonstrate
  19. 19. 14. About Wellers• Medium size firm of accountants in South East• In business for 70 years, 4 offices and 80 staff• Business Oxygen
  20. 20. Norma StewartPartnerT: +44 (0)20 7630 6665E: