Buckfast - Charity Seminar 2019

B U C K F A S T
C H A R I T Y S E M I N A R 2 0 1 9

CHAIRMAN’S WELCOME
Jonathan Deacon
Finance Director, Buckfast Abbey

INTRODUCTION
Duncan Leslie, Partner

HOUSEKEEPING
@pkfFrancisClark
#CharitySeminar19
Network ID - Buckfast
Password - Wifiaccess.123

OUR CENTENARY YEAR
We are celebrating because:
 National 2018 Charity Finance Audit Survey league table special
commendation for overall service.
 96% of our clients ranked the service they receive from us as good (the
highest option).
 Highest placed regional firm in the UK for the number of audit services to
charities – a good start to our centenary year!
 Thank you to all our clients who took part in the survey.

CHARITY COMMISSION SPEECH – BARONESS STOWELL
• Charities need to live up to public expectations
• Collectively charities are not yet reaching their potential
• We must ensure that charities can thrive and inspire trust, so that people
can change lives and strengthen society – that purpose is at the heart of
the Commission's new strategy.

GOVERNANCE RESEARCH FINDINGS
Where does your organisation stand in today’s environment?
 13% had an independent review of governance in the last 3 years;
 22% thought that they had a diverse board;
 60% had a board away day in the last two years;
 60% have an annual staff day to update on strategy and activity.
 65% conduct a formal appraisal of the Chief Executive; and
 65% had a board level skills audit in the last 2 years;

FINANCE RESEARCH FINDINGS
Where does your organisation stand in today’s environment?
 60% prepare sensitised budgets/forecasts to help determine strategy;
 52% had subcommittees such as finance/audit that met regularly; and
 50% disclose their compliance with the fundraising code of practice.

WHY BALANCING RISKS FOR
STRATEGIC SUCCESS?

PROGRAMME
 9.45 – Governance – Stephanie Henshaw, PKF Francis Clark
 10.05 – Compliance from a Legal perspective – Laurie Trounce, Stephens Scown
 10.35 – Panel Q&A session – www.sli.do (code 4837)
 10.45 – Break
 11.15 – Compliance from a VAT perspective – Becky Hayes, PKF Francis Clark
 11.30 – Financial sustainability – Laura Waycott, PKF Francis Clark
 11.50 – Delivery – Scott Walker, Devon Community Foundation
 12.25 – Panel Q&A session – www.sli.do (code 4837)
 12.45 – Lunch

GOVERNANCE
Trustees and Executives - working together to improve outcomes
Stephanie Henshaw, Partner

IN THIS SESSION
 Why is the relationship between trustees
and executives important?
 Where does the balance of responsibilities
lie between trustees and executives?
 How can trustees and executives support
each other in their development?

WHEN THINGS GO WRONG
13. Kids Company’s demand-led operating model –
based on the doctrine that no child should be turned
away – carried the constant risk that the charity would
not be able to ensure that its commitments would be
matched by its resources. The charity’s Trustees failed
to address this risk. Instead, the Chief Executive and
Trustees relied upon wishful thinking and false
optimism and became inured to the precariousness of
the charity’s financial situations.
66. There is no evidence that Trustees were involved
in the decision to turn down the philanthropist’s offer of
significant financial and human resource. At the time
the offer was made and rejected, Trustees were
attempting to manage a £4 million deficit and secure
and additional £12 million grant from the Government.
Ms Batmanghelidjh’s citing of mere intuition about an
individual’s supposed lack of emotional authenticity as
justification for blocking the exploration of a new
partnership at a time of extreme financial difficulty
underlines how unaccountable and dominant Trustees
had allowed her to become, and how far she was able
to insist on maintaining personal control.

WHEN THINGS GO WRONG: TRUSTEE OVERSIGHT
The
trustees
Allowed CEO to dominate
Lacked relevant experience in core field
Suspended critical faculties
Were led by an ill-informed Chair
Failed to exercise proper function

WHAT DOES GOOD LOOK LIKE?
THE ROLE OF THE BOARD – AS DEFINED BY THE IOD
Vision, mission, values
Strategy, structure
Delegate to management
Accountability

CHAIR VERSUS CEO – ARE THE ROLES CLEAR?
Chair CEO

WHAT SHOULD EACH PERSON DO?
The Chair should:
 Lead the Board
 Ensure engagement and participation
 Encourage relevant discussion,
effective decision-making, appropriate
implementation
 Nurture the relationships between
Trustees.
The CEO should:
 Manage day to day operations
 Deliver objectives
 Act as main point of contact between
the Board and the charity

SUPPORT, CHALLENGE, TRUST
 Balance between support & scrutiny.
 Honest feedback important from both sides.
 Trustees should have free and open access to
the organisation.
 How close is too close?

THE BASICS
• Distribute in good time
• Read them!
Agendas and
papers
• Driven by board needs
• Focus on strategicInformation
• Training and development
• Skills audit
• Governance review
Effectiveness

BOARD COMPOSITION & DIVERSITY
How many
trustees?
Future skill
requirements?
Trustee tenure?
Recruitment
process?

 Percentage that are male
 Percentage that are white
 Average age
 Percentage that are retired
 Percentage with above-average
income
 Percentage with a professional
qualification
 75
 61
 92
 51
 64
 60
HOW AVERAGE ARE YOUR TRUSTEES?
 64%
 92%
 61
 51%
 75%
 60%

IDEAL TRAITS OF A TRUSTEE
 Ability to listen
 Openness
 Ability to challenge
 Clear link to beneficiaries
 Common sense
 Correct motivation
 Be able to ask the right questions

“A good board is a victory, not a gift”

COMPLIANCE FROM A
LEGAL PERSPECTIVE
Laurie Trounce, Partner
Stephens Scown

Laurie Trounce
Partner
Head of Charity Team
Phone: 01872 265133
Mobile: 07736 884233
Email: l.trounce@stephens-
scown.co.uk
25

AIMS OF THE SESSION
• To provide an overview of trustee duties and responsibilities
• To consider conflicts of interest and how to manage them
• To look at practical ways to ensure serious incidents are reported
• To provide hints and tips for being an effective trustee
• To share some thoughts on future legislative and regulatory developments
26

STRATEGIC CONTEXT
Charity Commission Statement of Intent 2018 – 2023
• Focus on holding charities to account
27

WHO ARE THE TRUSTEES?
“The persons having the general control and management of the
administration of a charity” s.177 Charities Act 2011
• Voting members of the governing body
• Legally responsible for the charity
• Operate within a formal set of rules
• In a charitable company, company directors and trustees are the
same people
• Are responsible for appropriate delegation to staff / volunteers
• Almost always unpaid
28

THREE KEY QUESTIONS FOR TRUSTEES
• Why does my charity exist?
• What is its legal structure and what are the legal and governance
implications?
• Are we meeting the charity’s objects in the most effective way now
and in the future?
29

TRUSTEE DUTIES
Public benefit Acting in the charity’s
best interests
Reasonable skill
and care
Acting collectively Safeguarding and
protecting assets
Being accountable
30

LEGAL STRUCTURE
Legal form Incorporated
(separate legal
personality
Additional duties
on trustees
Contracts /
employment in
the name of
Liability to third
parties limited
Trust No No Trustees personally
(for the charity)
No
Unincorporated
Association
No No Trustees personally
(for the charity)
No
Company Limited
by Guarantee
Yes Yes (Company law) Charity Yes
CIO Yes Yes (Charities Act
and CIO
Regulations)
Charity Yes
31

TRUSTEE LIABILITY
Potential liabilities
• Governance
o Breach of duty under charity law
• Operational
o Claims from third parties
• Criminal
Trustee liability protection
32

PRACTICAL STEPS FOR COMPLIANCE
• Know your governing document
• Ensure trustees have suitable inductions, regular training and updates
• Take prompt and appropriate action when things go wrong
• Ensure trustees utilise their skills and experience
• Take advice when needed
33

AREAS OF CHARITY COMMISSION FOCUS
• Conflicts of interest
• Fraud and financial
mismanagement
• Abuse of beneficiaries
• Abuse of charity for terrorist
purposes
34

CONFLICTS OF INTEREST – MAKE THE
RIGHT CHOICE
35

CAN YOU IDENTIFY CONFLICTS OF
INTEREST?
Expect and prepare for them
• A trading subsidiary makes payments to one of its directors who is also a
charity trustee.
• A trustee becomes an employee of the charity
• A charity needs urgent building repairs (£100k). A sibling of a trustee offers
their services for a reduced price of £50k.
• A trustee is employed by a local authority that is considering funding the
charity.
36

WHAT IS A CONFLICT OF INTEREST?
Conflicts of interest
Where a charity trustee or someone connected to them has or may have a
personal financial interest in a transaction with the charity
Conflicts of loyalty
A charity trustees duty to the charity could conflict with their duty of loyalty to
• a member of their family
• a person connected to them
• a organisation that employs them
• another charity of which they are a trustee
• a body that has appointed them as a charity trustee
Definition of a connected person (s.188 Charities Act 2011)
37

WHY DO THEY MATTER?
Recognise the dangers they present
• Personal liability
• Flawed decision making
• Reputational damage
• Note additional rules for Directors and CIOs
38

RECENT STATUTORY INQUIRIES
•CC 29 March 2019 Relief
for Distressed Children
and Young People
•CC 27 February 2018
Reb Moishe Foundation
•CC 20 February 2018
Decision of statutory
inquiry in connection with
a grant making charity.
39

MANAGING CONFLICTS OF INTEREST
• Ensure you know the rules and the implications for your charity
• If a conflict is identified:
- Has it been declared?
- Can the conflict be removed?
- Can it be authorised?
• Has the conflict been recorded appropriately?
40

• Register of Interests
• Conflicts of Interest Policy
• Approach to meetings
• Appropriate training
• Seek advice as required
41

REVISITING AN EXAMPLE
A trading subsidiary makes payments to one of its directors who is also
a charity trustee.
• Director of trading subsidiary is also a charity trustee
• Decision to pay the director creates a conflict of interest between the
personal interest of the director and the interests of the charity
• Director should disclose the conflict of interest at an early stage
• Before making a decision the other directors should consider the
conflict and how to eliminate the potential effect
• Consider governing document – likely to require the withdrawal of
the director from all aspects of the discussion and decision making
about the payment
• Record the conflict appropriately
42

SERIOUS INCIDENT REPORTING
• Purpose
• The meaning of “serious”
• Most common types of serious incidents
• Reportable vs Non-Reportable
44

RESPONSIBILITY FOR AND TIMING OF
SERIOUS INCIDENT REPORTS
• Trustee responsibilities
• Requirement for prompt reporting
• Annual Reports
• Consequences of failure to report
• Be aware of the Freedom of Information Act 2000
45

• Inform your Auditor
• Undertake regular training
• Implement and review your Serious Incident Reporting Policy
46

Key Policies & Procedures
GDPR
Whistleblowing
Scheme of Delegation
Procurement
Land Disposal
Safeguarding
Health and Safety
Financial Procedure Rules
Equality & Diversity
Intellectual Property / Branding Guidelines
Board Development and Training
Volunteers
HR policies including Email & Internet Access
Sponsorship
Partnerships (incl. overseas payments as needed)
Reserves
Investment (including ethical investment)
Risk Management / Board Assurance Framework
Trustee Code of Conduct
Trustee Expenses
Conflict of Interest
Complaints
Social Media
Fundraising (donation acceptance and refusal)
Serious Incident Reporting
.
47

ESSENTIAL READING
Charity Commission Guidance:
• Essential Trustee (CC 3)
• 15 Questions
• Public Benefit: Rules for Charities
• Conflicts of interest: A guide for charity trustees (CC29)
• How to report a serious incident in your charity & Examples table:
deciding what to report
• Charity Governance Code
• Code of Fundraising Practice
49
The information in this presentation is intended to be general information only
and should not be interpreted as legal advice. English law is subject to change,
so while Stephens Scown LLP seeks to ensure the information contained in this
presentation is up to date and accurate, the law can change quickly and no
guarantee is made as to its accuracy which means the information should not be
relied upon. Presentation slides should not be viewed as an alternative to
professional advice and Stephens Scown LLP does not accept liability for any
action taken or not taken as a result of this information

PANEL Q&A - CODE 4837
www.sli.do

COMPLIANCE FROM A
VAT PERSPECTIVE
Becky Hayes, Senior Manager

VAT RISKS FOR YOUR REGISTER
 Financial
 VAT liability
 Irrecoverable VAT
 Penalties if you get it wrong!
 Operational
 Do your finance team know what they are doing?
 Compliance
 VAT registration
 Changes in legislations

COMPLIANCE RISK
MAKING TAX DIGITAL FOR VAT
 Is MTDfV on your risk register?
 Effective from 1 April 2019
 Should you enrol?
 Are you deferred?
 Is your software compatible?

VAT REGISTRATION
 Would it be beneficial for you to be VAT registered?
 input tax recovery
 What could trigger having to register for VAT?
 New grant income
 New service contract
 Hidden income
 Overseas expenditure
 VAT registration threshold is £85,000
 Also think about the corporation tax small trading threshold - increase effective 1
April 2019 to £80,000

VAT RELIEFS AVAILABLE
EVEN IF YOU’RE NOT VAT REGISTERED
 Advertising and items for collecting donations
 Fuel and power
 Construction
 Property used for a charitable purpose

FINANCIAL
SUSTAINABILITY
The ability to start, grow and maintain your organisation
Laura Waycott, Manager

UNDERSTANDING YOUR
ORGANISATIONS FINANCIAL
SUSTAINABILITY:
 Assessing and managing risk
 Planning for the future
 Accurate financial reporting
 Key performance indicators
 Reserves
 Sensitivity analysis
 Stress testing
 Final thoughts

WHAT DO WE MEAN BY
FINANCIAL SUSTAINABILITY?

 The risk register
 Surety of income/loss of key
contracts
 Costs exceeding income
 Fixed v’s variable costs
 Insufficient reserves
 The risk management policy
 Risk appetite
 Procedures and controls
 Assurance
 1st line – Management
 Policies
 Control framework
 Management review
 2nd line – Corporate oversight
 3rd line – External sources of
assurance
ASSESSING AND MANAGING RISK

PLANNING FOR THE FUTURE
 Do you have a strategic plan?
 Do you have financial forecasts?
 Cash flow projections – long-term and short-term
 Funding requirements/sources
 Developing and maintaining strong stakeholder relationships

 Are your trustees well
informed?
 Do they have management
information that is:
 Timely
 Reliable
 Relevant and
 Understandable?
 Estimates and judgements
ACCURATE FINANCIAL REPORTING

KEY PERFORMANCE INDICATORS
 Financial KPI’s
 Non financial KPI’s
 Useful as a source of assurance
 Can you link your KPIs to your reserves policy

 What are reserves?
 Liquidity
 Why does your organisation need to hold reserves?
 Are you holding the right level of reserves?
 Developing a reserves policy
 Are you articulating your reasoning in your reserves policy?
RESERVES
In order to consider the long term
financial sustainability of your
organisation you need to consider
your current level of reserves and
your reserves policy.
Your free reserves are your:
Unrestricted funds x
Less:
Tangible fixed assets (x)
Programme related investments (x)
Designated funds (x)
Any other commitments (x)
Free reserves
x

RESERVES POLICIES
In November 18 the Charity
Commission completed a review
of charity’s reserves policies.
Does the trustees’ annual report % of charities
Explains the charity’s policy on reserves 92%
States the level of reserves held 67%
States why reserves are held 90%
Meets all three requirements 64%

 Fixed/core costs
 Breakeven
 Income fluctuations
 Contract/grant income
 Donations/legacies
 Fundraising
 Variable costs
What happens if your
projections don’t go as
planned?
SENSITIVITY ANALYSIS
CostsandRevenues
Income Level
Income
Total Costs
Fixed Costs
Break-Even Point

STRESS TESTING
 What combination of risks would lead to failure?
For example increased costs and a lost income
stream?
Have you tested to the
point of failure?
 Costing up of your risks
 It’s not all bad news

FINAL THOUGHTS
 SWOT analysis
 Blank sheet approach
 Trustee skills mix
 What haven’t we thought of?

DELIVERY
Scott Walker, Director
Devon Community Foundation

Balancing Risk for Strategic Success
Delivery
Scott J Walker - Philanthropy Director

Risk, Strategy & Delivery
• Who are we, what do we do?
• UK Community Foundations
• Delivery – Our Approach

Three Things
Funding…
We invest in great ideas and unsung heroes, helping them to do what they do
best: make a real difference to the lives of local people
Philanthropy…
We are a catalyst for giving, inspiring local philanthropy that changes lives
today, tomorrow and forever
Nurture local communities…
We are the champion of local communities and all those who contribute to
helping those communities thrive

Our Impact
• Established 1996
• £11,756,791 funding distributed
• 3,789 groups & individuals supported

Funding
Giving Away Other
Peoples Money!
Partnerships

Funding
Giving Away Other
Peoples Money!
Partnerships
GroupsDonors

Culture?
Culture
DeliveryStrategy

Delivery
People, Process,
Procedure
Strategy
Plan, Principles, Policy
Culture
Think, Act, Do, Values, Behaviours, Lived
Experience

Delivery
People, Process,
Procedure
Strategy
Culture
Experience
+ve & -ve

Delivery
People, Process,
Procedure
Strategy
Culture
Experience
+ve & -ve
RISK

The Biggest Risk?
Our Delivery

Our Delivery - The Biggest Risk

Our Delivery - The Biggest Risk
People & Communication

Where do we fit?
Funders
Civil Society Infrastructure
Charities
Community Groups
People

Asset Based Community Development

Theory Of Change 2015 - 2020
Thriving Communities
If we support the voluntary sector, donors, and
partners in Devon to identify and tackle issues
together and build upon their strengths then
communities will be more resilient and inclusive with
increased capacity to thrive.

If we support the voluntary sector, donors, and
partners in Devon to identify and tackle issues
together and build upon their strengths then
communities will be more resilient and inclusive with
increased capacity to thrive.

If we understand where we can contribute resources
to communities to bring about positive social change
across Devon, then those communities will be more
resilient and inclusive with increased capacity to
thrive

Guiding Principles
• Everyone has gifts: Each person in a community has something to contribute.
• Relationships build a community: People must be connected in order for
sustainable community development to take place.
• Citizens at the centre: Citizens should be viewed as actors—not recipients—in
development.
• Leaders involve others: Community development is strongest when it involves a
broad base of community action.
• People care: Challenge notions of "apathy" by listening to people's interests.
• Listen: Decisions should come from conversations where people are heard.
• Ask: Asking for ideas is more sustainable than giving solutions.
• Inside-out organisation: Local community members are in control.
• DCF and other partner institutions we work with serve the community:
Institutional leaders should create opportunities for community-member
involvement, then "step back”.

Culture
• Just Be NICE!
• Be Natural
• Be Informed
• Be Collaborative
• Be Enthusiastic

Delivery
People, Process,
Procedure
Strategy
Culture
Experience
+ve & -ve
Our Delivery

01392 667000
Exeter
01722 337661
Salisbury
01823 275925
Taunton
01803 320100
Torquay
01872 276477
Truro
01752 301010
Plymouth
01202 663600
Poole
Francis Clark LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other
individual member firm or firms.

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