Charities October11 Forrester Boyd


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Forrester Boyd Charity Newsletter for October 2011

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Charities October11 Forrester Boyd

  1. 1. charitiesgroup issue 2 news 2011 LEADING ADVISORS IN THE CHARITIES SECTORnew pension auto-enrolmentSignificant reforms to pension law salary and gradually rise to 3%. ‘essential’ if current and futureunder the Pensions Acts of 2007 and resources are potentially insufficient2008 are to affect charities within Charities operating defined benefit to meet additional contributions, orEngland, Wales and Scotland from schemes (also known as final salary if the impact of funding the schemeOctober 2012. schemes) are also to be subject to is to have an ‘unacceptable’ impact the requirements of accounting on charitable activities.Under the Acts, charities will have to standard FRS17, which requiresautomatically enrol all eligible workers disclosure of the schemes’ assets or For more information go tointo a qualifying pension scheme. liabilities on the balance sheet. previously an employeewould not benefit from a pension Several commentators have raisedscheme unless they had opted in, concerns about the effect thisunder auto-enrolment they willautomatically benefit from their disclosure will have on the way a charity manages its reserves (the ‘free’ public benefitemployer’s qualifying scheme unless resources available once commitments reportingthey choose to opt out. Employees have been met and expendituredeclining to opt out will have to covered). However, according to the requirementscontribute at least 5% of their earnings Charity Commission, provided ato the scheme, while employers will charity is confident that scheme Compliance with the Public Benefitalso have to contribute a percentage. contributions can be maintained Reporting (PBR) requirements varies with no impact on planned levels of greatly between charities, accordingWhile these auto-enrolment provisions charitable activity, trustees are to a study carried out by Sheffieldseem onerous, they are to be unlikely to have to designate any Hallam University. Responding to thisimplemented with a degree of further funds when drafting their research the Charity Commission hasflexibility. Employers’ duties under reserves policy. urged trustees to embrace PBR as athe Acts are to be phased in, meaning chance to ‘tell the story of theiran employer will only be obliged to If the trustees are uncertain as to charity’s work and its impact.’fulfil them once the relevant ‘staging whether increasing contributions candate’ arrives. The staging date will be met using expected future income Less than 6% of the charitiesdepend upon the number of or they feel doing so would mean surveyed with an income below oremployees, with charities employing ‘significant curtailment’ of charitable equal to £500,000 clearly addressedlarger numbers having an earlier activities they are advised to seek all the PBR requirements. Whilestaging date than those employing ‘immediate actuarial and legal advice’. larger charities were generally morerelatively small numbers. The Seeking professional advice becomes likely to have met the requirements,employer’s contribution levels are in some cases this was as a result ofalso to be phased in. Contributions work by external advisers andwill start at 1% of an employee’s members of staff, rather than the trustees’ themselves, with the research claiming that in some cases trustees’ had only a ‘vague awareness’ of relevant guidance. Compliance ‘general charitable purposes’ charities being less likely than others to satisfy the requirements. charities
  2. 2. Charities and the Bribery ActThe Bribery Act 2010 came into by the MoJ, which include principlesforce on 1 July 2011. It created four of proportionate procedures, duenew offences, including failure by a diligence and communication.commercial organisation to preventbribery, and modernised the general The MoJ is particularly clear on thelaw on bribery and corruption. In issue of facilitation payments. While‘The Bribery Act 2010 – A Quick these small payments for theStart Guide’ the Ministry of Justice purpose of speeding up a service are(MoJ) confirmed that the Act applies treated as the norm in someto charities. cultures, they are nevertheless counted as bribes under the new law exemption’ in respect of facilitationThe Charity Commission just as they are under the old law. payments, and describesrecommends that all charities adopt prosecution as usually taking placea risk-based approach to compliance According to the Commission, the unless it is sufficiently within theand advises them to carry out risk Government recognises that public interest to do otherwise.assessments when faced with facilitation payments may besituations that have the “potential to necessary to protect against ‘loss of For more information go to:involve bribery or corruption”. When life, limb or liberty,’ and in such anti-bribery policies and cases is likely to allow the commonprocedures a charity should consider law defence of duress; however, it To view the MoJ guidance go to:the six informing principles outlined stresses that there ‘is no general applications – learn from rejectionA set of new guidelines has been enhance their processes to cut down the refusal of funding, as well aspublished to help charities learn on the time they spend on rejected methods of providing feedback andfrom and improve on unsuccessful submissions. post-refusal support.grant applications and to assistgrant-making organisations to Jon Fitzmaurice of Cass Business Read the guide at:support rejected applicants more School said they had found ‘a lot of The research, published frustration on both sides’, as grantby the Centre for Charity seekers wanted feedback even whenEffectiveness at the Cass Business applications were successful, whileSchool, aims to improve policy and grant makers struggled to find timepractice among grant makers and to give detailed feedback. He addedgrant seekers. that ‘if both sides work harder at this process the sector will benefitThe Art of Refusal: Promising enormously.’Practice for Grant Makers and GrantSeekers was funded by the Charities The guide provides advice to grantAid Foundation (CAF) and includes seekers on how to make pre-qualitative research from around 40 application contact with the grantgrant-making and 100 grant-seeking makers, how to identify theorganisations. appropriate individual and suitable timing for the contact. It also advisesJane Arnott, senior advisory manager on how to gain good qualityat the CAF, explained that many feedback and how to manage thecharities that had failed to secure a communication of a grant refusalgrant were ‘puzzled as to why an within their organisation.application failed.’ She added that as For grant makers, the guide makescompetition for grants is becoming suggestions for attracting the bestincreasingly fierce, it is important to applicants, setting clear criteriahelp charities improve their throughout all stages of the process,applications and grant makers and best practice for communicating
  3. 3. in brief.. models, according to research by to make charitable donations both in New Philanthropy Capital (NPC). their will, and during their lifetime. The study found that social Hannah Terry of CAF explained thatCharities independence enterprises reported an average of new incentives could "help tocould be questioned 17% annual growth over the last five establish a norm of leaving 10% ofCharities and social enterprises years, compared to just 6% growth an estate to charity" but that this taxestablished by public sector in normal firms. Two thirds of social relief alone "will not have a majoremployees under Government enterprises were still operating five impact." There is more on this storyreforms could be in danger of years after starting up, compared at: their independence with 47% of normal businesses. Aquestioned, two experts in the spokeswoman for NPC attributed Cheques to continue as longsector have claimed. Responding to the resilience of social enterprises to as they are neededa consultation by the Independence their "diverse sources of funding", as The Payments Council announced inPanel, Rosie Chapman and Belinda they get income from both July that cheques would continue toPratten, former policy heads of the commercial activities and grants. be used, after proposals to scrapCharity Commission and National There is more on this story at: them provoked widespread criticism.Council for Voluntary Organisations It also said that the target date of(NCVO) respectively, said the 2018 for the closure of the chequereforms could cause the public to Charity Commission processing system would bedoubt a charitys independence, and publishes guidance on abandoned. The Payments Counciltherefore, the extent to which it is Equality Act consulted around 600 stakeholderworking in their interest. They also The Charity Commission has groups and concluded that many,argue that this is particularly true of published guidance on a key section particularly charities and smallcharities with Government- of the Equality Act 2010 that may businesses, would suffer if theappointed trustees and other such affect charities activities. The guide cheque payment method waslinks to Government. focuses particularly on the charities removed. The Payments CouncilThere is more on this story exemption in the Act, which allows Board has said that it will work on charities to restrict the help they improving the security and efficiency provide to a section of society that of all payment methods andDonation by default most shares a protected characteristic, encourage innovation in paymenteffective, research finds provided it can be justified as a fair, options. There is more on this storyAdding a donation to a customers balanced and reasonable way of at: and giving them the choice to carrying out a legitimate aim. Aopt out is the most effective way of spokeswoman for the Commission Guide to ethical investmentgetting people to give to charity, said that “trustees must remember for charities launchedresearch by the Cabinet Offices that the general principle of fair and The National Ethical InvestmentBehavioural Insight Team (BIT) equal treatment for all applies to Week (NEIW) Action Guide forsuggests. The research, which was charities." She added that trustees Charities has been launched inconducted in a restaurant, found should "familiarise themselves with partnership with the Charity Financedonation by default to be more this guidance to ensure that their Directors Group (CFDG). The Guideeffective than other methods such as charity is working within the law." provides advice on how socialinforming diners about a charity and There is more on this story at: impact investing and other greenleaving an envelope on the table. and ethical forms of investment canThe BIT estimated that the average help charities achieve their mission.obtained in this way was equivalent Proposed inheritance tax Research by NEIW found that impactto 1.2% of each diners spend, and relief welcomed investing is becoming more popularthat if this method was rolled out The Charities Aid Foundation (CAF), with charities and 36% of privateacross UK restaurants, it could Charity Finance Directors’ Group investors want to know more aboutgenerate £50 million for charities. (CFDG) and National Council for it. Caron Bradshaw, chief executiveThere is more on this story at: Voluntary Organisations (NCVO) of the CFDG, explained that green, have welcomed proposals to ethical and impact investments ‘reap introduce inheritance tax relief for significant social, mission related,Social enterprises more charitable legacies in their joint reputational and financial benefits’resilient in recession, report response to an HM Revenue & for charities and charitablefinds Customs (HMRC) consultation. foundations. Read more at:Social enterprises are more likely to However, the groups have urged the in a difficult economic Government to introduce further Read the guide at:climate than traditional business initiatives to encourage more people
  4. 4. charities still fail to ‘showcase’ benefits Charities must do more to According to the Charity Commission, demonstrate how the public benefits which regulates charities in England from their work, the Charity and Wales, trustees are generally Commission has warned. Research able to describe their charity’s aims carried out for the Commission by and describe who benefits from their Sheffield Hallam University found work, but are less able to demonstrate that many charities are failing to meet how people have benefited in practice. the legal requirement to demonstrate Small charities in particular were public benefit in their Trustees’ Annual found to be at fault. According to Reports (TARs). Almost a third of the the research, while 26% of charities charities included in the research did with an income of more than not provide descriptions of the £500,000 had prepared TARs that benefits that arise from their activities, met the requirement, only 10% of and a further 50% provided only charities with an income of between aims to relieve poverty or advance vague or unclear descriptions. Less £100,000 and £500,000 did so. education or religion were presumed than 20% provided clear descriptions Among charities with an income of to provide public benefit, but were of public benefits in their TARs. less than £100,000, only 2% not required to demonstrate this. managed to meet the requirement. The Charities Commission has published guidance for charities on The requirement to demonstrate demonstrating public benefit, along public benefit was introduced in with sample TARs, on its website. April 2008, following the implementation of the Charities Act For more information go to: 2006. Prior to this, charities with t: 01472 350601Louth t: 01507 606111 tougher competition for fundingScunthorpe t: 01724 863105 High levels of demand and to benefit from their support. increasing competition for example, the Lloyds TSB Foundation diminishing funding streams mean for England and Wales is looking toIf you would like to receive further that nearly three quarters of increase the length of time thatinformation on any of the articles in organisations applying for funding must elapse before an organisationthis newsletter, please contact our from BBC Children in Need are can re-apply for funding aftercharities partner, Kevin Hopper, at our unsuccessful, according to chief receiving one of its grants. At present,Grimsby office or e-mail executive David Ramsden. organisations must wait two before being eligible to apply again. Speaking at the Action PlanningAuthorised and regulated by the Financial 2011 Charity Funding Roadshow, Mr Other sources of funding are beingServices Authority. Ramsden went on to say that fierce cut off altogether, such as the competition meant that funding Government’s Civil Society Transition organisations would increasingly be Fund, which was set up to help small “using the language of outcomes” charities and social enterprises when considering applications. struggling under public sectorindependent quality assured professionals "We’ve had to do some pretty spending cuts.The UK200Group is a modern and proactive professional careful analysis about where we canmembership association of chartered accountants andlawyers which provides training and business services to make the most difference," he said. According to Nick Hurd, minister forenhance the performance of member firms. As well asbeing focused on the general small to medium businesses, the civil society, no more fundingmembers have specialist knowledge and experience of the Mr Ramsden also commented that, will be available now that theagriculture, healthcare, charities, legal and property andconstruction sectors to provide effective support and advice of the organisations whose funding Transition Fund’s £107 million hasin the areas of tax, financial management, business planningand legal issues. applications were successful, many been allocated. “It’s finished, there’ were not awarded the full amount no money to do another one,” heThis newsletter has been prepared for general interest and it is important to they had requested. told delegates at the Roadshow.obtain professional advice on specific issues. We believe the informationcontained in it to be correct. While all possible care is taken in the preparationof this newsletter, no responsibility for loss occasioned by any person acting orrefraining from acting as a result of the material contained herein can beaccepted by the UK200Group, or its member firms or the author. Other funding bodies are looking at For more information go toUK200Group is an association of separate and independently owned andmanaged chartered accountants and lawyer firms. UK200Group does not ways of enabling more organisations client services and it does not accept responsibility or liability for theacts or omissions of its members. Likewise, the members of UK200Group areseparate and independent legal entities, and as such each has noresponsibility or liability for the acts or omissions of other members.