1. 1
FOCUSFINANCE
The magazine for CFG members September 2014
ALSO THIS MONTH:
EVALUATING RISK
PLANNING FOR SORP
INVESTING OVERSEAS
PROJECT MANAGEMENT
Drawing the line
WHAT LEVEL OF RESERVES
SHOULD YOU HOLD?
3. 4 5
Welcometoour
newmembers
andsubscribers!
54
The report reveals that we have been able
to increase overall income (excluding
donated goods and services) by some 7%.
We’ve put on more events, conferences,
training and other face-to-face support,
increasing this area of our work by 14%
and growing our delegate numbers by 10%.
We’ve also grown the number of individual
members by 4%, though the number of
organisations in membership fell slightly.
Against a backdrop of significant pressure
for the sector, our journey through last year
did, however, bring us to a juncture which
required some important decisions and
possibly the most profound shift to date in
how we operate. This included undertaking
a major change programme, developing a
new strategy and relocating offices. As a
result, we have had to heavily invest our
reserves in order to embark on a new
direction of travel in supporting the sector.
The changes we’ve made will drive up the
quality of the products and services we
provide to you and the wider sector. This
includes broadening the sorts of training
we can offer (for example, we can now offer
bespoke training for small groups at our new
offices in the Angel Islington, London), and
maximising the quality of engagement
between our corporate supporters
and charities.
We are now confident that we’re in a
position to deliver our ambitious targets for
growth and reach in 2014-17, and indeed
our first quarter results show we are ahead
of budget and targets in the current year.
• In 2014/15 we had a target for the year to
provide SORP briefings or training sessions
to 1,000 people. To date almost 1,200
people have attended or booked to attend
a session at a conference or one of our
many half-day training sessions, and more
dates have needed to be added to meet
demand and the needs of our members;
• Our Annual Conference in May was
the most successful to date in terms
of delegate numbers (15% more paying
delegates than last year), and there
were increased satisfaction scores from
attendees and our corporate partners;
• We launched two successful publications
with positive feedback from members and
significant amounts of media and sector
interest – Managing in a Downturn and
The Pension Maze;
• We have grown our member engagement
and special interest groups;
• We have piloted new models of training
delivery, including bespoke “in-house”
training.
Whilst there is still much to do, we believe
CFG is now fit for the future and has a firm
platform for growth.
We are pleased to tell you about our trustees’ annual
report for 2013-14, which is now available on our
website at About us Annual reports.
CFG: Fit for
the future
MEMBER MATTERS The latest updates for CFG members plus
opportunities to contribute to CFG’s policy work.
EU consults on the
impact of IFRS
As part of a review of the International
Accounting Standards (IAS) Regulation,
the European Commission has published a
consultation on the impact of the new
International Financial Reporting Standards
(IFRS) in the EU. Charities reporting under
these standards are invited to submit their
comments on the practical implications of
IFRS and any areas which they believe could
be improved. Please get in touch if you wish
to contribute to a response.
Evidence needed
on Lobbying Act
Guidance on the Lobbying Act has now
been published, eliciting comment from
across the sector. Aside from deciding which
organisations are required to register with the
Electoral Commission, there are reports that
the Act may cause undue burden for charities
in terms of accounting.
If you are planning to register, we would like
to hear from you about your experience of
interpreting the reporting requirements in
the guidance.
Funding review still
open for input
CFG has come together with NCVO, the
Institute of Fundraising, NAVCA and the Small
Charities Coalition to review the impact of the
recession on the voluntary sector, and the
changes organisations have experienced.
We are asking members to tell us their
stories through our “call for evidence”
at http://svy.mk/1uhNZaQ. If you have
any questions about the review,
please contact Andrew O’Brien
at andrew.obrien@ncvo.org.uk.
Charity Commission
holds public meeting
New Chief Executive Paula Sussex will be
speaking at the Charity Commission’s next
Annual Public Meeting about the regulator’s
work over the past year and her plans for
the coming months. The meeting will be
chaired by William Shawcross, and will also
include a lecture from Dr Frank Prochaska
on “the state of charity”. The event will take
place on 17 September between 4pm and
6pm at Church House, and is free to attend.
To book a place, contact publicmeetings@
charitycommission.gsi.gov.uk.
Voice your views Visit the CFG website for more information:
Policy Have Your Say Consultations
Apologyto
CharityFinance
magazine
In the last issue of our Economic Outlook
Briefing we published income information
from Charity Finance magazine’s Charity
100 Index, not only without permission
but also wrongly attributed to HMRC. We
apologise to Charity Finance for this error.
If any CFG members would like to subscribe
to Charity Finance magazine, where you
can read the full Charity 100 and Charity
250 Index reports each month, along
with comprehensive analysis and updates
on issues relevant to charity finance
professionals, please call Killian Cremin on
020 7819 1227 or email killian.cremin@
civilsociety.co.uk. Quote “CFG offer”
until 30 September to add a free website
upgrade, giving you full access to
civilsociety.co.uk.
Members
Addaction
Age UK Berkshire
Age UK Enfield
Al Kawthar Academy
The Albert Kennedy
Trust
BASIC – Brain and
Spinal Injury Centre
Brighton and Hove
Seaside Community
Homes
British Nutrition
Foundation
Broadening Choices
for Older People
Catholic Marriage
Care
Community Housing
Cymru
Crossfields Institute
CXK
Diocese of Hexham
and Newcastle
Emboti
Forest Peoples
Programme
Institute of Physics
and Engineering in
Medicine
Life Changes Trust
Manchester YMCA
Parochial Church
Council of the
Ecclesiastical Parish
of Horsham
Pavilion Dance
South West
Promo-Cymru
Sheffcare
Single Homeless
Project
StreetGames UK
Surrey Community
Action
VICTA
WPF Therapy
YMCA
Worcestershire
Subscriber
UTAX (UK)
CONTACT US
Email policy@cfg.org.uk
to contribute to any of
our policy work
If you have an interesting story to tell, a
particular area of interest or practical tips
and techniques to share, we would love to
hear from you. To send us your submission
please visit www.cfg.org.uk/ac15, fill in
the relevant form and follow the submission
instructions.
Alternatively, if you would like to suggest a
topic or speaker please use the session-
suggestion form available in the same place.
Submissions are open to both charity
members and subscribers, and the
deadline is 19 September 2014.
Don’t miss this chance
to shape the
programme of
our flagship event!
Call for papers
CFG is looking for interesting and practical sessions
for our 2015 Annual Conference that charity finance
professionals from a variety of backgrounds and
organisations can learn from.
CFG Annual Conference,13 May 2015
As mentioned on the page opposite,
over the last year CFG has developed
a new strategy and invested in a change
programme. With that overall framework
in place, we have been reviewing the detail
of our activities and are looking at how we
can improve what we do further in order to
better meet your needs.
This means we want to find out more
about you, what your needs are and
how we can help. We’d be grateful if
you could give us your views by visiting
www.cfg.org.uk/survey14 and
answering the questions provided.
In return for your time, we’ll enter you in
to a prize draw. Five people who complete
the survey in full before the deadline will
be selected at random to win £50 each
in CFG vouchers for their charity to spend
on training or events.
The survey closes
for responses
on 2 October.
Have your say!
CFG’s Member Survey is now open for responses.
This is your chance to help us shape our future.
Lastchance!
Don’tmiss out!
We’re delighted to invite you to
member meetings in November and
December on governance and related
issues. These will present an opportunity
to ask any questions you may have on
the work of CFG and our results, and
to explore areas of future development.
4. 6 7
Language needs to
embrace and invite,
rather than bewilder
and put off potential
participants
66
ON OUR RADAR CFG’s policy work: representing your views to decision makers,
plus research, guidance and news from around the sector
Where banks have been found guilty of
facilitating transactions that have ended
up in the wrong hands, they have had
their wrists publicly and painfully slapped.
This includes HSBC, which has been taken
to task for processing payments that
supported Hezbollah and Mexican drug
lords, with the latter case resulting in
a $1.9bn settlement. Elsewhere, BNP
Paribas (a French bank) is currently under
investigation in the US over the alleged
laundering of over $100bn from Sudan.
The costs of effective due diligence are
high. Tens of millions are spent every
year on running checks against sanctions.
This is driving a trend away from financial
services which are: high-cost to run
(in terms of the relevant anti-money-
laundering checks required to have some
guarantee of security); high-risk (in terms of
the potential costs to the organisation that
gets it wrong, even with comprehensive
checks in place); and which do not deliver
sufficient financial return to counteract the
aforementioned costs. Hence a number
of organisations are no longer falling into
HSBC’s risk appetite.
In light of all of these factors, it is perhaps
no surprise that CFG’s members are
reporting that banks’ de-risking processes
are impacting on INGOs trying to make
international payments, either by formal
banking services or by money services
businesses, or trying to open and maintain
bank accounts that ultimately service
overseas beneficiaries. Charities have
been deemed “vulnerable” by international
regulatory institutions such as the US-
based Financial Action Task Force,
especially those that are moving funds to
areas at high risk of terrorist and money-
laundering abuse.
Charities that are owed money by the
Dove Trust’s online donation platform
charitygiving.com will receive around a third
of what they were due, following a legal ruling.
A judge assessing the case decided
that money would be distributed without
distinguishing between donations made
before and after the site was declared
insolvent and an interim manager (Pesh
Framjee, pictured) appointed.
If this ruling is relevant to your charity,
please visit www.charitygiving.com
to find out more about
how you can claim
the outstanding funds.
What’s the big issue?
Banking risk
HSBC has abruptly closed the bank accounts of a number of
organisations and individuals (including a number of Muslim
charities), as it reassesses its “risk appetite” for engaging
with certain clients. This follows other banks de-risking in
response to a stringent global counter-terror regime and
reputational damage following the financial crisis.
7
Social
investment:
What’s all the
noise about?
forms of investment, ranging from pure
social investment to impact and “mixed
motive” investing. Why wouldn’t you want
to make your money work even harder,
bringing social as well as financial return to
organisations that strive for social change?
However, it remains to be seen whether
steps to stimulate the market, such as
the social investment tax relief, are enough
to enable the market to break out of its
“embryonic” status. Organisations must
make use of the mechanisms available
to assess their appetite and need for
these products.
Whether expectations for this market
can be matched in reality will rely on a
combination of factors. Language needs
to embrace and invite, rather than bewilder
and put off potential participants.
Departments across government need
to recognise that charities and social
enterprises have a valuable role to play,
and that it does matter that the motives
of social investment vehicles are social
rather than profit-making. Charities for
which social investment is a credible
and valuable way of fast-tracking change
need to be supported to take the plunge.
However those advocating social
investment may also need to be much
more realistic. Social investment has a
genuinely transformative potential for
the right charities, but it is not a panacea
for all the sector’s funding challenges.
Expectations need to be managed! Social
investment is not a replacement for lost
income, even though it has huge potential.
There’s no doubt that social investment
is very much the flavour of the month.
There is a lot of interest on the supply side
from pioneers like Sir Ronald Cohen, as
well as banks (like Big Society Capital) and
intermediaries. The government is relishing
the UK’s place as the world leader in the
development of the market. The social
market is viewed by its fans as a “fast
growing” market which could result in
genuinely new money for social good.
According to the City of London’s Growing
the Social Investment Market: The
Landscape and Economic Impact, the
social investment market grew by almost
a quarter to £202m in 2011/12. Since then
there has been a steady increase in the
number of social investment deals being
struck, yet demand continues to be
outstripped by supply.
It is understandable to get excited about the
notion of social investment. The emergence
of the Charity Commission’s CC14
guidance brought about a new focus and
perhaps an anticipation that suddenly
charities would be free to explore new
CFG opposes annual-
return questions
CFG has responded to the Charity
Commission’s consultation on proposed
additional questions in the annual return.
CFG strongly opposes the requirement
to disclose campaigning expenditure and
income from both public-sector delivery
contracts and private donations.
We are broadly in favour of the other
proposals, but have stressed the
importance of ensuring that the burden
on charities is kept to the minimum level
necessary to enable the Commission to
carry out its functions effectively and keep
the public informed.
Concern over
postage VAT change
We have written to the Treasury and
the HMRC Charities team jointly with the
Institute of Fundraising regarding HMRC’s
recent letter to the Direct Marketing
Association on the VAT costs for postage.
We have raised concerns about the
potential impact on charities of applying
VAT to single-source-supplied bulk mail,
which stems from the removal of postage
as an “ancillary” cost.
We have asked for reassurance that
charities that have engaged in single-
sourcing since 2012 are not liable for
any unpaid VAT, as these costs would
directly reduce the amount of money
that charities have to deliver vital services,
and in some cases these changes will
make charities vulnerable if they have to
pay almost three years’ worth of unplanned
VAT. We will work with the relevant
government departments to influence the
decision, with the aim of ensuring that any
changes made are appropriate and do not
unduly affect the sector.
Protection of Charities
Bill to be published
The Protection of Charities Bill announced in
the Queen’s Speech earlier this year, which
aims to equip the Charity Commission with
powers to tackle abuse more effectively and
efficiently, will appear in draft following the
summer recess. Having responded to the
Cabinet Office consultation earlier this year,
we will be keeping a close eye on the Bill’s
development and pre-legislative scrutiny.
Policy progress
Court rules on Dove Trust fundsCFG will be jointly holding a
conference on social investment
with Big Society Capital on 27
November. Members will have the
opportunity to engage in this debate
and hear from a range of speakers
on topics including engaging your
trustees in social investment,
loan financing and performance-
related financing.
For more information please see
page 16, or to book your place visit
www.cfg.org.uk/socinv
5. 8 9
Tom Davies,
Senior Manager,
Not for Profit Team,
Grant Thornton
8
ON OUR RADAR CFG’s policy work: representing your views to decision-makers,
plus research, guidance and news from around the sector
9
ACCOUNTING FOCUS
The new SORP has been revealed, but how should you
be preparing? Tom Davies gives some planning tips.
Ready for
lift-off
Assessing it under these headings will act
as a helpful way to identify where additional
information will be required, such as from your
HR team in relation to calculating your holiday
pay accruals, but also where wider discussions
with stakeholders such as trustees, donors
and lenders will be needed to explain potential
financial impacts. Importantly, it will also
enable you to plan your own internal resource
requirements within the finance team, including
any need for additional training.
The outcomes for each item could be
captured in a table such as figure 2.
Naturally, there will be areas under the new
SORP which you believe are still open to
judgment and differing interpretations, such
as the recognition of legacies. With issues
such as this, you should use the current
audit cycle to take specific examples and
discuss them as part of your audit debrief
in the current year. This will enable you to
address these areas of uncertainty as
early as possible.
Compared to other sectors, such as
higher education and housing, it is clear
that the impact of the new FRS 102 and
the Charities SORP will be less fundamental
on a charity’s financial statements, but as
always: Prior Proper Planning Prevents
Painfully Poor Production!
As someone who grew up in a military family,
it is hard not to think of the “7 Ps” military
adage, which extols the virtues of proper
planning, when trying to provide some
practical suggestions for finance teams
as they look to adopt the new SORP.
Continuing the military theme, teamwork
is key, not least in ensuring that you are
engaging throughout the transition period
with your beneficiaries, stakeholders and
auditors to manage the potential impact
of the changes on a timely basis.
As the vast majority of charities are now
in this transition period, what helpful
suggestions can I make? Firstly, prepare
a transition timetable – smooth transition is
dependent upon careful planning. A charity
with a December year-end adopting the FRS
102 SORP might produce a timetable that
looks something like figure 1.
Assessing the impact
Secondly, many of you will have already held
a number of discussions considering the
potential impact of FRS 102 and the new
SORP. However, now that the new SORP is
published, I would recommend that time is
made to sit down with your finance teams
to conclude how the new SORP is going
to impact your organisation and what
your response will be.
I would suggest that impact is assessed
under two headings:
• Financial – which measures the impact of
specific items on the financial statements in
terms of the effect on the balance sheet or
statement of financial activities (SoFA);
• Resource – which considers the resources
required to address the issue during the
transition process.
Research and reports
Charities‘not
explaining their
liabilities’
In a recent report, the Charity Commission
analysed the accounts of charities that have
reported net current liabilities. Out of the
98 accounts reviewed, nearly half (42) had
not used their trustees’ annual report (TAR)
to explain how they were addressing the
associated risks. Among those that did,
the planned solutions included restructuring
and also merging with other charities.
In response, we have stressed the
importance of not taking the findings out of
context. These valuations are often only a
snapshot in time and need be considered
within the wider narrative of the charities’
overall finances.
A‘Hippocratic oath’
for bankers?
The think-tank ResPublica recently
launched the report Virtuous Banking:
Placing ethos and purpose at the heart of
finance, which reviews the way in which the
banking industry governs and organises
itself and explores how the financial sector
can be made more responsive, responsible
and ethos-driven. The report addresses
problems of the past and considers what
paths can be taken to restore ethics to
the sector, such as bankers swearing a
“Hippocratic oath”.
Report suggests drop
in volunteering
This summer saw the release of findings
from the Cabinet Office’s Community Life
survey for 2013-14, which indicated that
the number of people volunteering formally
had dropped from 44% to 41%. Some 27%
said they had volunteered formally once a
month, compared to 29% last year.
Bank fines to be given
to charity
Approximately £100m of fines levied on the
Lloyds Banking Group for the manipulation
of financial benchmarks such as Libor will
be allocated to military charities. In total,
the government is allocating £300m to
the Armed Forces Covenant and wider
organisations.
SORP Committee
secretariat announced
The Chartered Institute of Public Finance
and Accountancy (Cipfa) has been awarded
a three-year contract by the Charity
Commission to provide the secretariat to
the SORP Committee. The role, which was
previously held by the Commission and its
Scottish counterpart OSCR, includes
preparing technical briefing papers and
drafting the text of the SORP. Cipfa, which
is the accounting body for public services,
will take up the role in September and has
the option to extend by two years.
Charity funds make
impressive 10% return
According to the VM Charity Fund Monitor
from State Street, UK charities made an
average investment return of 10.4% over
the 12 months to the end of June this year.
The best performing assets were property
(17%) and UK equities (13%). The worst
was cash, which returned only 0.4%.
Charity Commission
taking harder line
The Charity Commission’s 2013-2014 Annual
Report, published in July, demonstrates what
the regulator describes as a “steep increase in
investigatory work”. It reports that 64 statutory
inquiries were opened between April 2013
and March 2014, compared to 15 during
the previous financial year. In a section titled
“tackling abuse and mismanagement”, the
Commission declares that it is “now quicker to
intervene”, and is taking a “tougher approach”.
Three-quarters of
mergers‘are takeovers’
According to the first of a new series called
the Good Merger Index, almost three-
quarters of charity mergers should be
classed as takeovers. The study, which is
published by the consultancy Eastside
Primetimers, examined 189 charity mergers
that occurred between January 2013 and
April 2014, and found that in only 23% of
cases did two or more organisations form a
new one. It argues that the rest should be
classified as takeovers, because they
involved one organisation transferring its
assets and activities to another organisation
and being dissolved.
News in brief...
HMRCrewrites
VATguidance
HMRC has rewritten its guidance on
VAT for charities. The revised guidance
offers an introduction to VAT for charities,
as well as discussing whether activities
are business or non-business, the VAT
treatment of income received, VAT reliefs
on purchases, fuel and power, and VAT
on charity events. The guidance can be
found at http://bit.ly/VciYF8.
DBpensionscode
comesintoforce
The Pensions Regulator has published
its code of practice for defined-benefit
pension schemes, which applies to all
schemes in Great Britain. The code
provides practical guidance for trustees
and employers on how to comply with
the scheme funding requirements
contained in part three of the Pensions
Act 2004. Entitled Funding Defined
Benefits, the code can be found at
http://bit.ly/1sQfDrA.
Medicaland
veterinarysupplies:
NewVATguidance
HMRC has rewritten its guidance on
charity-funded equipment for medical
and veterinary uses. The guidance explains
when goods and services purchased with
charitable or donated funds by eligible
bodies and/or third parties can be zero-
rated, what an eligible body is, and the
conditions that must be met. The guidance
can be found at http://bit.ly/1sNXvzu.
Guidance and support
1 JANUARY 2015 31 DECEMBER 2015NOW
Set timetable and consider
resource planning
Consider agreements, terms
of loans and other instruments
Assess impact of new
standard on each financial
statement item
Assess impact of final FRS 102 SORP
Training of staff and others
Ensure systems are in place to
gather required information
Discussions with, and
education of, stakeholders
Restatecomparative
financialstatements
Prepare financial
statements under
FRS 102
Figure 1:
Figure 2:
FRS 102 SORP issue
Financial statement presentation
Key changes include:
• Reduced number of income and expenditure
categories on the face of the SoFA;
• Gains/losses on investments included
within net incoming resources as opposed
to other recognised gains/losses;
• Reduced number of headings on the face
of the cash flow statement;
• Cash flow statement to be reconciled to
the total of “cash and cash equivalents”.
Potential approach
£ – LOW/MEDIUM RESOURCE – HIGHIMPACT:
• Prepare skeleton accounts in advance
of the first year-end in sufficient time to
allow input from the board, and in order
to obtain any information that is not
readily available;
• Review the mapping of the nominal ledger
to ensure the trial balance reflects changes
to the presentation in the financial
statements;
• Review accounting policies to ensure
they are FRS 102 and FRS 102
SORP compliant;
• Consider impact of changes on bank
covenants, if applicable;
• Communicate changes to wider stakeholders.
6. 10 11
Monitoring reserves
should not just be an
annual exercise as
accounts are signed off
One of the most common questions to
be asked at the CFG Foundation Charity
Finance course is “how much should we
hold in reserve?” This is also a regular feature
of discussions at most audit or finance
committees. Despite changes in the
economy, the SORP and developments
in trustee law, the answer to this question
is fundamentally unchanged.
The Charity Commission’s guidance (CC19)
is not prescriptive on levels of reserves.
Recognising the lack of homogeneity in
the sector, it does not attempt to define
what level of reserves a charity should have.
Rather, it states that a charity should have
a reserves policy and must be able to justify
why it is holding a particular amount in
reserve at a particular point in time. The level
of reserves should be justified with reference
to the charity’s current position and future
prospects. If there is a benchmark to apply,
it is the basic test of a trustee acting as a
“prudent man of business”, balancing the
needs of current and future beneficiaries.
Despite this, it is inevitable and right that
charities are compared. This leads inexorably
to using the now familiar mantra of reserves
expressed as a proportion of expenditure – a
hangover from the initial consultation on the
Charity Commission’s reserves publication.
In practice, as our own research has
demonstrated in the past, even this is terribly
fraught, as both the precise definition of
reserves and the nature of expenditure to
be considered are full of individual variations
in practice and underlying fact.
SORP changes
Charities’ reserves and their presentation will
be affected by the new SORPs (the points
that follow mainly refer to larger charities
adopting FRS 102, though they certainly
represent good practice for all charities).
One example is that the presentation of the
reserves in the annual report is now more
tightly defined. Paragraphs 1.48 and 10.91
are key in this respect, and charities should
compare their existing reserve policies with
this new guidance. Annual reports that refer
to reserves in terms of cash, investments or
1110
COVER STORY
some other definition created by the charity
will need to amend their approach.
The Commission’s guidance also makes it
clear that monitoring reserves should not just
be an annual exercise as accounts are signed
off, but that they should be monitored
regularly throughout the year. Charities which
do not yet adopt the SORP definition will need
to consider how best to do this, but it would
seem logical to move to the statutory basis
rather than have two methodologies running.
Some charities build their reserve policies
around the minimum that they require to
keep going, whilst designating any other
funds. Others simply set out the purpose
for which all their reserves are held. Charities
adopting the former route will welcome
paragraph 10.91, which effectively gives
official sanction to the idea of a separate
“continuity” fund.
Income, expenditure and balance
sheet
In considering how reserves will appear in
the accounts, it is worth noting the changes
that will affect income and expenditure, and
sometimes the balance sheet. Although few
of these are operationally significant, they
will affect perception. Key changes to
consider include:
• Earlier recognition of income when its
receipt is “probable”, whereas the
equivalent criterion under SORP 2005
was “virtually certain”;
• Income from some contracts can be
classified as restricted income rather
than unrestricted income;
• Legacies are not only caught by the
change in recognition criterion, but also
affected by enhanced guidance.
Obviously earlier income recognition will
boost balance sheets, and therefore
reserves. Treating some contracts as
restricted may reduce reserves, depending
on prior treatment, and will certainly reduce
the amount of unrestricted expenditure.
This may be significant if this figure is used
as a benchmark.
Expenditure is relatively unchanged, but
beware of the effects of changes in defined-
benefit-pension scheme treatments. There
are two changes here that will affect
expenditure and the balance sheet position.
Firstly, FRS 102 changes expenditure by
recognising, within expenditure, net interest
determined by multiplying the net defined-
benefit liability (the defined-benefit obligation
net of plan assets) by the discount rate used
to calculate the defined-benefit obligation.
By contrast, FRS 17 recognised the
expected return on scheme assets and
the unwinding of the discount on scheme
liabilities. The effect on expenditure and
surpluses may be significant.
In respect of multi-employer schemes where
there is an agreed deficit-funding plan, FRS
102 requires a liability to be recognised for the
present value of the contributions payable
that arise from that agreement (to the extent
that they relate to the deficit) with the resulting
expense recognised in the profit or loss. This
accounting is likely to give rise to much more
volatility in the SoFA as deficit funding plans
are revised with each triennial actuarial
valuation, and previously-assessed liabilities
are increased or decreased. The balance
sheet, and therefore the reserves, will be hit
by what may be a substantial liability.
Some organisations will also need to
consider the implications of other balance-
sheet changes too. Although these will affect
less charities, mixed-motive investments and
mixed-use properties could both result in
changes to the funds that are presented as
available to support the free-reserve figure.
It may be that this all seems a long way
removed from the real world. However, the
importance of reserve management is being
continually reinforced with stories in the
press commenting on charity reserve levels,
and of course one of a trustee’s fundamental
duties is to avoid insolvency. So however
esoteric, this is a subject that needs
grappling with. The new SORP provides
both a challenge and an opportunity to
have another look at this important topic.
We hold four different categories of reserves/
funds – endowments, restricted, designated
and free reserves. FotE’s current policy on
reserves effectively looks only at free
reserves. The other fund types do not need
to have targets set around them and so we
haven’t included them in the current policy
and won’t be covering them here.
Historically, FotE has had a policy of holding
three months of annual expenditure as free
reserves. The rationale for this level has
been around having sufficient funds
available that, if every service should close,
there would be sufficient resources in place
to wind every service down over three
months. This is the “armageddon”
rationale, and there are two issues with this:
• It assumes that every service will have to be
shut down at exactly the same moment;
• It assumes that no income at all will be
received during any close-down period.
So what is the appropriate level of reserves
to hold? Fortunately, lots of external
guidance is available on setting reserves
policies, and we’ve found the following
items useful in refining ours:
• The Charity Commission has a number of
different documents to help charities;
• Our current auditors (Mazars) are
obviously a good source of more specific
information on how to tailor our reserves
policy;
• Sayer Vincent’s Drawing up a Reserves
Policy is a more risk-based approach to
setting reserves, using a number of steps
to get to a policy outcome.
Our first step was to analysis our income
risk. Using the Sayer Vincent methodology,
this has come out as in figure 1.
Without looking at the model, it’s hard to
know if the reliability scores are good or
bad. But I can tell you that this is a relatively
low-risk profile which shows that our
income sources are relatively dependable.
The next step was to analyse our
expenditure commitments. There are lots
of ways to slice and dice your expenditure
(i.e. by staff costs and other major cost
types, or by functional area, or by activity,
stream). We’ve decided to look at things
by activity and our level of expenditure
commitment is laid out in figure 2.
Interestingly, this shows that we have a higher
level of commitment to our home-support
work than to our care-home operations,
which we are taking into account when
putting together our new policy.
The final step is to consider the risks that
the charity is facing, using our risk register.
In the main, the uninsured risks that we
are carrying (i.e. those that require
reserves to be held) appear to be around
circumstances that lead to the loss
of confidence in a single part of our
operations, rather than across the whole
charity. This gives weight to not having an
“armageddon” approach to free reserves.
These three bits of analysis don’t feed into
a black box that churns out a magical
reserves figure. We are using this data to
structure our discussions, and that’s the
final and obviously most important step.
This is the part of the journey that we are
at – the conversations: finding out about
individual and organisational risk appetites,
establishing a risk-based approach to free
reserves and balancing the needs of future
and current beneficiaries.
As I said, we’re not at the destination yet,
but my hope is that, by going through this
exercise, we can free up around £1.5m for
our work. Who wouldn’t want to do that!
Where to draw
the line?
Where to set reserve levels continues to be a thorny
question. Don Bawtree considers this along with the
consequences of the new SORPs.
Friends of the Elderly (FotE) is currently moving towards a new
reserves policy. Rui Domingues shares the journey so far.
Figure 1: Analysis of income risk
Income source Percentage of total income Reliability
Care homes 71.8% 144
Home support 20.1% 121
Community services 4.7% 28
Donations and legacies 1.0% 18
Investment income 0.9% 17
Management fees 0.0% 0
Other income 1.4% 17
Figure 2: Spending commitments
Income Source Percentage of total costs Commitment
Care homes 69.4% 1,110
Home support 18.8% 1,203
Community services 6.9% 10
Fundraising 1.8% 16
Grants 1.8% 85
Isolation / public affairs 0.6% 4
Governance 0.6% 3
Investment management 0.2% 1
Deciding on a
new reserves
policy Rui Domingues,
Director of Finance ICT,
Friends of the Elderly
Don Bawtree,
Partner, BDO
7. 12 13
Alyson Pepperill,
Chair, Institute of Risk
Management Charities SIG,
and Head of Oval Charities
RISK FOCUS
12
There are many definitions of “risk”, and
they revolve around an occurrence which
impacts on the delivery of an objective. Risk
management therefore looks at how risks
can be eliminated, avoided, reduced or
accepted by an organisation.
Figure 1 provides a process that can be
followed to identify the risks that your charity
faces. One needs to quantify the size of the
risk to the organisation in terms of impact
and likelihood of the risk occurring, and
then consider how to manage the risk.
At a more strategic level, the board and
senior management team can view risk
management as how you:
• Identify and anticipate problems that will
stop you achieving your objectives;
• Manage the risks your organisation
presents to the public, your employees
and volunteers, and your trustees;
• Maintain the trust and confidence of
internal and external stakeholders by
running a successful and ethical
organisation;
• Work within existing budgets to meet
your objectives and create financial stability
and viability;
• Demonstrate that you are a competently-
managed organisation.
This article focuses on identifying risks for
the charity, but the process can be used to
identify risks to a new income stream or a
special project.
Identifying risks
Who should participate?
In order to gain as broad an insight as
possible into the risks facing the
organisation, it is important to include
a representative from each area (i.e.
departments, activity areas and/or income
streams) as well as those with an oversight,
such as your trustees and executive
leadership team. This could be achieved
through departmental and management
meetings, as well as through online surveys.
How can risks be identified?
It’s probably easier to provide some guidelines
or headings through which participants can
structure their thinking and to issue them with
an introduction to “what is a risk’’. Figure 2
sets out some common headings:
For further assistance, see the Charity
Commission’s Charities and Risk
Management document (CC26), which
offers more examples of risks.
Consolidating the risks identified.
You should end up with a long list of
identified risks through your broad
engagement with employees and trustees.
In order to reduce this list down to a more
manageable and meaningful one, risks can
often be grouped and collated as the same
risk, or a subset of that risk.
Alyson Pepperill suggests how to identify and
evaluate the risks to your organisation.
Defining or quantifying risk
Probably the most simple, structured and
time-controlled way forward is to hold a
“risk workshop”. You may want an external
consultant, such as your external auditor or
risk consultant, to attend as an objective
facilitator and timekeeper.
An alternative way of defining and
assessing the risks is for between one
and three people to work through an initial
assessment. A wider workshop is then
used to “test” areas of uncertainty and
obtain wider buy-in.
The risk workshop will usually be subjective
and consensual as you’re predicting whether
a risk might occur and the size of the impact
on the organisation, rather than having
actually experienced the risk or accessed
factual data.
It is useful if some monetary parameters can
be applied. These need to be agreed by the
director of finance and encompass:
• What a significant financial impact from
a single event is equal to;
• The size that a series of events that
financially impact the organisation across
a 12-month period will have to reach to
seriously impact on operations.
As well as assessing the size of a risk you
have to think about how likely it is that a risk
will happen.
Figures 3 and 4 opposite give some useful
guidance on how the likelihood and impact
of an identified risk can be measured.
Figure 4: Impact scoring example
Please note the financial limits selected are for example purposes only.
This offers several routes to help you assess the impact of a risk and score it accordingly.
Score 1 – Negligible Score 2 – Low Score 3 – Medium Score 4 – High Score 5 – Very high
Little or no financial impact
(less than £5,000)
The financial impact
would be losses, or a
lost income of no greater
than £25,000
The financial impact
would result in losses or
lost income of no greater
than £100,000
The financial impact would
result in losses or lost
income of no greater
than £500,000
The financial impact would
be greater than £500,000
Services are not disrupted Some temporary disruption
to the activity of one
service but not beyond this
Regular disruption to the
activities for one or more
service
Severe service disruption
on a departmental level or
regular disruption affecting
more than one department
Severe disruption to the
activities of all departments
No impact on delivery of
key objectives
It may cost more so there
may be a delay in delivering
one of the organisation’s
key objectives
A number of objectives
would be delayed or
not delivered
Many objectives would be
delayed or not delivered
Unable to deliver most of
the objectives
No loss of confidence in
the organisation
Some loss of confidence in
the organisation felt by a
certain group or within a
small geographic area
A general loss of
confidence in the
organisation within
the local community
A major loss of confidence
in the organisation and
within the local community
A disastrous loss of
confidence in the
organisation, both
locally and nationally
These scores can then be plotted on a “risk matrix”, which will help you to visualise your key risks, how to manage them and where to
deploy any necessary capital expenditure.
Figure 3: Likelihood scoring example
Score 1 – Highly unlikely Score 2 – Unlikely Score 3 – Possible Score 4 – Very likely Score 5 – Definite
Previous experience at
this and other similar
organisations makes
this outcome highly
unlikely to occur
Previous experience
discounts this risk as
being likely to occur,
but other organisations
have experienced
problems in this area
The organisation has in
the past experienced
problems in this area,
but not in the last
three years
The organisation has
experienced problems
in this area in the last
three years
The organisation is
experiencing problems
in this area or expects to
in the next 12 months
There are effective,
tested and verifiable
controls in place that
prevent occurrences
of this risk
There are controls in
place that whilst not
tested, appear to be
effective
Some controls are in place
and generally work, but
there have been occasions
when they have failed and
problems have arisen
Controls may be in place
but are generally ignored
or ineffective
No controls in place
Figure 2:
Example one Example two
(Charity Commission)
Example three
• Financial risk
• Operational risk
• Natural hazard
• Legal regulatory
• Governance
• Operational
• Finance
• Environment/external
• Compliance (law and
regulatory)
• Financial risk
• Operational risk
• Legislative/regulatory risk
• Major/new projects
Figure 1:
RETAINREDUCE ELIMINATE TRANSFER
ACCEPT CONTRACT INSURANCEPOST LOSSPRE LOSS
IDENTIFY
QUANTIFY
MANAGE
Issues
and
solutions
I
Our list of identified risks is way too
long to take to a risk workshop.
S
It is important to group together the
feedback from the broad range of
contributors as there will be overlap. This
should reduce the list considerably.
I
How do we decide how big a
risk is?
S
You will need some financial guidance
to help you assess the impact of a
risk and hopefully the tables above also
provide some useful guidelines that can be
applied to different risks.
I
We know what our big risks are
and don’t need to go through
this exercise.
S
The exercise may spot additional (and
especially emerging) risks, which will
make it worth the time-investment.
I
Risks change; are we meant to do
this exercise several times over?
S
Not the full exercise, although you
may want to consider doing that
every 2-3 years as good practice. However,
you will need to keep the output live by
thinking about what new risks there are
and how the likelihood and severity of a risk
can be managed down. The best way to do
this is to schedule a quarterly review into
the management meeting agenda.
I
We have undertaken the risk
workshop and identified and
assessed our risks – is that it?
S
No, because so far we have not
looked at how to manage the risks,
what you’re already doing to manage
risk or what you want to do in the future.
That’s for another article. In the meantime,
it would be useful to re-order the risks
by their importance within the headings
used And remember that not every risk
is significant enough to go on the risk
register. It could just be someone’s
own agenda item!
Trouble on the
horizon?
Key
I Issue
S Solution
8. 14 15
A key asset-allocation consideration is
deciding how to split exposure between
domestic and overseas assets. With the UK
constituting about 3.5% of global GDP and
around 8% of the FTSE All-World Index, it is
obvious that a substantial opportunity-set
resides outside the UK in terms of economic
exposure and access to a much bigger array
of companies.
In addition to providing participation in bigger
markets, overseas exposure offers the
opportunity to diversify risk by minimising
correlation exposure within portfolios.
Understanding the correlation exposure
embedded in portfolios is extremely
important. This analysis needs to be across
asset classes (horizontally), and also looking
at correlation exposure within individual
asset classes (vertically).
Equity exposure
Taking the latter (vertical) approach and
focusing on equity exposure, the key
correlations to consider are, firstly, the
magnitude of economic correlation –
whether investing abroad delivers access
to faster growth and exposure to economic
cycles that are de-synchronised from the
UK. The second consideration is the
quantum of correlation in global equity
market returns and an understanding of
what exposure is represented by the
benchmark equity index. On top of this
has to be overlaid the decision of whether
or not to hedge exchange-rate exposure.
Comparison of global industrial production
data shows that the UK economy is most
correlated to the US economic cycle, is
moderately correlated to the Eurozone
region, and is negatively correlated to the
emerging market economies. This implies
that exposure to the emerging markets
potentially provides not only exposure to
faster-growing economies but also an
opportunity to offset the impact of a cyclical
downturn in the UK.
The obvious follow-on from this is to assess
whether the economic correlation is reflected
in the behaviour of equity-market returns.
Examining regional local-currency returns
(stripping out the impact of currency swings),
we observe that over the last five years the
UK equity market has maintained the highest
correlation to the US equity market.
However, somewhat surprisingly, the data
shows a higher correlation to emerging
markets than Europe. So while the US
economic and market correlations appear
to be connected, the results from emerging
markets and Europe do not correspond
to the economic correlation data.
This imposes an interesting requirement on
investors – understanding the exposure you
are buying when you invest in a benchmark
index. Dissecting the UK index provides
some interesting insights. For instance,
the FTSE 100 is only 23% exposed to
domestically-generated revenues. By
1514
TAX FOCUS INVESTMENT FOCUS
As HMRC seeks to reduce input tax recovery via
the so-called “cost component”, Graham Elliott
surveys the battleground.
In the firing
line
Looking further
afield
contrast, the US SP 500 is 70% exposed
to domestic revenues. Relative to global
equities, the UK market is overweight in
the oil and basic-material sectors and
underweight in technology and industrials.
Consequently, the UK’s sector skew is
more defensive than the major regions,
and the responsiveness of UK EPS to global
industrial production is relatively low. More
importantly, the UK’s exposure to emerging
markets via the banks, basic materials and
oil sectors explains the rise in correlation
between the UK market and emerging
markets alluded to above.
Currency exposure
The other key consideration when investing
overseas is the impact of currency exposure.
If a currency appreciates, it reduces the
return from overseas assets and vice versa.
For instance, All-World ex UK equity-market
returns since 2012 in sterling terms
(unhedged) have appreciated 40%, but if
calculated in local currency terms (assuming
perfect hedging), overseas equities have
returned 59%.
Clearly, failure to hedge overseas exposure
over the last few years has eroded realised
returns from overseas assets. It is also worth
bearing in mind that multinational companies
offer a degree of embedded hedging
protection. This is because they can mitigate
some of the overseas-profit translation effect
by either directly hedging (using their own
treasury departments) or repositioning their
assets and debt. However, currency risk is
hard to avoid given that nine of the largest
20 dividend payers in the UK calculate their
dividends in US dollars or euros, and convert
to sterling at the prevailing rate.
The core rationale for investing in overseas
equities is that it provides opportunities to
participate in larger economies that offer a
much wider selection of quality companies
and business models. It also enables an
asset allocator to diversify portfolio risk and
correlation exposure. In order to do this it is
imperative that the overlay of economic and
market-return correlations are fully understood.
Charities are rightly preoccupied with the
question of how much VAT they can claim
on costs. This usually focuses on the method
of calculating the percentage split between
taxable and non-taxable activities, so as
to apportion VAT on general costs. But the
issue of how to define the use of certain
costs in the first place is not as easy as is
often assumed. Is the cost wholly referable
to a taxable supply, to a non-taxable activity,
or a bit to both? The question is simple but
the answer can be difficult. This is
increasingly becoming a battlefield in which
HMRC seeks to reduce input-tax recovery.
This trend continues as we learn that HMRC
has a new argument up its sleeve, that of the
so-called “cost component”. We know this
because HMRC presented a paper on the
subject in June. But what is it all about?
In simple terms, for a cost to be either wholly
or partly recoverable it must have a “direct
and immediate link” with taxable supplies.
How is this determined? One approach
outlined by the Court of Justice of the
European Union (CJEU) is that the purchase
must be a “cost component” of the intended
relevant supply. Whilst this “cost component”
phraseology is obscure, it could be thought
to mean that the price charged must be
equal to or greater than the sum of such
costs. In other words, the intention must be
for the activity to at least break even in the
long run, even if that intention fails, if the
costs are to be treated as genuine “cost
components”. The tax-payer community has
never seen it in that light because, as is well
known, businesses liable to VAT can run at
a deliberate loss, as is often the case with
charities. Achieving full cost recovery from
the customers is not the intention.
What seems a more sensible view is that,
where a fully commercial and profit-seeking
operation is involved, any choice between a
This is a clear and
present danger for
charities, and needs
to be resisted
taxable and exempt supply being regarded
as using the cost in question needs to have
regard to the extent to which prices of
either supply absorb the said cost. That
makes sense.
The HMRC view
HMRC’s paper goes much further though.
Paragraph 13 says: “A cost is used for the
taxable supplies to the extent that it is
incorporated into their price. Accordingly
the VAT incurred on a cost is deductible
to the extent that the cost is incorporated
into the price of the taxable transactions.”
That seems pretty unambiguous.
But might it only relate to cases where there
is a choice of allocation between taxable and
non-taxable activities? No, rather paragraph
three of the paper says: “This does not just
apply to cases where costs have to be split
between taxable and exempt supplies; it
applies in all deduction situations.” This
seems to mean that VAT recovery will be
limited to the proportion of the cost which is
intended to be recovered in the price of the
taxable supply, irrespective of whether or not
the charity undertakes non-taxable activities,
or the extent to which it does.
The reasoning given is fairly complex, but
note this point in paragraph 11 of the paper:
“In AB SKF [a decision of the CJEU], … the
CJEU observed: ‘If … the cost of the input
transactions is incorporated into the price …
the right to deduct VAT charged on the
input transactions should be allowed.’
The corollary must be that if the cost is not
incorporated into the price, then the right
to deduct is not allowed.”
With respect, I do not agree that the
ostensible corollary they draw follows from
the CJEU’s comment. Furthermore, it takes
no account of the CJEU’s decision in
Commission v France (C-243/03), in which
it held that a subsidy of costs applied by a
charity when determining prices could not
erode the level of input tax recovery on the
costs that had been subsidised.
But the paper does not single out charities,
so why do I think charities are in the firing
line? The reason is that we advisers compare
notes from time to time, and this shows that
there are HMRC assessments against
charities based on this line of thinking. This
is therefore a clear and present danger for
charities, and needs to be resisted.
Figure 1: Total returns of the FTSE All World ex UK index in sterling and
local currency terms
Local currency return Sterling return
2012 2013 2014
100
110
120
130
140
150
160
159.20140.87
90
Philip Lawlor and Nick Murphy explain the key
considerations when investing overseas.
Image:spiritofamerica/Shutterstock.com
Graham Elliott,
Special Counsel/
Transaction Tax
Consultant, Withers LLP
Philip Lawlor, chief
investment strategist,
Nick Murphy, Investment
Management Strategist,
Smith Williamson
9. 16 171716
CFG EVENTS Keeping you ahead in your career: Highlights of upcoming CFG events
across England, Scotland and Wales. Book now at www.cfg.org.uk/events.
Social Investment:
Financing your
charity for
the future
As traditional sources of funding are squeezed, charities
and other organisations are exploring social investment
as a new way of funding their activities.
Are you ready
for SORP 2015?
More thought needed
on audit committees?
Don Bawtree, Partner at BDO LLP, considers the role of charity
audit committees and developments in the private sector.
Nearly all charities have some sort of
committee dealing with finance, but only
larger ones tend to have a separate audit
committee with closely-defined terms of
reference. Many organisations will instead
have a hybrid, combining the roles of an
audit committee with others such as finance,
general purposes, risk or governance.
As with so many aspects of charity
governance, there is a compromise to
be struck between getting the rights skills
on board, and the amount of time that
the non-executives and management can
devote. It certainly seems to be true that
audit committees can function more
effectively if they are established specifically
for that purpose, rather than as part of a
wider brief. For instance, an audit committee
which also considers risk can quickly
become a delegated function of the board,
with trustees spending little time considering
wider risk. Or a finance committee which
encompasses audit can find it difficult to
distinguish issues of principle from the
practical implications of some aspects of the
annual report and accounts’ presentation.
There is no formal guidance issued by the
charity regulators, so organisations need to
look to other sources, both corporate and
not-for-profit. As they do so, they will find
ample food for thought. Issues include:
• Independence – is this so important where
the board is entirely non-executive?
• Frequency of meetings – are they
needed as often in smaller organisation?
• Committee composition – the Financial
Reporting Council suggests a minimum of
three members, but complex charities may
need to involve a wide range of experience
to be effective. This also needs to be
balanced with the continuing challenge
for diversity and user representation;
• Remuneration – trustees can’t be paid, but
independent committee members can be;
• Skill base – especially for single-issue
charities, how to attract members
experienced in financial reporting?
• Training – how to keep members up to
date with corporate governance and
financial reporting requirements?
• Reporting – listed companies are being
asked under the revised corporate code
to report on their activities much more
transparently;
• How to derive suitable measures – for
instance on compliance with any code,
or on audit quality, or on effectiveness?
There is much to learn from the corporate
sector. We have recently produced two
reports on the topic looking at good practice
and recent trends: http://bit.ly/1kY3qkv.
But with the corporate world putting
increasing focus on audit committees and
their reporting, there is a sense that charities
need to be considering this more formally,
sharing good practice and learning from
other parts of the not-for-profit sector.
Which is why we are delighted to be
launching a training session on charity audit
committees with CFG. We hope that this will
be of interest not only to organisations with
audit committees, but all charities which are
concerned with strong financial governance.
For more information and to book, please
visit www.cfg.org.uk/auditcommittee
Preparing for SORP 2015: An
essential overview for charities
You’ll receive practical guidance on the main
accounting changes that will affect charities,
as well as planning tips to help you transition
to SORP 2015. Upcoming dates include:
23 September 2014, 12:00-16:30
Cardiff – in partnership with Grant Thornton
9 October 2014, 12:00-16:30
Leeds – in partnership with Grant Thornton
14 October 2014, 12:00-16:30
Manchester – in partnership with
Grant Thornton
3 December 2014, 12:00-16:30 Edinburgh
– in partnership with Saffery Champness
SORP 2015: Charity accounting
and reporting for small charities
This session is aimed at charities with
an income below £1m, but particularly
those below £500k, and will focus on
the FRSSE – the SORP specifically for
smaller organisations.
3 October 2014, 13:00-16:00, London –
in partnership with Small Charities Coalition
9 December 2014, 13:00-17:10, Bristol –
in partnership with Saffery Champness
Preparing for SORP 2015:
An essential overview for
international charities
This session will provide practical guidance
on the main accounting changes that will
affect international charities.
7 November 2014, 09:00-13:30 London –
in partnership with Crowe Clark Whitehill
Preparing for SORP 2015:
An essential overview for trustees
Trustees will gain an overview of how
the SORP changes will affect their areas
of responsibility, such as the trustees
annual report.
11 November 2014, 12:00-16:30
London – in partnership with
Kingston Smith
12 November 2014, 12:30-16:30
Birmingham – in partnership with
Sayer Vincent
Preparing for SORP 2015:
An essential overview for
smaller charities
This session will provide an essential
overview of accounting, reporting and
external requirements for smaller charities
(with less than £6.5m income).
24 November 2014, 12:00-16:30
London – in partnership with MHA
MacIntyre Hudson
Visit www.cfg.org.uk/sorp for the full list of
training dates and to book your place.
Many charities and social enterprises
providing important services that address
key social issues in the UK rely on income
generated from traditional sources of funding
such as grants and donations. However,
following a reduction in the provision of
funding, some organisations are looking to
social investment as an alternative way to
meet their financial needs.
The term “social investment” denotes
financial activity that not only delivers
economic returns but provides significant
social benefits as well. There are a number of
different forms of social investment including
loans, bonds and equity investment.
Social investment can enable organisations
to develop new or existing income-
generating activities. Investors provide
different types of financing options to the
voluntary sector and will often accept lower
returns in order for a greater social impact
to be generated.
CFG’s Social Investment Conference, run in
collaboration with Big Society Capital, aims
to provide delegates with an understanding
of the financing options available to their
charities.
The full-day conference is aimed at finance
directors, CEOs, finance managers, senior
accountants, charity consultants and
trustees that are looking to increase
their knowledge in this important and
expanding area.
We’ll be joined by experts from the
corporate and charity world, who will provide
insights from both the charity and lender
perspectives. Kevin Barnes, Director of
Finance at Barnardo’s and CFG Trustee,
will be chairing the conference.
The conference programme will explore
key aspects of social investment, including
loan and performance-related financing,
regulations and guidance, alternative
sources of funding and more.
Throughout the day there will be many
opportunities to network with fellow finance
professionals and hear from charities about
their experience of accessing different forms
of finance.
Confirmed sessions include:
Charitable trusts: Social investment
insights
Some charitable trusts and foundations
are using social investment alongside
grantmaking to fulfil their mission. This
session will provide an overview of charitable
foundations’ behaviours, attitudes and
interests in the social investment market.
Trupti Patel, Social Investment Fund
Manager, Esmée Fairbairn Foundation
Social investment: Regulatory
context and trustee perspective
A brief introduction to the powers to make
social investment, key parts of the Charity
Commission guidance (CC14), and the
context of the Law Commission Review.
This will be followed by an interactive QA
session to explore common concerns raised
by trustees and how to overcome them.
Luke Fletcher, Partner, Bates Wells
Braithwaite, Jane Hobson, Head
of Policy, Charity Commission
25 September 2014 Inmarsat,London
The CFG Investment Conference will cover a wide variety of topics including governance
and policy, investment strategy, accounting for financial instruments under the new SORPs,
performance and benchmarking, alternative investments and an equity outlook. Join the
closing plenary debate to find out more about ethical investment, the advantages and
disadvantages, and the different approaches available to charities.
The conference will provide an excellent opportunity to exchange ideas and views with
fellow finance professionals working in the charity sector. Take time to explore the event
exhibition, quiz the experts and network with colleagues at the closing drinks reception.
Visit http://cfg.org.uk/inv2014
Investment Conference 2014
Lastchance tobook!
View the full event
programme and
book your place at
www.cfg.org.uk/socinv
27November2014
London
New event
announced!
Cyber Security Conference
5 December 2014, CCW, London
We’re pleased to announce our first
Cyber Security Conference, brought
to you in partnership with Crowe Clark
Whitehill. As we increasingly rely on digital
technology to function, and charities store
and process more information online such
as donors and beneficiaries’ personal
details, there is an imperative for
organisations to assess their cyber
security. Book at www.cfg.org.uk/
CYB15 to find out more about your cyber
and information risks, and how to create
the processes and culture to prevent
these threats.
Big Society Capital is a financial institution
with a social mission, set up to help grow
the social investment market, so that
charities and social enterprises who
want to borrow money, or take on
investment, can access the finance
they need to do more.
10. 18
CFG events at a glance
For further information on all CFG events or
to book, please visit www.cfg.org.uk/events
or email events@cfg.org.uk.
Conferences
25 September 2014
Investment Conference
Inmarsat, London
08 October 2014
Midlands Conference
Birmingham Repertory Theatre,
Birmingham
16 October 2014
South West Wales
Conference Marriott Hotel, Cardiff
27 November 2014
Social Investment: Financing
Your Charity for the Future
Barclays, London
05 December 2014
Cyber Security Conference
Crowe Clark Whitehall, London
Members’
meetings
LONDON AND THE
SOUTH EAST
09 October 2014
Harnessing Technology and
Minimising Risk London
06 November 2014
Governance and
Performance Management –
Open Meeting London
10 December 2014
Making the Leap from
Managing to Leading London
MIDLANDS
16 September 2014
Motivating and Managing
Staff and Volunteers
Birmingham
03 December 2014
Governance and
Performance Management –
Open Meeting Birmingham
NORTHERN ENGLAND
18 November 2014
Governance and
Performance Management –
Open Meeting Manchester
SOUTH WEST WALES
18 September 2014
Motivating and Managing
Staff and Volunteers Bristol
20 November 2014
Governance and
Performance Management –
Open Meeting Bristol
Training
15 September 2014
Foundation Investment
Training London
30 September 2014
Foundation Charity Finance
Birmingham
01 October 2014
Foundation Charity Finance
Bristol
01 October 2014
Advanced Charity Finance
London
02 October 2014 –
09 June 2015
Inspiring Financial
Leadership London
14 October 2014
Performance Reporting
London
14 October 2014
Advanced Investment
Training London
15 October 2014
Foundation Charity Finance
London
22 October 2014
Performance Reporting
Birmingham
23 October 2014
Trading and the Law London
04 November 2014
Performance Reporting
Bristol
12 November 2014
Audit Committee Training
London
18 November 2014
Foundation Investment
Training London
09 December 2014
Foundation Investment
Training Manchester
18
CPD Further your professional development with expert advice
and a round-up of CFG events and training.
Time to get agile?
Libby Hare considers when agile project
management is suitable.
Traditional or “waterfall” project management is planned around
the sequential development of the project deliverables or
outcomes, is based on stages, and is generally focused on what
needs to be delivered at the end of the project. This means that
often you don’t start to gain benefits from the project until its
completion. In contrast, agile projects are focused on delivering the
products in an iterative way as they are being worked on, so you
review and potentially amend the deliverables during the project
and should start to see the benefits sooner.
Agile’s origins are in software projects, and various methodologies
have been developed as a result, such as DSDM Atern, Scrum,
Lean and Extreme Programming. Although some are more suited to
software development than general projects, and some have more
rigorous governance, they all aim to deliver projects more flexibly.
All types of agile have some characteristics in common. Agile
depends a lot on trust within project teams, and teams need to be
empowered to a level where decisions can be made quickly within
short, defined timeframes. Equally, collaboration between team
members is essential, together with good communications and
feedback – both within the team and with other stakeholders.
Pros and cons
Traditional and agile methodologies are both valid, so how do
you decide which to use? You should take organisational culture
into account as well as pragmatic considerations. Traditional
approaches work well where the project is familiar, where
requirements are clear and set, and where there is a definite
sequence to events – typically office-moves, hardware
procurement and accounting system implementations. Agile
approaches work well where there is an acceptance that the
requirements may change during the project, where there is a
level of uncertainty, and where elements of the project could be
delivered during the project itself – such as campaigns, CRM
implementations and website development.
If the agile approach is the best fit for your project,
then you need to:
• Establish good governance, with clarity over responsibilities
and decision-making;
• Ensure that there is a good understanding by all those involved
in the project about the way the project will be managed,
particularly where external suppliers are involved;
• Trust the high-level plan showing the different stages, and
leave the project team to produce and manage the detailed
stage plans;
• Encourage collaboration between team members and allow
sufficient time for end-user involvement at all stages of the
project;
• Accept that there will be a high level of change during the project
and ensure that the project team is sufficiently empowered to
make day-to-day decisions.
Libby Hare,
Partner, Adapta Consulting
