Small Charities Finance Bulletin January 2016

Below is the latest edition of our update for small charities.

Contents

Welcome

Welcome to CFG’s Small Charities Bulletin. This bulletin has practical, specific, relevant and easy to use information to strengthen the work of small charities.

This month’s issue also includes a range of practical advice for smaller charities on all things financial. Features this month include why are talented Honorary Treasurers in such demand? What such a role entails and how you can find good quality treasurers. We also have advice on how to choose outsourcing for financial areas that is affordable.

CFG are keen to support and work with small charities wherever possible: doing so allows us to better understand the issues facing smaller organisations, and helps us to ensure that we can find the most useful practical resources and make these available to you.

We are keen to hear your thoughts on this bulletin, suggestions for topics to cover, share useful easy to use resources and to share opinions on format or frequency. Please email us on smallcharities@cfg.org.uk with any feedback.

CFG Small Charities Financial Programme

CFG is proud to announce that it is running an exciting innovative small charities programme pilot in September 2016. The purpose of the programme is to develop the knowledge and financial capabilities of small charities, helping them to inform their decision making, improving their resilience and increasing the difference they make in their communities.

The programme will deliver affordable, relevant, useful financial training and free downloadable resources aimed at small charities in different locations across England and Wales. If you know of others who work and or volunteer in small charities please let them know about this new programme and sign up to our dedicated e-bulletin. As well as providing key updates, the bulletin will alert you to new training courses relevant to you and your charity.  To find out more please click here.

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Did you know that small charities have to provide workplace pensions?

The government has introduced new pension regulations that require all employers to provide a workplace pension scheme for all employees earning £10,000 or more, aged between 22 and State Pension Age. This is called auto-enrolment.

The amount of money that your employees can earn before you need to auto-enrol them changes every year, so make sure you check the Pensions Regulator’s website.

Whilst all eligible employees must be auto-enrolled they can opt-out of the scheme, although employers cannot encourage them to do so.

The idea behind these regulations is to ensure that all workers are encouraged to save for their retirement. CFG knows that small charities, like any other employer, want to support their staff members. However, you will be faced with additional administrative and cost burdens.

To help you to navigate the regulations, CFG has produced a free auto-enrolment guide in collaboration with Premier Pensions. Three key pieces of advice include:

  • plan early;
  • do not assume that your current pension scheme will be compliant with new regulations or that your current provider will be able to offer you a compliant scheme; and
  • do not assume that your employees will opt-out of the pension scheme that you auto-enrol them in. Evidence to date shows that most people chose to stay in. 

The guide also includes three case studies to provide examples of the steps that some small charities are already taking to prepare for auto-enrolment. You can find the guide by clicking the following link: Free Small Charities Pension Auto Enrolment Guide

If you have any questions please contact CFG Policy Team: policy@cfg.org.uk

                                                                

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Why are talented Honorary Treasurers in such demand?

Denise Fellows, CEO of the Honorary Treasurers Forum. Denise is also Director and CEO of the Centre for Charity Effectiveness Consultancy and Talent Development at Cass Business School.

Becoming an honorary treasurer isn’t simply about getting immersed in compliance and activities; it’s about making a real difference to an organisation.  With charities under increased scrutiny from donors, the media and the public, and under pressure to demonstrate good governance, the role of Honorary Treasurer has never been more vital. Denise Fellows outlines some of the benefits of being a treasurer, and where charities can go to recruit one.

Financial matters are the responsibility of all trustees; however, it’s often the treasurer that other trustees turn to for advice, guidance and reassurance on all aspects of financial management and reporting, control systems, solvency and investments.

For this reason, many charities are keen to recruit trustees with professional financial qualifications. However, trying to recruit a good treasurer with a background in finance can be challenging, as accountants and bankers can shy away from doing a role they consider too similar to their day job.

Many don’t realise that the role is multi-faceted, and that it can be very interesting and challenging. Becoming an honorary treasurer isn’t simply about getting immersed in compliance and custodial activities, it’s about making a real difference to an organisation, and using knowledge and experience to support the Chair and the Chief Executive to make strategic decisions based on a sound financial basis. 

As Graham Spooner, honorary treasurer at Diabetes UK, and an Associate with Amberley Advisory, a firm of corporate finance advisers, says: “I don’t believe that the role of Honorary Treasurer is like a busman’s holiday. It’s a very different type of environment working within a charity than within the world of city finance, and it has its own unique set of challenges and opportunities. From my perspective, I wanted to work with a charity that means a lot to me and I can use my skills and experience to help make it more effective and efficient.”

What does the role entail?
In larger charities, the role of the treasurer will often act as a link between the finance staff and the board, in smaller charities the treasurer may be rolling up their sleeves as book-keeper. Some charities have large investments which need careful management; others are facing challenges with cuts in funding; and some have increased financial risks, for example, because they deliver services overseas. The level of challenge is there for the picking.

The treasurer needs to be the financial conscience of the organisation, concerned not only in stewardship matters, but in understanding the bigger picture: having a holistic view of the organisation and the impact of decisions. Strategic and operational plans should be clearly integrated with the budget and the treasurer needs the overview to review the allocation of resources to different strands of activity.

They need to be able to take a broad perspective and recognise financial risk from the operational data and review outcomes to ensure the charity is effective and efficient. This requires business orientated skills – it is more than pure number crunching. 

Many of the large accounting firms are now encouraging their staff to develop their business skills, and becoming a treasurer is a good way to do so. Treasurers need to be good communicators, strategic thinkers and relationship builders. The skills developed by being a treasurer can not only look good on a CV but can enhance competences in the day job. Many treasurers are Finance Directors within other charities; they appreciate the opportunity to sit on the other side of the board, and gain a better understanding of their own trustees from the experience.

Trustee opportunities
There are plenty of opportunities for budding treasurers. Out of the 180,000 registered charities in England and Wales, it’s estimated that almost half of charities have at least one vacancy on their board. Many charities still rely on their own networks to recruit so it can be hard to find people with appropriate skills and experience.

There are easy ways that charities can cast their recruitment nets more widely to find good treasurers. Resources such as recruitment firm Trustees Unlimited and networks such as the Honorary Treasurers Forum are a good way to start, both advertise vacancies on their websites. Social media can also help, as can contacting local businesses, which may have finance staff looking to take on voluntary roles.

Charities need talented honorary treasurers, and finance professionals are waking up to the opportunity to not only give back, but also to receive the benefits and rewards of taking on this vital role.

CFG members can also advertise treasurer vacancies for free - visit www.cfg.org.uk/jobs to find out more.

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Outsourcing finance: too pricey for small charities?

Lisa Healings is Head of Finance at VAST. Lisa also sits on the CFG Community Accounting Advisory Panel.

There is a cheap way for small charities to outsource financial services: through local infrastructure organisations and community accountants. VAST are one such support organisation, providing services to organisations in Staffordshire. Lisa Healings talks through some of the benefits of outsourcing, and outlines the types of services that are available.

For small organisations in the charity sector, funding cuts mean that balancing the books and continuing to provide the level of service that their beneficiaries deserve is a constant juggling act. 

Increasingly, I am meeting with charities where the Chief Executive is spending their valuable time on bookkeeping, payroll processing and preparing financial reports to keep trustees and funders happy: instead of writing bids to ensure the valuable work of their organisation can continue. Charities such as these simply cannot afford to pay the salary level required to get financial staff with the experience needed to understand the complex requirements of accounting for charity funds.

With first real time information (RTI) reporting and now auto enrolment deadlines looming for many smaller charities, the bureaucratic burden is ever increasing. With this comes the threat of high fines if everything is not done correctly and on time. 

Outsourcing finance and payroll is one solution that can work well for small charitable organisations. Doing so can ensure that staff can focus on delivery, in the knowledge that well qualified and experienced professionals are looking after everything. This can help ensure that organisations are fully up to date and compliant with financial matters, but there is often a misconception that this is very expensive.

There are local infrastructure charities, such as VAST in Staffordshire, all over the country that provide support in this area. There are also specific community accountancy providers who provide tailored support at affordable prices. This gives even the smallest charities access to qualified accounting staff, who are experts in the requirements of the charity sector. Charities who could never afford to employ a Finance Director of their own can draw on expertise available for an affordable hourly rate. Ultimately, this gives Boards of Trustees, Chief Executives and funders confidence in an organisation’s finances.

The work that community accounting teams do with their clients is far reaching and covers things like:

  • Bookkeeping
  • Management accounts
  • SORP compliant year-end financial statements
  • Independent Examinations
  • Assistance with content of trustees’ annual reports
  • Fund accounting
  • Provision of accounting software
  • Accounting software support
  • Tailored bookkeeping training
  • Budget preparation for the organisation or individual funding bids
  • Cash-flow forecasting
  • Attendance at trustee meetings and AGM’s

Alongside this, many of community accounting providers are based within charities offering wider infrastructure support to the sector, so there is a one stop shop available for finance, funding and governance advice.

Community Accountants
Community accountancy services are not-for-profit organisations that help local voluntary and community organisations to manage their finances. The kind of assistance given ranges from payroll to bookkeeping and from financial planning to annual accounts. Community accountancy services are sometimes based within a local council for voluntary service (CVS) or equivalent, or as independent organisations in their own right. To find out more about community accountants please visit the community accounting website

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Case study: How outsourcing finance worked for Disability Solutions West Midlands

“Our accounts are much more concise since we outsourced them to VAST, which means financial reports generated are clearer and easier to understand for all the trustees of the charity.”
Neill Adams, Trustee and Treasurer of Disability Solutions West Midlands.

Disability Solutions West Midlands is a registered charity that was in need of an accountant to do their weekly bookkeeping, prepare budgets and management accounts, and to present these to their board of trustees. They also had a number of different projects running, and needed to monitor all income and expenditure relating to each of the individual projects.

VAST has been supporting the organisation with their bookkeeping needs for the past five years. At a weekly site visit, all financial records are brought up to date and suppliers paid as required. Disability Solutions needed their financial information to be user-friendly, and immediately accessible to the charity’s staff when VAST’s staff are not on site.

VAST also supply low cost accounting software, which can be accessed online anywhere, and the information is stored securely on the Cloud - therefore there is no need for onerous backup procedures. The software allows different users to have their own individual log in and each user access is tailored to the different levels of access required by members of staff and trustees. The software automatically updates as necessary. Departmental reporting is used to ensure that all project funds can be easily identified, and at a glance staff can see how their project is going financially.

Monthly management accounts are also prepared by VAST, and we attend the quarterly trustees meetings to report on the financial position of the charity to give the trustees confidence that they fully understand the financial position. At the year-end, VAST are able to produce fully Statements of Recommended Practice-compliant accounts (SORP), saving the cost of having these prepared by an auditor, and we also liaise with the auditors to resolve any queries they may have. In addition, Disability Solutions use VAST’s payroll bureau service to ensure that staff salaries are correctly processed and all necessary submissions are made.

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Small charities can claim Gift Aid on small cash donations

Small charities are able to claim Gift Aid on cash donations of £20 or less, without the need for a Gift Aid declaration through the Gift Aid Small Donations Scheme (GASDS). However, it seems that not many small charities know about it, or if they do, they are not taking advantage of it.

When the scheme was first introduced, the Government thought that it would raise tens of millions in its first year for small charities. However, the latest figures say that the scheme only raised £6 million in 2013-14. Estimates for the second year, 2014-15 suggest that the scheme will raise £23 million. This may seem like a big jump, but this figure is still 70% lower than original projections.

So why are so few small charities taking advantage of this scheme?

There is some concern that the scheme puts too many barriers in place for it to be worthwhile for small charities to go through the process – for example, charities have to be registered for the general gift aid scheme to be able to benefit from GASDS.

There is also a problem with communications. CFG believes that more should be done to raise awareness of the scheme and the benefits it can have for small charities. But to really know how small charities are trying to use the GASDS we’ve launched our own survey, where there is a chance to win a free place at CFG’s Gift Aid Conference in February. We’ll be delivering all this research to the Government over the next few months.

There is some good news –the Government has announced that there will be a review into the GASDS, something which CFG has repeatedly called for. The review began with a three month consultation, which was launched in December 2015. CFG’s policy team will keep you updated with the progress of the review.

If you would like to be kept up-to-date with developments on GASDS, please register your interest with CFG’s policy team policy@cfg.org.uk

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Useful training and resources for small charities

CFG regularly run training courses, seminars and conferences to develop the skills and financial leadership of charities. CFG is now piloting a programme that will offer training particularly focusing on the needs of small charities that is affordable and easily accessible. The training will focus on particular useful financial areas that CFG gets asked about the most and will come with easy to find free downloadable resources. You will be able to book the training from September 2016 through a new small charities programme website. Please keep your eye on these bulletins to find out more.

CFG is also looking for relevant resources than can be freely shared via the small charities programme website, if you have used a particularly useful resource please do share it with us so that CFG can make this available to even more small charities. Contact: Nicholas Faraday, Small Charities Programme Manager smallcharities@cfg.org.uk


Small Charities Coalition Fundraising Training for Small Charities
Free fundraising training is being delivered by the Foundation for Social Improvement in partnership with Small Charities Coalition and GlobalGiving and provides fundraising training across the country to small charities from February to June 2016.
This programme is being supported by the Cabinet Office, and allows vital and practical skills to be passed on to individuals and charities that need them the most.  To read more please click on the following link: http://www.thefsi.org/services/training/

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