What is clear, as I have mentioned previously, is that there is a tremendous level of change happening in the charity sector at present. Be that need to work in partnership with other charities to secure funding, or the need to restructure more formally to be create the agility that is essential to move quickly on opportunities, or just generally bolster fund raising teams to be able to secure a level of funding that allows service to be delivered at a sustainable level.
This change is often creating a need to undertake root and branch reviews of the charity and even challenge the existence and ethos it has. In doing so it is vital that a charity keeps focussed on its charitable purpose and ensures that any changes made will not alter these. If there is a change to the charitable purpose, there may need to be changes made to the constitution documents to ensure that no governance breeches are made.
One of the things to consider as part of the review is are assets still suitable for the current environment. For example, historically a charity may have purchased lots of equipment to deliver services. This may be particularly true of charities working with disabled persons. Is the cost of annual depreciation and maintaining equipment still cheaper than the cost of hiring equipment? If the equipment is subject to rapid technological improvement, it may be more beneficial to hire equipment and be able to upgrade it more regularly than purchasing it outright. It may also allow more service users to be provided for if there is a short-term peak in demand. One of the absolute benefits of hiring rather than purchasing is the need to fund raise is spread over time rather than requiring a significant fundraise to be able to purchase outright.
Another area of important review is investment policy. For many years, charities have received very poor returns on cash deposits with historically low interest rates. Now is a good time to be reviewing the rates available and ensuring that the best returns are being generated. It is also worth considering if the investment policy remains appropriate – given the current rate of inflation, might it be more appropriate to make use of managed fund investments with a specialist investment provider? It is possible that such a change may allow a charity to at least maintain the purchasing power of their cash by moving out of bank deposits. This is however, a potentially risky policy and professional advice should always be sought before doing so.
Historically a lot of charities tend to have their own internal resources with functional roles occupied by employees of the charity. Where the charity found that it couldn’t fill the positions, it would sometimes try and muddle by and allocate the role to the team members that were in place. This is often terribly inefficient and results in two or more roles being done badly. There is a lot of need and thus demand for experienced people in key roles such as finance and fundraising; rather than try and patch the roles up with people not really suited to the role, consider the use of outsourcing, especially on finance and legal roles rather than hiring specific people. This can bring a greater level of experience and also provide naturel cover for sickness etc as the outsourcing provider will often have a large pool of people available to cover leave.
Finally, one key area to review is the area of reserves. This is an area that is vital for a charity and is a little bit of an art form; too much and you may look like you are hoarding cash leading to funders being less likely to help. Too little and it looks like the management team are spending in an uncontrolled manner and not displaying good governance! The reserves policy needs to be appropriate to the charity, both in terms of the size and the age of the charity. A newly founded charity may not have reserves generated. In itself this isn’t a huge problem but if the charity is an established one then negative reserves may be evidence of mismanagement. Other UHY specialists have written in detail on reserves so I won’t say too much here other than to highlight the policy may have been set some years ago and it is important that the charity reviews reserve regularly to ensure they are still appropriate and not preventing the charity from operating efficiently.
As a final note, as well as careful review of the situation, do consider Fagin’s thought process of “I think I’d better think it out again” and make sure that any changes made have full consideration of the impacts they may have on the charity, the team and the end users.
The next step
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