Buckfast - Charity Seminar 2018

Seminar: Building a sustainable charity
May 2018

Chairman’s welcome
Jonathan Deacon – Finance Director, Buckfast Abbey

Introduction:
Duncan Leslie, Head of Charity & Not-For Profit

.
“The Commission’s job is not to represent charities to the
public but to represent the public interest to you.”

10:00 Chairman’s introduction
10:10 Creating a vision Sarah Pryce, The Critical Friend
10:30 Turning a vision into a plan Richard Wadman, PKF Francis Clark
10:45 Keeping the plan on track: financial reporting Stephanie Henshaw, PKF Francis Clark
11:05 Keeping the plan on track: VAT Julie Towers, PKF Francis Clark
11:25 Keeping the plan on track: Cyber Security Richard Wilding, PKF Francis Clark
11:35 Break
11:55 Effective trustee boards as part of a sustainable
charity
James Evans, Tozers Solicitors
12:15 Real relationships that provide sustainable
income
Paul Courtney, Institute of
Fundraising South West
12:35 Communications that count: Why are you here? Mark Picken, MPAD
12:50 Questions
13:00 Lunch
.
Seminar schedule

Creating a vision
SARAH PRYCE MSC FCIPD

@SarahPryce
The Critical Friend
The Critical Friend
@thecriticalfriend

A powerful vision + a
resilient workforce = a
sustainable organisation

If you are working on
something exciting
that you really care
about, you don’t have
to be pushed. The
vison pulls you.
Steve Jobs

Our vision is to end preventable
loss of life at sea

Our vision is that fewer people die
by suicide

Our vision is to beat cancer sooner

Our vision is a world without dementia

What impact are you going to
make on the world (or your bit
of it)?

What will the world look like
when you have finished
changing it?

Does your vision do these things?
• Inspire you
• Inspire the team
• Make you proud
• Give you goosebumps

A traditional view of resilience
•Stamina
•Grit and determination
•Tenacity
•Being the last person standing
•Working hardest or longest
•Being unbreakable and invincible
•Never giving up

So what is resilience?
The capacity to
recover quickly from
difficulties;
toughness
Oxford Dictionary
The ability of a
substance or object
to spring back into
shape; elasticity
Oxford Dictionary

A more relevant take on
resilience
•Flexible
•Adaptable
•Grounded
•Learns from mistakes
•Motivated
•Knows when to stop or to change course

So why should
resilience matter to us?

How many charities are there
registered in the UK?
167,972 charities were registered in UK
at 31 March 2018
Charity Commission

How many people employed in
our sector?
853,000 people employed in
the voluntary sector in the UK
June 2016 (NCVO)

So whichever way you look at it, we
are part of an influential sector that
makes up a significant part of the
economy

Building resilient people is a
win:win
•Less perceived stress
•Lower rate of absenteeism
•More likely to stay longer
•Higher levels of job satisfaction
•Have better physical and mental health

A 3 step approach to resilience
1) Clarity

2) Capacity

3) Trust

If you don’t trust your people…..
….then why are they your
people?

Leadership; the ability to
translate vision into
sustainable reality

A quick recap
•Create a vision that inspires you and the people
around you
•Make resilience a priority
•Set clear priorities, create enough capacity,
trust and empower people
•Be the kind of leader who people want to
follow

@SarahPryce
The Critical Friend
The Critical Friend
@thecriticalfriend
Questions?

Turning a vision into a plan
Richard Wadman

Turning a vision into a plan
• What is a Strategic plan?
• The “Strategic plan”
• Financial projections
• Using your Strategic plan to raise
finance

The alternative to having a plan if you want to
attain your vision…
“Unlike an ordinary compass, Jack Sparrow’s
compass proved most valuable, as it pointed
to what the owner wanted most”

What is a Strategic plan?
• Documentation of the overall delivery system for the achievement
of the objectives
• A process that makes the “management”:
• See their Charity objectively
• Assess their achievements
• Set, or reset, their strategy based on their view of the future
performance
• Determine the resources available or required to meet the
Charity objectives
Be prepared to commit time and effort to the Strategic plan

Strategic Plan: Requirements
• Strategic Objectives (Vision), Strategy and Action Points
• Clear
• Concise
• Understood
• Strategies and Short term action points to cover:
• Revenue + Costs (Discretionary and non discretionary)
• Fundraising and PR
• Finance
• Personnel
• IT/ Training - possibly outsourced
• Regulatory/ Assets
• Stakeholder aspirations – outcome to beneficiaries and service
users
• Words and Numbers (and these need to be internally consistent)

Strategic Plan: Format, options and tips
• One page! – internal use only, or basis for fuller plan
• Format: Depends on audience and purpose
• More conventional
• Accuracy, Brevity and Clarity (ABC rule) and Keep It Simple
(KIS)
• Avoid jargon
• Pictures (including graphs, charts and tables) and words
• Use Appendices
• Presentation is key avoid being “too glossy” but also avoid
“boring”
• Content checklist

Financial Projections – What?
• Income and Expenditure account, Balance
Sheet and Cash Flow (integrated)
• Monthly for say first 2 years, annual thereafter
• Assumptions document*
• Narrative
• Clear and concise
• Attach workings for staff costs etc
• Prepare workings in a presentable format
(* = useful for getting “buy in” from users)

Financial Projections – how?
• Built up from base data e.g., staff list, rental costs
• Depends on your activities e.g.
• Steady delivery pattern – monthly/ quarterly
• Vs unpredictable e.g disaster relief services
• Charity shops – weekly/ monthly
• Specific project reports – depending on milestones
• Format consistent with annual and/ or management accounts
• Figures consistent with Strategic Plan
• Set out your Key Performance Indicators (“KPIs”)

www.website.com
Projections: Reporting and monitoring
• Budgets and forecasts
• Management tools not aspirational
statements
• Sensitivity analysis on key assumptions
• Don’t forget capital expenditure
• In-year reporting – KPIs (financial)
• How are we doing against
budget/forecast?
• Action required – reforecast, discretionary
costs?
• Cash flow v income and expenditure
(beware grants)
• How quickly do you need to be able to
respond/ react?
• What data do you collect/ does your
system produce?

Funder ready
1. Identify the right funder
2. Demonstrate
awareness of services
users, opportunities and
threats
4. Housekeeping
and mitigating issues
3. Credible and evidenced

Using your Strategic plan to raise finance
• Appropriate
• Tailored
• Competitive

Preparation for a fundraise: General
• Environment & current
operations
• Communicates “Strategic
case”
• Future strategy
• Professional
• Tailored
• Especially important for
start-ups
• Realistic
 Supported
• Add up
 Underpin Strategic case
• “Integrated” (Balance
sheet & Cash flow)
 Monthly cash headroom
 Sensitivities
• Central / Local Govt
Contracts e.g domiciliary
care
• Tax – VAT, PAYE/NI, CT
(if trading subsidiary)
• Statutory + management
accounts & other records
Strategic plan Projections “Housekeeping”

Funding options
DebtGrants
• Eligibility – sector, size
• Impact / project – i.e. usually
not for general expenses
• Only receive once spent
• Ongoing compliance
/reporting
Requirements
• Cash flow
• Security
• Covenants – appropriate?
Requirements
Crowdfunding

www.website.com
Are you ready?
• Get ready before you have to be ready!

Stephanie Henshaw
Keeping the plan on track:
financial reporting

Where does financial reporting fit in?
Charitable
Objects
Aims and
objectives
Strategic plan
Reporting and
monitoring
Trustees
Management

Reporting and monitoring
• Financial information
• Fundamentals
• KPIs
• Management v trustees
• Reserves policies
• Driving factors
• Stress-testing and resilience

www.website.com
Reporting and monitoring fundamentals
• Understand your activities
• Deliverables – what and to whom?
• Sources of income?
• Required resources – revenue and
capital?
• Identify your break even position
• Cost base – discretionary and non
discretionary?
• Certainty of income – funding gap?
• Get to grips with cash flows
• Timing and amounts?
• Source and application?

www.website.com
Reporting and monitoring fundamentals
• Budgets and forecasts
• Management tools
• Assumptions and sensitivities
• Revenue and capital expenditure
• In-year reporting
• How are we doing against
budget/forecast?
• Action required – reforecast,
discretionary costs?
• Cash flow v income and expenditure
(beware grants)

www.website.com
How much and how soon?
• How quickly do you need to be able to
respond/ react?
• What data do you collect/ does your
system produce?
• Depends on your activities e.g.
• Steady delivery pattern – monthly/
quarterly
• Charity shops – weekly/ monthly
• Specific project reports – depending on
milestones
• Key Performance Indicators

Why have KPIs?
• Setting and measuring targets
• Best use of resources
• “The canary in the mine”
Management
• Achievements and performance
• Financial and non financial
Reporting
• Engagement with staff and
stakeholders
• Transparency and openness
Communication

77
Same picture, different angles
Trustees
Reporting and
monitoring
Management
Operational
- Manage
- Control
- Report
Governance
- Challenge
- Sustainability
- Assurance

What do management need?
• Useful and timely data
• Restricted and unrestricted reserves
Manage
• Allocate responsibility
• Regular routines, reviews
Control
•Operational v strategic
•Transparency v excessive detail
•“Dashboards”
Report

Trustees and good financial governance
Strategy
Reporting
Control
environment

Trustee challenge is crucial to good governance
“There is no such thing as stupid
question…”
“….only stupid answers!”
The Emperor’s new clothes?

Useful questions for trustees to ask
• What are the sensitivities in the budget/ forecast?
• What is our break even point?
• What is our funding gap?Challenge
• How are we doing against budget?
• What are the red flags?
• What due diligence have we done?
• What do we have in reserve?
Sustainability
• Have previous budgets and forecasts been reliable?
• Do explanations from management stack up, are they
consistent?
• Number and size of adjustments between
management and statutory accounts?
Assurance

www.website.com
Charity reserves
• Why? To ensure sustainability of the charity
• Maintain delivery of outcomes
• Protect beneficiaries
• Respond to variations in funding
• React to appropriate opportunities
• What? Reserves = funds that can be spent
freely on charitable purposes
• Exclude endowments and restricted
income
• Exclude tangible assets
• Exclude designated reserves

Thoughtful reserves policies…??
“3 months’ expenditure”
“£xxxxx”
“Sufficient to cover
costs of closure”

www.website.com
Developing your reserves policy
• Must be appropriate to your circumstances
• What are you trying to deliver?
• How are you funded?
• What are the uncertainties over
income?
• What is your cost exposure?
• How much do you need:
• To cover your funding gap?
• To cover for emergencies?
• To support planned development,
improvement, repair?

85
An alternative approach?
Risk register
Likelihood and
financial impact
Cumulative
financial effect
Reserves policy

Stress-testing: how resilient are you?
• Current headroom?
• How to increase/improve?
• Risk mitigation opportunities?
What
combination of
risks causes the
biggest problem?
• Check your calculations?
• Designated reserves for
future plans?
• Charitable purposes?
What if you seem
to have plenty of
headroom?

www.website.com
Agenda
• VAT considerations for charities
• VAT and funding
• VAT exemption pitfalls
• Reliefs on expenditure
• Upcoming issues
• Making Tax Digital for VAT (MTDfV)
• Brexit
• Checklist summary

.
VAT and Funding
Do not forget VAT when entering
into new funding agreements
• Supply of services (or goods) or a grant or donation?
• If a grant or donation:
• does it relate to a non-business activity and will there be an
impact on the recovery of VAT on expenditure?
• Alternatively does the grant or donation merely supplement
business activities?

91
No VAT on the income
No recovery of VAT on expenditure relating to
the income
Several categories of VAT exemption apply to
charities
 Education
 Welfare
 Sport
 Cultural
 Fund-raising
 Subscription / Membership
VAT Exemption Pitfalls

Charity client “Help the Community Ltd” has been
actively looking for different sources of income. Their
objects are to improve the health and employability
of the local community.
They have managed to secure the following:
• Money from local authority - to help the younger community
• Agreement with local college for employability course
• Funds from Sport England
VAT Exemption Pitfalls - Example

.
VAT Exemption Pitfalls – Example
Local Authority Income (£50K)
Specifically to build and run a youth centre
Not a grant
Does not meet the welfare exemption
Income counts towards VAT threshold

.
Local College Funding (£20K)
To find pupils to enrol on course
Money based on pupils found
Provide equipment for teaching
Help find teachers
Does not meet education exemption
Income counts towards threshold

.
Sport England Grant (£20K)
To start a tennis club
To find facilities
Target people in the age range 10-40 years
House keeping conditions
If not a grant does not meet sporting exemption
May count towards VAT threshold

Not straight
forward
VAT
registration
may be
breached
No stop date
for historic
registration
obligation
Could have a
substantial
impact on
sustainability
Conclusion

.
VAT Exemption Pitfalls
Cultural Exemption
Precluded from distributing and
does not distribute profits
Profits applied to continuance
or improvement of facilities
Managed and administered on
a voluntary basis

.
VAT Reliefs on Expenditure
Land,
Property
and
Construction
Purchase or construction of new building to be
used for a relevant charitable purpose (RCP)
Construction of annex to be used for RCP
purpose
Purchase or construction of new building to be
used for a relevant residential purpose (RRP)
Certain works to dwellings and/or RRP
buildings taxed at 5%
Option to tax made by landlord or vendor can
be disapplied where use will be RCP

.
VAT Reliefs on Expenditure
Other
Reliefs
Advertising
Medicinal products purchased by charities engaged in
medical care or research
‘Relevant goods’ purchased by charity or eligible body
using charitable funds or voluntary contributions
Fuel or power at 5% rate where use ‘otherwise than in
the course or furtherance of a business’

.
Making Tax Digital for VAT (MTDfV)
• Effective for accounting periods
beginning on or after 1 April
2019
• Applies to all taxpayers
registered on a compulsory
basis
• VAT returns must be submitted
either using accounting
software or via bridging
software
• Ability to submit more
information

Brexit
• Effective 1 January 2021 ????
• Will affect charities that trade with other EU countries
• Purchases of goods will become imports subject to
VAT and customs duty
• Sales will become exports
• EC Sales Lists no longer required for sales of services
• Reverse charge still accountable on purchase of
services

.
Checklist Summary
Income
• Is your income a grant or contract?
• Are you confident of the VAT liability of income?
Exemption
• Are you aware of all the conditions necessary to apply an exemption?
MTDfV
• Will your system be able to submit VAT returns under MTDfV rules?
Brexit
• Have you considered the impact of BREXIT and done anything about
it?

Richard Wilding, Head of cyber
security
Cyber Security

What happens in an internet minute?
16m
text
messages
4.1m
videos
viewed
342,000
apps
downloaded
46,200
posts
uploaded
452,000
tweets
990,000
swipes
156,000
emails
40,000
hours
listened
50
‘voice-first’
devices shipped
120
new accounts
created
15,000
GIFs sent via
messenger
1.8m
snaps
created
3.5m
searches
751,522
spent online
900,000
logins
70,017
hours watched

Cyber Crime is growing
• Cyber criminals have huge technical
know-how. Far superior to most
legitimate businesses/charities.
• Charities are often oblivious to the threat
that results from their lack of cyber
security.
• A company doesn’t have to have a
transactional website to be vulnerable.
• Many charities possess intellectual
property that has significant financial
value to cyber criminals

106
Current risks and threats
Current examples:
• One in five charities have been attacked in
the last year
• Majority of large charities have experienced
cyber attacks, says report
• Research by the government finds that 73
per cent of charities with incomes of more
than £5m have been victims in the past year

107
Current risks and threats cont
Further examples:
• The report says that, despite the prevalence
of cyber security breaches in the sector, only
21 per cent of all charities have a cyber
security policy in place, and only 8 per cent
have an existing cyber security incident
management process.
• Only 42 per cent of charities had sought any
guidance or advice on cyber security, and 5
per cent of them recalled using government
guidance on the subject.

108
Current risks and threats cont
Further examples:
• The Information Commissioner’s Office has
fined eleven charities that breached the Data
Protection Act by misusing donors’ personal
data.
• Cyber attacks can be nothing short of
catastrophic for an organisation, and for
those about whom it holds sensitive
information, and every charity is a potential
target for attackers with financial motivations

Cyber Essentials
• Self-assessment questionnaire for the company to complete
• Covers 5 key areas/71 questions
• We provide upfront assistance (1.5 days needed) to support
how to complete and progress
• It is submitted via a secure portal for us to assess
• Basic vulnerability scan performed
• Assessor feedback provided
• Once successful can use the Cyber Essentials logo for 12m
• Limited insurance provided/can help reduce further cyber
insurance

Cyber Essentials PLUS
• We audit and test the 5 key control areas
• Includes detailed vulnerability and limited penetration
testing
• A report is then issued
• Once successful can use the Cyber Essentials PLUS
logo for 12m
• Can help to reduce cyber insurance further

111
General Data Protection
Regulations 2018
• What is GDPR?
• What are the consequences – 2 levels?
 Higher of up to 20m Euro’s/4% of global
turnover
 Higher of up to10m Euro’s/2% of global
turnover
• What should I do?

IASME (Information Assurance for Small and Medium Enterprises)
• IASME – two levels standard and gold
• 180 questions (including those in Cyber Essentials)
• Includes GDPR specific questions
• Akin to ISO27001
• A report is then issued
• Once successful can use the IASME logo for 12m

www.website.com
Next steps
• Pick up a brochure
• Complete form
• September cyber event
• Contact your PKF Francis Clark adviser or
e-mail: cyber@pkf-francislark.co.uk

Effective trustee boards as part of
a sustainable charity
James Evans

https://www.charitygovernancecode.org/en

Key Principles
1. Clear organisational purpose
2. Strong and effective leadership
3. Integrity
4. Decision making, risk and control
5. Board effectiveness
6. Diversity
7. Openness and accountability

Is everyone here for the
right reasons?
- Committed to the cause
- Want to help the charity deliver public
benefit
- Committed to good governance and
continued improvement of the charity

Do you understand the
role?
• Must understand trustee role and
responsibilities –CC3 & governing document

Common problems
-Misunderstanding of role
- Micromanaging
- Third party interests
-Conflicts of interest
- Failure to appreciate a conflict exists
- Self-certifying
-Lack of diversity
- Closed recruitment processes
- Obstacles to accessible participation

Common problems
- Problems with information
- Too much, not understandable, KPIs not clearly
identified
- Ineffective delegation
- Insufficient use of sub-committees
- Delegation frameworks not clear

Leadership, vision and
values
•Clear and relevant aims and
strategy for achieving them
•Board agrees vision, values and
leads by example
•Ensure values are reflected in
all the charity’s work

Culture and behaviour
• Safe to suggest, question and
challenge, difficult issues not avoided
• Appropriate skills and knowledge of the
charity
• Trustees can give enough time to the
role
• Chair helps develop strong working
relationships between trustees

Collective responsibility
- Collective and confident
decision making
- Once decisions are made,
everyone unites behind
them

Skills and structure
-Consider skills, knowledge and
experience needed on a regular
basis to govern, lead and deliver
charity’s purposes
-Also look at board composition- min
5, max 12?
• - Consider maximum terms of
office - 9 year max?

Recruitment and appraisal
- Formal, rigorous, transparent recruitment
- Appointments made on merit, against
objective criteria and considering benefits of
diversity
- Proper induction processes
- Board performance reviews - including the
chair

•“Good governance is no longer an
optional extra. It’s essential to
charities’ effectiveness and
probably their survival too”
Sarah Atkinson
Director of Policy and Communications
Charity Commission

James Evans
j.evans@tozers.co.uk
01392 207896

I want to be in a
relationship with you….

Relationships (the Goose way)
• Working in a team combined effort (70% further)
• Its harder on your own – there’s something
about the team that draws them back
• Share the lead
• Help each other – protect those that struggle
• They encourage…

What is at the heart of
a good relationship?

Real relationships…
•Trust
•Truth
•For better for worse
•Richer for poorer
•Til death do us part(!)

I want to trust you
•What are you doing with my money?
•What are your plans for the future?
•Can I come with you on the journey?
•Is it about you, me or us?
•We want to be together….

It’s all about
expectations!

What would you expect if you
gave money to your charity?

Tell me the truth!
•What does it cost to make a
change?
•How can I make a difference?
•Don’t make promises you cannot
keep!

For better and for worse
•Celebrate the good stuff
•Be honest with the bad stuff
•Don’t brush it under the carpet
•What did Bob always tell us….

For richer, for poorer
• Don’t panic
• Be honest with the costs
• Be ambitious, don’t be stupid!

Til death us do part
• I’m in this for the long haul (I’m not a one night
stand)
• What’s the long term plan?
• What happens when I’m gone?
• How can I make a difference when I’m gone?

And what do all these
things make…?

Deep relationships
• Involvement vs. Engagement
• Going with the flow – being flexible
• Delighting our donors
• What does it look like when we really know each
other?

Loyalty
• Let your work do the talking
• Communicate your IMPACT
• Cast your vision
• Take people with you on your journey –
TOGETHER!

Paul Courtney
T: 01752 893839
M: 0779 933 0816
E: paul@kairosfundraisingsolutions.com
W: www.kairosfundraisingsolutions.com
Twitter: @paulkairos

Mark Picken | @mpad_mark
Summer 2018
t. 01872 321533 e. info@mpad.co.uk
@weareMPAD www.mpad.co.uk
Why are you here?

In the news

“Shockwave through the sector”

“Good will factor is diminishing”
“People now trust charities no more
than they trust the average stranger
they meet on the street.”
Baroness Stowell
Chair of Charity Commision, 16 April 2018

Charity Report

“The biggest reason why people give you
money is because you ask for it”
National charity CEO

Poll 1 - If you donate to charities,
what is the main reason?

Poll 2 - If you support charities, do they
mainly tend to be?

Poll 3 - Have recent media stories, such as Oxfam or Save
the Children, impacted on your views about charities
negatively?

Poll 4 - Have recent media stories impacted
on your support for charities?

Poll 5 - Have you ever taken part in an
event to raise money for charity?

Poll 6 - If you have donated to a charity, did it
say thank you?

Thank you

Poll 7 - Have you liked or shared a charity’s
social media post?

Poll 8 - If you have shared a charity’s
social media post, have you then donated
to that charity?

What should happen - set your
organisational objectives
Increased profile
Increased supporters
or volunteers
Increased engagement
Increased donations

“What’s your purpose?”

“What’s your offering?”

Purpose + Offering
= Key messages

What often happens:
Diving head forwards into tactics
I want a
website!
I want some
national PR
That Facebook /
social media stuff
- I want that!
I need some
advertising We need a
new logo

“What’s in it for me?”
(more than a mention in PR)

What can you measure?
Outputs into outcomes
Frequency
of press
releases
Frequency of email
marketing shots
Frequency of
social media
campaigns
Traffic to
website

What can you measure?
Outputs into outcomes
Outcomes
Donations Event
sign-ups
More
volunteers

Recap
• What’s your purpose?
• What’s your offering?
• Key Messages
• Who are you talking to?
• Where will you find them?
• What’s in it for me?
• What’s your impact?

Thank You
Mark Picken
–
Mark@mpad.co.uk
@MPAD_Mark

Buckfast - Charity Seminar 2018

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