Singing for their sup­pers

While high pro­file en­dorse­ment is wel­come, the char­ity sec­tor now has harsh cor­po­rate re­al­i­ties to con­tend with, writes Colin Card­well

The Herald Business - - Charities -

TIS the sea­son to be giv­ing – and when it comes to char­ity, this is the time of year when we give with our hearts rather than our heads. Many of us are par­tic­u­larly swift and sus­cep­ti­ble when it comes to reach­ing for cash or cards (those with a more struc­tured ap­proach to their giv­ing tend to align it with the end of the tax year in spring). This year will be no ex­cep­tion, with pic­tures of the Philip­pines, a na­tion painfully re­cov­er­ing from the dev­as­ta­tion of Ty­phoon Haiyan vex­ing the col­lec­tive con­science of a rel­a­tively com­fort­able con­stituency of Xbox and PS4 con­sumers.

Celebri­ties such as Ce­line Dion and JK Rowl­ing have been no slouches in rais­ing the pro­file of spe­cific causes. Last month Dion recorded a video clip in which she en­dorsed Child 31, a doc­u­men­tary about the work of Ar­gyll-based Mary’s Meals, which pro­vides a meal to 822,000 chil­dren in their place of ed­u­ca­tion; while also last month Rowl­ing raised £1 mil­lion at a fundraiser for chil­dren’s char­ity Lumos, which she chairs.

Com­mend­able as these events are, fund­ing the Third Sec­tor de­mands more than a sen­ti­men­tal burst of sea­sonal good­will or a highly-pub­li­cised event. Re­search by the Scot­tish Coun­cil for Vol­un­tary Or­gan­i­sa­tions and ev­i­dence from its con­stituent char­i­ties demon­strate that the sec­tor has been sub­ject to the same pres­sures on its dwin­dling in­come as any other since 2009.

Roslyn Neely, di­rec­tor of fundrais­ing at the Chil­dren’s Hospice As­so­ci­a­tion Scot­land says: “I would say that this year has been one of our tough­est so far, with a drop in com­mu­nity and small do­na­tions.”

With daily costs of £25,000 in­volved in run­ning care ser­vices at CHAS, any short­fall in con­tri­bu­tions is bound to be con­cern­ing. “Peo­ple are cer­tainly find­ing their cir­cum­stances more chal­leng­ing and are pri­ori­tis­ing their giv­ing more – there is much less spare cash around.”

There is also, she adds, an in­creas­ing de­sire to see where the money is go­ing. “At CHAS we have an ad­van­tage,” she says. “We are in Scot­land so peo­ple can come here to visit our cen­tres and see ex­actly what we are do­ing, in terms of in­ten­sive care and sup­port of the rel­a­tives, in­clud­ing those who have been be­reaved.”

John Wilkes, chief ex­ec­u­tive of the Scot­tish Refugee Coun­cil agrees that while the de­mands made of the sec­tor have not di­min­ished, the chal­lenge of fund­ing its ur­gent re­quire­ments has grown.

“Char­i­ties are not im­mune to the gen­eral eco­nomic cli­mate and like many oth­ers the Scot­tish Refugee Coun­cil has cer­tainly been af­fected by the down­turn,” he says. “But we are used to change and we con­tinue to adapt and evolve in re­sponse to ex­ter­nal cir­cum­stances.”

For Roslyn Neely, this kind of adap­ta­tion means that CHAS now has to be “a bit shrewder. We have to demon­strate how the money is be­ing used and how we are fulfilling our strategy.”

That strategy, she says, has in­volved in­tro­duc­ing more events into the cal­en­dar. Many peo­ple, she ex­plains, are more likely to spon­sor a friend or col­league for the ef­fort they are mak­ing rather than sim­ply drop­ping

money into a col­lect­ing box. Giv­ing to char­ity in the 21st cen­tury has be­come a much more in­volved busi­ness than sign­ing a cheque. There are fis­cal year deeds of covenant, trusts – and a whole land­scape of so­phis­ti­cated fi­nan­cial in­stru­ments.

Not-for-profit or­gan­i­sa­tions, in short, are op­er­at­ing in the same un­for­giv­ing bear pit as their less cud­dly coun­ter­parts. The rules and the re­wards are the same – but have char­i­ties caught up with this?

James Eng­land, head of Char­ity and Cor­po­rate In­vest­ing at Stan­dard Life Wealth high­lights the com­plex­i­ties. “For­tu­nately, char­i­ties have seen their in­vest­ments bounce back this year, but many are fo­cus­ing more on their fi­nances and en­sur­ing they are struc­tured as ef­fi­ciently as pos­si­ble for the fu­ture.

“There are many hot top­ics for char­i­ties at the mo­ment: the new State­ment of Rec­om­mended Prac­tice; the in­tro­duc­tion of the to­tal re­turn ap­proach, re­sult­ing in trustees be­ing given more flex­i­bil­ity and con­trol; and more re­cently, the de­bate over pro­fes­sional ver­sus re­tail clas­si­fi­ca­tion for char­i­ties, re­sult­ing in some smaller char­i­ties see­ing a change or re­duc­tion in ser­vice.”

Mal­colm Rust, head of the pri­vate client and char­i­ties teams at Shep­herd and Wed­der­burn Fi­nan­cial is en­cour­aged by the fact that many char­i­ties are com­ing to terms with the in­creas­ingly in­volved de­mands made of them.

“There is no doubt they are more alive to ef­fec­tive fi­nan­cial man­age­ment and con­trols. This is now more ap­par­ent in the smaller char­i­ties – par­tic­u­larly start-ups which have grown rel­a­tively quickly.”

He agrees with Roslyn Neely that there is – and given the strait­ened cir­cum­stances of the past six years a nat­u­ral – de­sire to see where the money is go­ing and what the re­sults are.

“Phi­lan­thropists now ex­pect some­thing back – ROI or ‘re­turn on in­vest­ment’ is the buzz phrase. It’s in­creas­ingly about tar­geted in­vest­ment with a clear re­turn sought, which leads to chal­lenges be­ing laid down to char­i­ties to meet the tar­gets,” he says.

“I think the fo­cus now for char­i­ties is to ad­dress that chal­lenge and give the ‘in­vestors’ the ‘re­turns’ they seek.”

So are there any dif­fer­ences left be­tween the man­age­ment of Third Sec­tor or­gan­i­sa­tions and their peers in the purely-for-profit arena? James Eng­land gives an as­set man­age­ment per­spec­tive.

“Many char­i­ties have sim­i­lar re­quire­ments to cor­po­rates. Of­ten the goal is to pre­serve cap­i­tal ver­sus in­fla­tion or to achieve spe­cific rates of re­turn above cash rates. If this is the case, then the in­vest­ment ap­proach is the same. Eth­i­cal con­sid­er­a­tion is prob­a­bly where a char­ity port­fo­lio will de­vi­ate in terms of the hold­ings from other clients we man­age.”

And char­i­ties are of, course, bound by the same rules as their pri­vate sec­tor coun­ter­parts – which leaves them open to the same ac­cu­sa­tions and op­pro­brium. This year has seen a sting­ing se­ries of ar­ti­cles in the press about the sec­tor risk­ing be­ing “brought into dis­re­pute” over the mis­match of chief ex­ec­u­tives’ pay and pay-offs and fall­ing rev­enues.

Mal­colm Rust in­jects a note of cir­cum­spec­tion: pro­vided the in­di­vid­ual is per­form­ing at or above the level ex­pected, there are reg­u­lar ap­praisals and the re­turn is bench­marked, then the re­mu­ner­a­tion lev­els can be sup­ported, he ar­gues.

“It’s when the per­for­mance dips that the ques­tions re­ally arise. But some are ef­fec­tively the CEOs of large turnover busi­nesses so why shouldn’t they be re­mu­ner­ated ac­cord­ingly if they do well? It is about at­tract­ing and re­tain­ing the right skilled peo­ple.”

Rust also high­lights the haz­ard that any com­pany or or­gan­i­sa­tion now faces on a real-time ba­sis: the mav­er­ick uni­verse of so­cial me­dia.

“There are cases of ur­gent ad­vice we have to give, for ex­am­ple, about neg­a­tive com­ments made on the in­ter­net. I’m per­plexed by some users of, for ex­am­ple, Face­book and Twit­ter whose mes­sages can in some cases can be very dam­ag­ing to rep­u­ta­tions – par­tic­u­larly when em­ployed un­fairly and without sub­stance. Char­i­ties thrive on their rep­u­ta­tions and once a seed is planted, even in jest or based on false in­for­ma­tion, whether ma­li­ciously or not, it’s out there.”

This, of course, is yet an­other chal­lenge for the sec­tor which, with oth­ers, is fac­ing se­rial rounds of reg­u­la­tory re­quire­ments.

John Wilkes takes a prag­matic ap­proach: “We share the reg­u­la­tory bur­den ex­pe­ri­enced by many oth­ers in terms of is­sues such as new pen­sion reg­u­la­tions, em­ploy­ment and com­pany law and we also have ad­di­tional reg­u­la­tion im­posed by the Char­i­ties Reg­u­la­tor, OSCR, and the Fundrais­ing Stan­dards Board.

“How­ever, while this im­poses ad­di­tional re­quire­ments it is im­por­tant that char­i­ties main­tain pub­lic trust and con­fi­dence and that proper reg­u­la­tion is seen to be ef­fec­tive.”

So what of the fu­ture? There are, af­ter all 23,000 reg­is­tered char­i­ties com­pet­ing for our at­ten­tion in Scot­land alone. Pro­fes­sional ser­vices firms and small busi­nesses have sought ef­fi­cien­cies through merg­ers – and char­i­ties are not im­mune from this, says Mal­colm Rust.

“There’s cur­rently not enough col­lab­o­ra­tion be­tween char­i­ties. We’ve seen many merg­ers and that trend is a good one to make ef­fi­cien­cies and cut waste. A head­line num­ber of 23,000 char­i­ties is still very high though and there are op­por­tu­ni­ties for greater col­lab­o­ra­tion; those that em­brace that are likely to thrive as they will be open to change.”

To­mor­row and the next day, though, char­i­ties have a more el­e­men­tal fo­cus. The Scot­tish Refugee Coun­cil’s Wilkes says: “De­spite the huge pres­sures on pub­lic ser­vices and fund­ing our proud­est achieve­ment is that, even in the tough­est times, we ex­ist to help thou­sands of peo­ple who have fled unimag­in­able sit­u­a­tions and are try­ing to build new lives in Scot­land.”

James Eng­land of Stan­dard Life Wealth says that many char­i­ties are now fo­cus­ing on struc­tur­ing their fi­nances

Singer Ce­line Dion, who last month sup­ported a doc­u­men­tary high­light­ing the Scots-based char­ity Mary’s Meals

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