Welcome to Focus On… our special quarterly bulletin looking at issues relevant to particular sectors and topics of interest.

In this issue, we consider the Charity Commission’s recommendations for dealing with the financial problems many charities, and examine how embracing digital technology can make a major difference to trustees and the organisations they oversee. We provide information on funding available to charities that work to challenge extremism, and review the proposed government reforms to the Gift Aid Small Donations Scheme. After our report on how UK charities are benefitting unexpectedly from the issue of the new £5 note, we turn the Spotlight on Manager Stephanie Smith. If you would like to discuss any aspect of our specialist charity audit and accountancy services, please contact Emma Murray, Audit and Compliance Director at Nicholsons, at emma.murray@nicholsonsca.co.uk or phone 01522 815100.

November 2016

An innovative and accessible initiative to help charity trustees harness digital technology was launched on 5 October.

The Making Digital Work:12 Questions about digital for trustees contains key areas for charity trustees to review when planning business strategies and work programmes. The tool is designed to increase digital literacy and to promote communication between trustees and staff about the ways in which digital can improve their charities’ operations and enhance management functions.

The questions invite charity trustees to examine the impact of digital – and changes they may need to make to accommodate it – in the following areas: governance; trustee induction and development; strategy creation; culture; service delivery and beneficiaries’ expectations; brand; reputation; fundraising; cyber security; evaluation and success, and resources.

Charity sector experts are urging trustees to drive digital transformation forward, and strongly recommend that boards use the 12 Questions to ascertain how they can maximise digital’s contributions to the way they run their charities.

Digital is widely acknowledged to enable organisations to work collaboratively, reduce costs and increase transparency and accountability. Greater use of social media is revolutionising fundraising opportunities, profile raising and audience reach. Technological advances may in future even

allow Artificial Intelligence to act for trustees, in addition to managing the many back office functions it is already replacing, Xero accounting software being a common example.

Sarah Atkinson, Director of Policy and Communications at the Charity Commission said: “As we encourage users to increasingly engage with the commission online, we want to reassure users and trustees with low IT skills or confidence levels that there is support for them.

“We hope trustees can use [our 12 Questions] to start a conversation about how they can plan for, and respond to, digital change in their organisations and determine where technology can add value.”

Nicholsons’ expert team have Xero certified team members with experience of implementing digital systems within the charity sector. We can advise you on how to ensure that your charity takes full advantage of digital technology. Please contact us for more information.

New digital resource now online to help charity trustees raise their game

The Home Office is pledging to provide financial support for charities and other organisations that challenge extremism within the communities they serve as part of the government’s wider four year ‘Building a Stronger Britain Together’ counter-extremism initiative.

Organisations can apply for in-kind assistance with their schemes up to the value of £75,000, or maximum grant funding of £50,000. In-kind aid includes training in use of social media and website development and optimisation.

New bids will be accepted every financial year to ensure funding has impact throughout the life of the initiative, and supports the third sector groups involved in the most relevant and innovative work.

The government programme is aimed at civil society and community organisations dedicated to creating more resilient communities, standing up to all forms of extremism and offering positive alternatives to individuals who are vulnerable to extremist persuasion.

UK Community Foundations and partners M&C Saatchi have received £800,000 worth of funding to deliver the programme via community foundations to eligible charities and third sector organisations.

UK Community Foundations Chief Executive Fabian French, said: “UKCF is very pleased to be working with the Home Office and M&C Saatchi on this important initiative. Community Foundations up and down the country work right at the heart of local communities so they have an unrivalled understanding of local needs and challenges and are best placed to deliver grants to local organisations.”

Organisations can bid for funding for specific projects that will meet the government’s objectives through the Home Office application process. More information can be found at www.gov.uk/government/news/home-off ice-announces-support-for-groups-fighting-extremism

If you feel this scheme might be of interest to you, please contact us for more information.

Charities challenging extremism receive Home Office funding boost

The new £5 bank note entered circulation on 13 September – and a social media campaign encouraging people to give their first plastic fivers to a charity of their choice looks likely to lead to increased donations.

The campaign began following Changing Business fundraising consultant John Thompson’s promise to donate his first new fiver, and went viral almost as soon as it was launched, having clearly captured the national imagination and conscience.

The campaign has also attracted the attention of the Institute of Fundraising and NCVO. The Children’s Society, Sue Ryder and Blue Cross are already asking their supporters to get involved and a string of other charities are certain to follow suit.

Ceri Edwards, director of policy at the Institute of Fundraising, said: “Sometimes a simple idea shared at the right time can make a world of difference.

The Bank of England has added its name to the list of fundraisers and will be auctioning off low serial numbered banknotes to help worthy causes. The Bank plans to issue new £10 and £20 notes during the next decade. Charities across the UK will be hoping for similar donor windfalls when these changes are made!

Twitter tags #firstfiver, #givefive and #fivergiver can be used to share John Thompson’s campaign details.

The money raised from the campaign will be donated to the Myotubular Trust, The Lily Foundation, and Bliss.

Please ask how we can help you to deal with financial issues that arise as a result of your fundraising campaigns.

‘Give your first plastic fiver to charity’ goes viral

The recent closure of a number of charities, including some well-known high profile organisations, has prompted the Charity Commission to investigate the charitable sector’s financial resilience.

The Charity Commission (‘the Commission’) recently published two reports showing that trustees who actively take early, pragmatic steps to identify and manage financial difficulties are likely to achieve better outcomes for their charities and the beneficiaries whose interests they guard.

The Commission identified 94 charities with incomes above £1 million whose auditors had highlighted potential or existing financial difficulties. The total turnover of the sample group was more than £462 million.

The Commission’s review of the charities’ accounts found income reductions and a range of cost factors were the chief cause of financial problems. The review also reported that trustee responses included creating business plans to increase service use and revenue, and increased risks management, with varying rates of success.

The Commission also undertook detailed monitoring and compliance visits to 10 charities in financial distress, five of which were drawn from the study group. The visits established that the majority of trustees had acted competently,

and that those who had intervened early and investigated diverse options to stabilise and improve finances had managed to steer their charities through testing times.

The Charity Commission’s two reports highlight key themes and offer advice that charities in all states of financial health need to heed. The reports conclude that:

• the case studies prove that taking early steps to confront financial problems pragmatically minimises risk to beneficiaries and charities’ operational funding

• a range of options, including mergers and collaborations, are available to charities to address financial predicaments and achieve positive outcomes to negative situations

• trustees must stay alert at all times to the risks of financial distress, especially as the future outlook for charities remains challenging.

The current financial pressures UK charities face are made clear by the fact that nine of the Commission’s 94-strong study group are no longer operating.

The Commission’s reports will be followed by its campaign to educate trustees and staff about successful financial management of charities and to equip them with the necessary tools to enable them to deliver it.

Paula Sussex, Chief Executive of the Charity Commission, said: “The economic reality for charities across the UK is a challenging one. But trustees will better serve those they need to support by exploring mergers and collaborations, diversifying income streams or taking other steps to manage their financial difficulties at an early stage.

“Charities should not take unmanaged risks, but the risk of doing nothing is only too real and the consequences can be devastating, particularly where vulnerable beneficiaries are involved.

“A head-in-the-sand approach raises concerns about the ability of trustees to run their charities effectively and can erode public trust.”

Ms Sussex added that although the Commission was unable to rescue financially-compromised charities, it was keenly aware of the problems they were experiencing. The Commission has pledged to update its guidance and find new ways to improve its accessibility and reach in a bid to minimise future financial failures in the sector.

Nicholsons has extensive experience of working with charities in all states of financial health, and we are keen to offer our expertise to assist trustees in maintaining and improving it. Please ask us for more details.

Trustees must act early to manage financial difficulties, Charity Commission advises

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Stephanie Smith has recently celebrated her 12th anniversary at Nicholsons, which she joined as a Junior in July 2004.

Stephanie’s BSc in Management and Computing, Association of

Chartered Accountants qualification and dedicated work for Nicholsons’ Charity team earned her swift

promotion to Manager, and she now works closely with Director Richard Hallsworth on corporate finance projects, including expansions and buy in management buy outs.

Stephanie offers an extensive range of accountancy and business support skills to her varied clients. She specialises in Xero accounting software and is an expert in creating tailored systems to enhance

clients’ bookkeeping, management accounting and reporting functions, and in providing training in how to use them. Stephanie also has recent experience of implementing Xero systems into charities.

Stephanie is a keen participant in outdoor activities, especially walking, climbing and scrambling and she also enjoys spending time with friends and family.

Employee focus – Stephanie Smith, Business Adviser Senior Manager

The Gift Aid Small Donations Scheme (GASDS) is set to alter radically, following the introduction of a new government bill that will remove current requirements stopping new charities from collecting extra revenue.

The Small Charitable Donations and Childcare Payments Bill proposes changes to the GASDS scheme, which include the removal of the ‘two-year rule’ requiring charities to be registered for at least 24 months in advance in advance of applying for funding from the scheme.

However, champion of voluntary sector financial management best practice, the Charity Finance Group (CFG), considers the government to be missing an opportunity to undertake widespread reform of the scheme and warned that the move would be ‘locking in future failure’.

The Gift Aid Small Donations Scheme, introduced in 2013, allows charities to claim relief similar to Gift Aid on annual small cash donations up to £8,000 (2016-17 figure), without needing to submit individual claim paperwork. The scheme has been criticised as inaccessible for small charities, as well as for its low take-up levels, particularly by the organisations it is primarily intended to help.

In addition to ending the two-year rule, the Bill proposes to scrap the requirement for charities to make successful Gift Aid claims in at least two of the four years preceding a GASDS relief claim. This would allow newly formed charities and community amateur sports clubs (CASCs) to access GASDS.

The bill also proposes to allow small contactless payment donations to come within the scheme’s ambit from 6 April 2017.

However, there are no proposals to change the ‘matching’ requirement, which rules that charities and CASCs must have made successful Gift Aid claims worth at least 10 per cent of the value of small donations for they are making GASDS claims, in the same tax year.

Andrew O’Brien, Head of Policy and Engagement at the CFG, said: “The government’s bill is a massive missed opportunity.

“If the revised scheme is to hit the targets that were intended to benefit from the original one, it needs widespread reform. It looks like it is locking in future failure.”

An Institute of Fundraising spokesman said GASDS was an excellent idea, but that it did not work effectively. He said “We have previously raised concerns and called for reform to make sure that more charities are able to benefit, in particular with regard to the ‘matching’ rules and

the types of donations covered. There scheme also needs a much higher profile within the sector.

“We hope that this bill offers a chance to improve GASDS and a plan to engage closely with its planned beneficiaries as it makes its way through parliament.”

The Small Charitable Donations and Childcare Payments Bill is due to receive its second reading in the House of Commons on 11 October.

We can assist you to maximise your Gift Aid and GASDS claims and deal with all your charitable financial accounting and business planning needs.

Government plans major shake up of Gift Aid Small Donations Scheme