Being a good charity manager includes being a good people manager, as the articles below show.

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The importance of surveying your people

Charities are increasingly recognising that having a better understanding of their staff and volunteers can help them more easily achieve their mission and goals. Gaining insight into how people feel about work and their engagement levels gives charity managers compelling evidence that can influence their organisational and people strategies, and form the basis for performance improvements.

According to a Chartered Institute of Personnel and Development Employee Outlook survey published last year, voluntary sector employees are the UK’s most engaged employees at 52%, compared with the private sector at 36%. The CIPD Engagement Index comprises a set of measures which are important to understanding the level of engagement an employee feels towards their organisation.

With engagement a growing focus for charities, many are turning to people surveys (for both employees and volunteers) to measure levels of engagement.

Engagement correlates with performance

Research shows that employee engagement correlates strongly with performance and regularly surveying people will highlight how engaged people are, what is working well and what needs to be improved.

Research also indicates that engaged employees have lower sickness absence and higher retention.

A Tower Perrins-ISR 10 global survey of 664,000 employees from 50 companies worldwide compared the financial performance of organisations with a highly engaged workforce to their peers with a less engaged workforce, over a 12 month period.

The results showed a significant difference in bottom line results in companies with highly engaged employees compared with companies with low levels of employee engagement. Companies with high levels of employee engagement improved 19.2% in operating income while companies with low levels of employee engagement declined 32.7% over the study period.

An employee or volunteer can choose to be engaged or not – it is all about how people feel and how committed they are to the charity. It’s not something an employer can require as part of the contract.

A good description of engagement came from Lord Currie, dean of Cass Business School, who said, “You sort of smell it – what goes on in meetings, how people talk to each other. You get a sense of energy, commitment, belief in what the organisation stands for.”

People’s engagement levels can be affected by whether an organisation delivers on its commitments and if it is perceived as being fair and trustworthy. Across the charity sector there are significant variations in employee engagement.

An engaged workforce brings benefits both for the charity in terms of higher retention levels, less absenteeism and higher individual performance; and for the employee and volunteer in terms of better psychological wellbeing and positive emotional experiences.

Regularly asking employees what they think and giving them the opportunity to give feedback contributes to creating a supportive working environment with effective communications.

Surveys are just the starting point

Surveys reveal how people feel about their role, their colleagues, management, leadership, culture and values. The results highlight both levels of engagement and disaffection, and the key factors that drive this, as well as what factors need to change.

Charities can analyse the data to understand what is working well and also the key issues to address. This helps identify communication gaps and issues that need addressing.

Surveys are really the starting point for organisations. The results enable managers to develop action plans that will move the charity forward. Undertaken regularly they allow the charity to track progress over time and maximise the value of its investment in people.

It’s up to charities to decide how often they conduct surveys, but once a year or once every two years is ideal for tracking progress and not losing momentum whilst implementing changes following the survey.

Shorter pulse surveys – focusing, say, on 10 questions – can be used between surveys to track progress on key factors.

Surveys are best avoided if a charity is in crisis or the leadership team is not behind the idea of the survey. Equally if leaders are unwilling to be open about the results or are not willing to learn from the results or to make changes, surveys should be avoided until the time is right.

Considerations when planning a survey

It’s crucial that leaders start communicating the reasons why a survey is being undertaken, and how it will benefit everyone working in the charity. They need to be clear on the message and get buy-in from the CEO and senior team.

Communication should be as wide as possible involving intranet articles, posters, emails, staff briefings and even videos. Response rates to surveys can vary but the average response rate for an employee survey is 75% and for a volunteer survey 25%, so it’s important to encourage healthy levels of participation.

People are often concerned about confidentiality and whether their response will be traced back to them. These concerns need to be addressed early on and the approach to confidentiality clearly stated at the start of the survey.

It’s also useful to have a staff forum or appoint people in the various areas of the charity to take responsibility.

Maximising the survey´s impact

The benefits of a people survey are determined by how the organisation uses the results. There is little point in a survey if the issues highlighted are not addressed and nothing changes. To move the charity forward the results need to be analysed and an action plan put in place.

It’s important that the senior management team is in the driving seat and considers the survey results, makes decisions about priorities, leads on the communication and maps out the way forward. This demonstrates that they have listened and are taking the results seriously.

They must be equally open and transparent about the positive and negative results. People don’t expect organisations to be perfect, but they do expect leaders to be honest about where things are at and be clear about the way forward.

It works well if leaders focus on a few organisation-wide priorities at a time and communicate them with everyone.

Responsibility should also be shared out for these priorities to help drive change. Making improvements is not going to be successful if the action plan is simply seen as the responsibility of the head office team.

In most charities, people’s experience of work varies considerably depending on their activity, so it’s important to break the results down to understand these differences.

Most managers will find their own departmental results interesting, but greater benefit comes when the results are shared and discussed with team members. Doing this encourages dialogue and identifies actions that can be taken by different departments and the charity as a whole.

Managers shouldn’t stop communicating when the survey has closed and should make sure they keep people up to date with what has been happening, the actions taken and how they can get involved.

It’s a good idea for charities to decide on the timing of the next people survey fairly soon after the last one as it sends a clear message that the views are important.

There are other listening tools

Whilst the people survey is a hugely important tool for finding out what people think it shouldn’t be the only tool for listening. It’s important for managers to keep other channels open and to proactively seek out the views of particular groups on particular issues.

The survey results should not be seen in isolation but alongside other performance metrics – for example, client/beneficiary feedback, growth, achievement/profitability, absence figures, staff turnover and volunteer retention/growth.

It is a good idea to analyse the results by department or activity, if necessary over time, and explore the extent of any relationships between the survey results and the metrics. This helps to make the business case for the importance of people to the success of the charity.

Successful charities are those which maximise the commitment and engagement of their people. They achieve this through creating the right leadership, management, communications, culture and people processes that deliver results and make their charity a great place to work. And people surveys are an essential tool for any charity which wishes to engage with this agenda.

Agenda Consulting's Roger Parry - an engaged workforce brings benefits both for the charity and for the employee and volunteer.
"It's crucial that leaders start communicating the reasons why a survey is being undertaken, and how well it will benefit everyone working in the charity."
"Making improvements is not going to be successful if the action plan is simply seen as the responsibility of the head office team."

Running the volunteer workforce with care

It’s clear that volunteers play an integral part in the operations and success of any charity, but in a highly competitive market, charities can find it difficult to attract and retain the quantity and quality of volunteers required.

A charity is in a difficult position in competing against other charities, not only for funds but also to secure voluntary help. Volunteer managers need to use increasingly sophisticated marketing techniques to 'protect' their workforces.

With stiff competition, volunteer managers can find themselves on a recruitment treadmill, focused on finding better ways to recruit, while not paying enough attention to retaining the good volunteers they have. To protect against churn, charities should work at understanding what motivates their volunteers and, where possible, try to accommodate these motivations in tailored volunteering roles.

Range of motivations

It is useful to think about the range of motivations people have for volunteering. This can help you to design volunteering opportunities and influence your recruitment message. Motivation will usually differ according to age, with younger people looking to develop new or existing skills, while older volunteers may be more motivated by the camaraderie of team work.

One way to attract individuals who are interested in the idea of being a volunteer would be to offer taster sessions before they have to fully commit. This will allow them to decide what area of volunteering they would work best in and will also give you the advantage of knowing how much they are willing to commit to your charity.

Creating tailored and challenging roles is just one of many suggestions which will help charities attract and retain volunteers. Finding out what motivates your volunteers will allow you to prepare detailed volunteer role descriptions and person specifications so that future volunteers know what the roles involve and what is expected of them.

Flexibility about hours

It’s important to remember that the individual is giving up their spare time for free, so be flexible with the hours they contribute to the charity or the tasks they do. Some of your volunteers may have other commitments or families to look after so being flexible will work not only in their favour but yours too.

Recognise hard work and long service within your charity - everyone likes to be appreciated for the hard work they do. Recognition programmes should encourage enthusiasm and charity success as well as providing a sense of pride and satisfaction to the individual. Acknowledging hard work shows that you value your volunteers and want to share their dedication to the charity.

Ideally you should decide how you will approach each of these areas before you start to involve volunteers. Write them into a clear volunteer policy - this way, everyone knows what to expect from the start.

Aside from concentrating on attracting and retaining the best volunteers, charities need to remember that volunteers are not employees. You must make sure that your charity does not inadvertently give volunteers employee or worker status as this could land you in hot water.

Different motives from employees

Volunteers come to charitable organisations with very different motives to employees as they are not concerned about a financial benefit. Volunteers bring a number of benefits to a charity. Aside from working for no compensation, they bring flexibility and prefer to have a casual relationship with the charity they are involved with.

Determining the employment status of individuals working within a charity can be problematic. It helps to have suitable agreements in place between the charity and the volunteer, setting out the level of expectation while being careful not to unintentionally stray into the realms of employment status.

Charities must be proactive in ensuring policies and practices that define the relationship between charity and volunteer are in line with the informal nature of volunteering. It is essential to get the balance right. Common pitfalls which can affect employment status include:

  • Paying your volunteers more than properly incurred expenses (e.g. £50 a week).
  • Exercising a significant degree of control over "volunteers". For example, requiring them to work specific hours and perform specific tasks, and disciplining them if they do not carry out instructions.
  • The employment status of each individual who works for the charity must be analysed to ensure a) their status fits with the organisation’s needs; b) they are given the appropriate documentation; and c) both parties are aware of their rights.

    The nature of the volunteering relationship with a charity is usually tested under three circumstances:

    1. The volunteer has a grievance.
    2. The volunteering relationship breaks down.
    3. Something changes in the volunteering relationship (for example, the volunteer may not be able to commit as many hours as they have done previously).

    These three situations are all reactive and will bring the legality of the volunteer relationship into focus. Employment rights vary significantly depending on whether the individual is an employee or volunteer. This is where your policies and practices will come into play, reinforcing the relationship between the charity and volunteer. Volunteers are not entitled to the national minimum wage, holiday or sick pay and have no rights to claim unfair dismissal or discrimination.

    Minimising the risk

    There are practical ways to minimise the risk of crossing the volunteer/employee boundary. While you may be concerned about entering a contractual situation, structures and documentation forms such as a "volunteer agreement" are an important part of the process and effective management of volunteers does not have to mirror your employment processes.

    Review all the documents you give to your volunteers and make sure that the language is less formal and more in tone with the voluntary nature of the relationship; avoid using language that is indicative of employment, e.g. a "volunteer agreement" not a "contract", or "volunteer role description" not a "job description".

    It is also important to consider whether or not the document is signed. Whilst what is written down will be a helpful indicator as to the status of the individual, it is not the be all and end all. Employment tribunals will look at the reality of the situation to determine the status of the individual.

    Volunteers are at the heart of a charity, so it is essential that you pay attention to them. By implementing the above strategies you can increase your chances of attracting and retaining the quantity and quality of volunteers needed, but also keep your charity out of hot water by steering clear of giving your volunteers an employment status.

Stone King's Caroline Banwell - volunteers are at the heart of a charity, so it is essential that you pay attention to them.
"Recognition programmes should encourage enthusiasm and charity success as well as giving a sense of pride and satisfaction to the individual."

Effective charity succession planning

Charities operate in an increasingly complex environment. Under ever more scrutiny from stakeholders, the public and the media, they also face increased demand for their services and shrinking income levels. Good leadership is therefore crucial.

Not only do charity chairs need to ensure the smooth running of the charity on a daily basis, they must also consider the future. Succession planning needs to be central to these plans to ensure a continuity of good governance.

All too often, organisations don’t have a succession plan and when the time nears for a chair to leave, no one is ready to step up to the role.

In 1991 Jack Welch, then CEO of General Electric, said: “From now on, choosing my successor is the most important decision I’ll make. It occupies a considerable amount of thought almost every day.” It took 10 years before Welch announced his successor.

Most charities won’t be thinking this far ahead. However, Welch’s words go some ways towards highlighting the importance of dedicating time and thought to this subject; especially given the scrutiny the charitable sector has been under in recent years.

Importance of succession planning

The Chartered Institute of Personnel and Development states: “Succession planning may be broadly defined as a process for identifying and developing potential future leaders or senior managers, as well as individuals to fill other business-critical positions, either in the short or the long term.”

Good charity leadership and governance is not just about the here and now; it is about ensuring the sustainability and efficacy of the charity for the years ahead.

In recent times, charities have become more adept at building breadth into their boards; skills audits have become common place. However, what organisations have in breadth they often lack in depth. Too often there is no obvious existing trustee who can take on the chair role. This is not acceptable.

Ways of successful planning

Think ahead. The chair needs to be thinking about who is going to replace him/her from early on. Foresight and planning will ensure there are people on the board who are being developed to step into the role. It also means that if there isn’t a suitable candidate or someone who is willing or confident enough on the board, new trustees with leadership ambitions can be recruited.

Don’t leave recruitment to the last minute. Often the approach by charities to succession planning is quite erratic, with some charities placing themselves under enormous pressure and risk by leaving recruitment right until the last minute. Too few charities are running their board recruitment campaigns with an eye on potential successors to the chair.

Consequences of ineffectual leadership

Charities don’t want to find themselves suddenly in a position where they don’t have effective leadership and governance. It could damage their reputation and impact the charity´s services, as well as reduce fundraising income levels, especially from the public.

In recent years the reputation charities have with the public has been tested. Research from IPSOS Mori, commissioned by charity think tank New Philanthropy Capital last October, showed that one in three members of the public has little trust in charities — and the bigger the charity, the less respect it enjoys.

The board must collectively accept responsibility for succession planning. The trustee board must collectively accept responsibility for succession planning and not just leave it to the chair or CEO. The board is accountable for the running of the charity and needs to be involved in the recruitment process. It must also ensure that its members are high performing, as this will help to retain and attract new members, who may have the potential a future chair or CEO.

Conducting a skills audit

Conducting a formal skills audit is a useful tool for identifying skills gaps and training and recruitment needs. Research has revealed almost half (47%) of Britain’s charities are facing a skills shortage on their board, yet many charities are recruiting through the same old networks and failing to do board member appraisals to address these skills gaps. Succession planning relies on having skilled and experienced people on the trustee board with the potential to take on the chair’s role.

Ensure there are no egos on the board. It’s important to deal with any egos on the board, as there is no room for trustees excellent at giving direction and opinions, but not producing much action, or trustees only looking for an honour or using the charity as a vehicle for securing a lucrative non-executive role. Having trustees not up the job is not acceptable in these days of increased regulation and scrutiny.

The board needs to be clear about its charitable purpose.

Also, don’t rely on the "old boy’s network". Testing the market for suitable candidates is recommended and not relying on the "old boy’s network" of recruitment, which can lead to boards lacking diversity and skills. Effective succession planning can help charities address issues such as diversity which is increasingly important for charities to demonstrate.

A recent Charity Governance report from Grant Thornton has highlighted a fall in the number of female chairs in the top 100 charities from 22 in 2014 to just 14. Whilst charities may have more female chairs than FTSE 350 companies (where only 3.6% of chairs are women), the gap between commercial and charity board diversity is closing fast.

Create a compelling reason for people to join the charity. Recruiting externally will mean charities must create a compelling reason for people to join. Charities are increasingly competing for talented people with corporate organisations and to attract the best people they must make the role appealing.

Always ensure a proper induction is given. Many charities fail to give new trustees proper inductions and this is a big mistake. At chair and CEO level it’s even more important that a robust induction process is in place as they will have overall charge of running the charity. For candidates recruited externally this is even more crucial as they won’t have the background knowledge and know all the key stakeholders like an internal person or board member would.

High on the agenda

Make succession planning high on the agenda. Succession planning is vital for the successful running of a charity and charities without a formal plan should commit to developing one this year.

Having a talent pipeline in a charity is as important as it is for commercial businesses and it´s worth spending time and effort developing a succession plan now, to avoid costly mistakes of recruiting the wrong person in the future.

Trustees' Unlimited's Ian Joseph - the chair needs to be thinking about who is going to replace him/her from early on.
"Good charity leadership and governance is...about ensuring the sustainability and efficacy of the charity for the years ahead."
"Succession planning relies on having skilled and experienced people on the trustee board with the potential to take on the chair's role."

The recipe for successful charity board meetings

Effective governance depends on successful board meetings. As the main forum for strategic decision making and performance management, meetings play a critical role in ensuring good governance which in turn enables the charity to maximise impact for beneficiaries.

But meetings are sometimes sadly seen as a necessary evil that eat up time, rather than an exhilarating, well run and productive event that adds value.

A well organised and effective meeting leaves everyone involved inspired and energised, clear about their contribution and what will happen next. An over long, poorly run meeting will leave them disengaged and potentially disenchanted, wondering what they are doing on the board.

Running an effective meeting is an art form and it is by no means easy. However, with careful planning, good chairing skills and robust processes, there’s no reason why every meeting can’t be a fruitful and highly rewarding experience that makes a tangible difference to a charity's organisational health and its beneficiaries.

Having an effective board meeting

We all know when we’ve been a good meeting. Participants were well prepared, they contributed their ideas when appropriate, they listened to each other and engaged in debate, the agenda was followed and everyone left with certainty about what is needed for progress.

A good board meeting will leave all involved in no doubt about the charity’s strategy, how well it’s performing and whether it is meeting its objectives.

People will be held to account and work done well praised and recognised. Work will be delegated and trustees will know how decisions from previous meetings have been executed.

Key challenges and drivers in the external environment will be debated and issues around regulation, compliance, governance and risk discussed.

But not all meetings are effective; how can we improve our meetings in 2015?

Steps towards effective meetings

Planning is vital. Dates should be planned annually in advance with an annual calendar reflecting priorities for attention through the year.

Preparation is important. The chair and chief executive should plan an agenda together in advance that reflects the charity’s priorities. The agenda should be structured around key governance tasks and strategic priorities, rather than around routine reports from senior management that could draw trustees into operational matters.

Balanced agendas will help to ensure the board is spending enough time looking forwards and outwards rather than inwards and to the past.

Timings should be kept to. Meetings should start and finish on time, with space built in for dialogue, discussion and debate (rather than a series of presentations), enabling all trustees to make a contribution and add value.

Board papers and presentation generally should be of a good standard. The quality of papers impacts the effectiveness of meetings. It helps to have an agreed format for board papers that is clear and succinct and easy to follow. A summary sheet outlining what’s required is also helpful; for the summary think about summarising the What (the facts), So what (the implications), Now what (the options).

Any presentations made during the meeting should not reiterate the content of the papers, but allow new ideas and conclusions to be generated and debated.

The meeting room itself is important. It should be welcoming and conducive to good teamwork, and big enough to accommodate everyone comfortably. Square and oval tables encourage good contributions because everyone can see and hear each other.

Behaviours and tone are highly relevant. The aim is for constructive and focused discussions that allow a range of views to be heard, with clear outcomes. Chairs will facilitate the discussions, but should not dominate, and helpful behaviours include clarifying and summarising, and ensuring a timely close.

The performance of the chair is fundamental. They set expectations. Their role is to keep the focus, create an environment where people feel comfortable contributing, challenging issues or saying they don’t understand certain points. The chair needs to bring out the best in the room to ensure high quality decision making.

The meeting agenda should do its job. Good meetings follow the agenda and ensure that any interests relevant to the meeting are declared at the beginning.

The needs of beneficiaries should always be considered throughout the agenda. Sometimes it is helpful for trustees to consider an issue from the perspective of each of their stakeholders.

Reporting needs to be good. The minutes are the legal record of the board’s decisions and should be an accurate summary of key decisions, debates and actions. All action points should be clearly recorded in a table at the end, with names of those responsible and due dates, to make sure they are carried out as agreed. The minutes should always be approved at the next meeting, signed by the chair and kept in a safe place.

There should be proper review and follow-up. It is important to regularly review meeting practice. This can range from a simple feedback session at the end asking what worked well and what could be improved, to more complex reviews with an external observer.

Pitfalls to avoid

Over dominant characters should be controlled. They can derail a meeting and stifle debate. If someone is dominating they must be encouraged to be more thoughtful; this takes courage but is vital. Equally, if someone is failing to contribute, they need to be coached and encouraged to participate fully. Straight talking to the person is often the best way!

Insufficient attention to risk is breach of an essential governance requirement. Risk needs to be on every agenda as it is a key part of regular board conversation and strategic decision making. Consideration of risk is an important part of SORP for charities.

Matters brought for sign off should have been adequately discussed. Trustees must ensure they are involved early enough in the cycle of development of a strategic option or idea. The worst scenario is trustees’ rubber stamping decisions. The best case is where senior management want to involve the board early on to get the best input from the brains around the table.

Beware of complacence. Trustees who rest on their laurels and become complacent can stifle the effectiveness of any board. Boards need to challenge themselves continuously and ensure critical thinking is applied to all decisions. Trustees can’t rely on the 'resident expert' (accountant, lawyer, doctor etc.) to make decisions for them.

Disrespectfulness should be avoided. Trustees must be professional and there can be no tolerance of people who antagonise or undermine fellow board members. Not turning up is also disrespectful.

Beware of getting stuck in operational matters. Good board meetings stay tightly focused on the strategic agenda however much some trustees or employees want to get into the minutiae.

Avoid big, dense reports and papers. These link directly to ineffective governance. Papers need to have a purpose, be clear and succinct, and enable trustees to see the information they need easily.

Don't merely see the board meeting as just a meeting. It should be seen as a great opportunity to build the board as a team. Build social activities around the meeting to enable people to get to know and develop trust in each other.

Not preparing is really bad. If trustees don’t read the papers in advance they won’t be able to make their best contribution. There should be reading to understand and raise queries, but also deep reading to build on the ideas and generate new ones. And of course all the papers need to be sent at least a week in advance.

Don't rely on the chair to do everything. All trustees need to be ready and willing to support and challenge each other, including the chair. Don’t leave difficult things to the chair to sort out.

Key attributes for a chair

Here are some suggestions as to key attributes and what constitutes them:

There needs to be commitment. The good chair prepares, attends, participates, follows up, actions; focuses on what is best for the beneficiary and the change the charity seeks to bring about; has a positive and appreciative intent

The chair needs to be contemporary. They should be actively knowledgeable about what’s going on within the charity; and be Informed and articulate about current events beyond the charity.

The chair needs to have courage. They will have to be prepared to face up and deal with difficult topics; encourage change; and speak out for the beneficiary.

Having a quiet life and automatically accepting the status quo can't be on the agenda. The chair must be prepared to challenge and stimulate others to challenge; they must be willing and open to being challenged.

Curiosity is an essential requirement. The chair should be interested in everything the charity does (not just their area of expertise); they have to accept that they will often have something to learn and not always to give; they have to bring something more than just wanting to do good. The chair should also actively value diversity; bring in new perspectives and mind-sets.

Treating the board as a team is a key starting point. The chair should be aware of the whole team – and get members of the team to respect each other's roles and moderate each others’ behaviour; and be keen to participate in assessing board performance.

To ensure effective governance charities need board meetings with trustees who are committed and contemporary, with curiosity and courage to confidently challenge to get the right impact for beneficiaries.

Cass' Caroline Copeman - trustees must ensure they are involved early enough in the cycle of development of a strategic option or idea.
"A good board meeting will leave all involved in no doubt about the charity's strategy, how well it's performing and whether it is meeting its objectives."
"Balanced agendas will help ensure the board is spending enough time looking forwards and outwards rather than inwards and to the past."
" The needs of beneficiaries should always be considered throughout the agenda. "

The main duties of a charity trustee

The Charity Commission's guidance, Essential Trustee: What you need to know, sets out what is expected of trustees and it is one of its core publications. In November last year the Charity Commission opened a three month period of consultation on a proposed revised version of that guidance. It was felt by many in the sector that the guidance needed to be updated to clarify the legal obligations imposed on trustees and seek to better explain what the Charity Commission expects of them.

On 10 July the final revision was published and it breaks down the role of a trustee into six core duties. Here is a summary of those duties and practical tips trustees may wish to consider when carrying out those duties.

ENSURE YOUR CHARITY IS CARRYING OUT ITS PURPOSES FOR THE PUBLIC BENEFIT. The objects of a charity are its purposes – they set out what the charity was established to do. A charity's objects should satisfy the Charity Commission's public benefit test; that is, that the charity's purpose benefits the public. "Public benefit" is succinctly described, and there are links to associated guidance for a more thorough explanation of the term.

Constant review

It is stressed that a charity's status, operation and accountability are all reliant upon this test being satisfied, so it is important to constantly review and reassess what the charity currently does and plans to do. Trustees must therefore ensure that all of the charity's activities further or support its objects and that those activities are for the public benefit.

By emphasising the need for trustees to be familiar with the charity's purpose, the guidance identifies the practical advantage of a clear understanding of what the charity has been established to do. This will hopefully assist trustees in deciding what activities it should undertake.

The guidance also states that it is of equal importance for trustees to be aware of any specific criteria that proposed beneficiaries of a charity must satisfy, and any other restrictions that are placed on those who can benefit. Thus, when planning the future work of the charity, it is clear that the charity is reaching and benefiting the right people.

COMPLY WITH YOUR CHARITY'S GOVERNING DOCUMENT AND THE LAW. A charity's governing document establishes the charity's purpose and outlines the powers which will enable that purpose to be carried out, and the guidance emphasises the need for trustees to be very familiar with it.

All charities are regulated and governed by different legislation in accordance with the activities it undertakes. For example, charities employing staff need to be aware of employment law, charities providing registered care need to be aware of the requirements of the Care Quality Commission; both must adhere to health and safety legislation.

External advice

The guidance stresses that trustees are not expected to have full knowledge of all the legislation applicable to their charity but given that complying with the law is of paramount importance, it directs trustees to seek external advice where necessary to ensure that the charity is fully compliant.

It also reiterates the general obligation trustees are under to keep up to date with practice guides and newsletters, and to be aware of potential financial and reputational risks, and to put in place appropriate safeguards and practices to guard against such risks.

ACT IN YOUR CHARITY'S BEST INTERESTS. The best interests of a charity are furthered when trustees make decisions which ensure the objects of the charity are carried out. Before making any decisions, trustees should be sure they are adequately informed and have balanced all available options or solutions before any final decisions are made, there are no conflicting personal interests or loyalties and that none of the trustees will receive any benefit from the charity which has not been properly authorised.

Ultimate responsibility

Trustees are ultimately responsible for the management and control of a charity and they must ensure they act with reasonable care and skill. This means dealing with a conflict of interest swiftly and diligently, taking account of all relevant factors and making a choice which is reasonable in all the circumstances, and being open and transparent in its dealings. If trustees do all of these things, keep accurate records of all decisions made and actions taken and ask for independent advice when it becomes necessary to do so, they are perhaps less likely to be found responsible for any wrong decisions.

MANAGE YOUR CHARITY'S RESOURCES RESPONSIBLY. A charity's resources can take many forms; they could be cash, shares, property, works of art or literary works. Trustees are responsible for all of the assets of a charity, regardless of what forms those assets take and where the funding stream comes from. They should ensure there are tight financial controls, accurate records of income and expenditure are kept and written policies are in place.

Charitable land

Before considering any investment strategies or making any financial decisions, trustees should review their governing document to confirm there are no restrictions which prevent them from taking any particular course of action and that they have considered all the benefits and risks, obtaining independent advice where necessary.

There are special rules concerning charitable land and these are set out in Part 7 of the Charities Act 2011 – these rules must be complied with if land owned by a charity is to be leased or sold. Whether or not trustees are considering marketing land for sale or granting a lease, they must ensure they are adequately storing all title deeds to the property so they are readily available should the need arise to use or review them.

By efficiently and diligently managing the resources of a charity and regularly reviewing those resources to consider whether they continue to meet the charity's needs, trustees are able to identify and assess any risks, and reduce any exposure to risk.

ACT WITH REASONABLE CARE AND SKILL. The personal skills and experiences of a trustee are vital to the work of a charity. but it is important for trustees to be aware of instances in the life of a charity where independent advice should be sought so they are able to make informed decisions which benefit the charity and ensure they do not breach their duties.

It is prudent to appoint new trustees who may have a particular skill or knowledge which would be advantageous to the charity. Due consideration should therefore be given to the recruitment process and if appropriate, advertisements placed in suitable literature and on relevant websites. Some charities may employ their own professional advisers where particular expertise is required.

Rectifying mistakes

Unfortunately, mistakes do happen so as soon as trustees become aware that something has gone wrong, a trustee meeting should be called to discuss the options available to rectify that mistake and ensure any loss or damage is minimised as much as possible. It would also be prudent after the event to review how the mistake occurred and how further mistakes in the future can be prevented.

If the trustees know or suspect that the charity may be involved in a serious incident, a report should be made to the Charity Commission as soon as possible. Serious incidents include fraud, theft or the charity losing any of its assets or money, a large donation from an unknown source, links with terrorism, the charity having no policy to safeguard any vulnerable beneficiaries or suspicions, allegations and incidents of abuse or mistreatment of vulnerable beneficiaries.

It is possible that trustees may be found personally liable for any debts or losses that a charity may face but provided they act honestly and reasonably, this would be rare. It is therefore important that trustees act prudently throughout.

ENSURE YOUR CHARITY IS ACCOUNTABLE. Fulfilling this duty extends beyond compliance and ensuring the charity meets its accounting and reporting requirements. It also includes being accountable to anyone who has an interest in the charity. This could include members, beneficiaries, supporters and funders. Trustees should be able to demonstrate at all times that the charity is legally compliant and is efficiently run so as to further the charity's purposes.

It is therefore important for trustees to consider implementing a complaints procedure, so that the concerns of third parties and groups or individuals with an interest in the charity can be formally raised.

Subject to a charity's governing document and any relevant legislation, trustees have a power to delegate. Accordingly, it may be appropriate for trustees to delegate a decision they feel they are not qualified to make together. For example, the trustees may be thinking of investing funds and they may need to delegate decisions to a third party who has the necessary skill and expertise to make the right decision.

However, trustees should always make it clear in any dealings with a third party acting for and on behalf of the trustees that they are acting as an agent for the charity only.

Intervention powers

The Charity Commission is the independent regulator of charities in England and Wales. It works closely with charities to ensure they are accountable, meet their legal obligations and promote public trust and confidence. The Charity Commission has published a variety of guidance documents to assist trustees and runs an online enquiry system for which there is no charge.

Although the Charity Commission has wide powers to intervene into the running of a charity or its work, this is more likely to take place where there is evidence of misconduct. Ultimately, provided trustees comply with charity law and the requirements of the Charity Commission, ensure the charity does not breach any of the requirements or rules set out in its governing document, and act with integrity and avoid conflicts of interest there should be no cause for the Charity Commission to investigate a charity.

Lee Bolton Monier-Williams' Howard Dellar and Louise Brooks - a charity\'s governing document establishes the charity\'s purpose and outlines the powers which will enable that purpose to be carried out.
"By efficiently and diligently managing the resources of a charity...trustees are able to identify and assess any risks, and reduce exposure to risk."
"If the trustees know or suspect that the charity may be involved in a serious incident, a report should be made to the Charity Commission as soon as possible."
"Subject to a charity's governing document and any relevant legislation, trustees have a power to delegate."

Presenting how a charity is doing

Deloitte has published its fifth annual trustees reporting survey reviewing the public reports of 50 charities and is about to release its second investment survey focusing on the investments reported by 100 charities. These surveys identify trends in reporting and investing which can help charities benchmark their own reporting progress and strategies.

These surveys do not contain a “right answer” as every charity is different and must do what best suits its own circumstances. However, the surveys provide information for both trustees and management giving them the opportunity to assess their approach.

A brief summary of the findings of both surveys follows (please note these are only preliminary findings from the investment survey).

Reporting your best

In uncertain times it is particularly important for each charity to take stock and decide its publication strategy: how to laud the charity’s successes or to assess the impact of the charity’s programme; how to present the public benefit achieved to potential users and stakeholders in the charity’s activities.

The ever changing digital world means that more stakeholders are looking to websites and electronic media to receive those messages. However, the charities sampled had a diverse response with, on the one hand, almost a quarter having neither their accounts nor annual report available on their website and, on the other, 22% having both their accounts and an annual report posted on their website.

It is important not only to make information available but also to make it attractive and understandable. It is said that "a picture says a thousand words" and almost half of our charities sampled have taken this to heart producing either visually appealing accounts or a separate annual report to draw in their stakeholders and tell their story.

However, the same cannot be said about the use of graphs which has declined from the prior year with only a quarter of charities including graphs. Graphs are a powerful, visual tool for highlighting the key elements of a balance or activity and, particularly for charitable companies which are required to produce a strategic report, there is a place for graphical summaries and highlights in describing both financial strategy and impact.

As charities continue to compete in a challenging economic environment there is a continuing need to make their individual story distinctive and visible.

A new framework

From 1 January 2015, charities will have to report under the new UK GAAP (Generally Accepted Accounting Principles), FRS (Financial Reporting Standard) 102 and the new SORPs (Statements of Recommended Practice) which accompany that change, with the exception of those who are small and choose to continue to apply the FRSSE (Financial Reporting Standard for Smaller Entities) for a brief time.

For some charities there will be little change and for others there could be more significant impacts, but most (particularly those above the audit thresholds) will have to raise their reporting game:

  • Risks will need to be better explained and mitigating factors included (only a third of the charities sampled included details of how they managed specific risks).
  • More emphasis is placed on Key Performance Indicators (KPIs) and how management assesses the impact of its activities (just over 60% of charities did not refer to any KPIs in their reports).
  • More emphasis is placed upon balance, and the reporting of successes and failures and, most importantly, lessoned learned and their integration with the charity’s plans for the future.

Investment avenues

Trustees have a duty to act in the best interests of their charity and that includes managing investment. Investment, however, need not be solely financial and the Charity Commission guidance on investments for trustees (CC14) makes this clear. The new FRS 102 SORP talks about accounting for three types of investment: financial, programme related, and mixed motive.

Whilst the reports reviewed reflected more evidence that social enterprise investments are being investigated, only a fifth of the charities sampled held programme related investments; and although we noted one charity investing in a charitable bond, most investments were of the listed market variety.

We did note more inward investment into charities this year with funding being raised through a bond issue or loans from a charitable giver and 2% of charities specifically reported on the concept of being "investment ready" and how they might achieve this.

Pressures on income and the increasing demand for services is unlikely to change in the short term and inward investment may be an unexplored avenue for charities. Given the emphasis on corporate social responsibility (CSR) there may be opportunities for charities which can explain themselves clearly, set their goals and measure their outcomes.

The restrictions described by trustees in their reports give another indication of change: whilst 78% of charities only disclosed negative restrictions, such as not investing in tobacco, armaments, gambling or pornography, a growing minority included positive restrictions such as helping underdeveloped countries, targeting environmentally friendly businesses, sustainable developments and improvements to the environment.

There was a clear message in these cases that investments supported the charity’s more general objectives, while also seeking a financial return.

Investment returns

Our second investment survey reflects quite a different investment year (2012/13 year ends) – with unrealised gains rather than losses being more common than in our first survey. 68% of charities reporting on performance declared their targets to have been met or exceeded compared to 56% in the prior year.

A review of the gross assets of the charities sampled suggested about 8% of a charity’s gross assets were held in cash with the smaller charities sampled having higher balances at 14% of gross assets. 84% of the charities sampled included an investment policy with a fifth emphasising the need for liquid resources.

Within the investment balances themselves there were also relatively high cash levels at approximately 20% of the investment balance. The amounts of cash held will affect the returns as cash returns remain low.

Investment returns in our sample varied from approximately 5-8% with an average return around 6% of cash and investments. 54% of the charities sampled with financial investments included investment fees in their accounts. Although such fees may not be directly comparable, the median fee paid was approximately 0.31% of the balances invested, up from 0.25% in the prior year. The larger charities were able to command the lowest rates of fees.

Your challenge ahead

How does your charity compare with the results included in the report? Do you understand your differences? Are they right for you?

Consider your reporting, investments and the challenges that face your charity. What can be done to raise the profile and impact of your charity? Do you demonstrate clearly how the trustees act in the best interests of the charity, and how the charity works in the best interests of the public?

The findings suggest that each and every charity should look to its strategies for both reporting and investments and be ready for the challenges ahead.

Deloitte's Nikki Loan - 68% of charities reporting on performance declared their targets to have been met or exceeded compared to 56% in the prior year.
"It is important not only to make information available but also to make it attractive and understandable."
"Trustees have a duty to act in the best interests of their charity and that includes managing investment."

Charities definitely have a fraud problem

Fraud is a challenging problem. Its economic effects are clear. In every sector of every country, fraud has a pernicious impact. In the not for profit sector, fraud denies charities the full benefit of the financial donations which are made to them and undermines their charitable purposes.

Historically, fraud has been described as "difficult to cost" and until relatively recently it has not been possible to fully quantify its effects. For example, studies simply counting those losses which are detected or prosecuted, or surveying those working in an area for their opinion, will never be accepted as a reliable indicator of the real economic cost of fraud. Unless one imagines that all fraud can be detected – and research indicates that, at best, organisations can only detect in the region of 1/30th of it – then a measure of fraud based on detected losses will always represent a serious underestimate.

Fortunately, in the last 10-15 years this situation has changed and it is now possible to produce much more reliable reports. Recent studies including"The Financial Cost of Fraud Report 2013" and building on this, the more recent " Minimising Fraud, Maximising Resources for Charitable Purposes" represent some of the most extensive global research in this area.

The reports document what has been found, across the world, over the period from 1997 to 2011, showing the impact of the recession on losses. Comparing and contrasting data from 2008 to 2011 with the prior period, an increase of 20% is shown, paralleling changes during previous recessions in 1980-81 and 1990-91. A credible, accurate and statistically valid picture of the cost of fraud is now presented.

Accurately measured

As these reports demonstrate, the financial cost of fraud and error can be accurately measured in the same way as other costs and this is not unnecessarily costly or difficult. Most importantly, an accurate, statistically valid figure can be provided for what the financial cost is estimated to be.

The fraud loss measurement methodology involves examining a statistically representative sample of items of expenditure, examining the information and evidence indicating that it has been made correctly, in error or fraudulently (using globally accepted civil law definitions of fraud), and determining which category each item of expenditure falls into.

Highly accurate figures can then be extrapolated from the numbers and values in each category. The use of this methodology has been a legal requirement in the United States since 2002 and is strongly recommended by the UK Government. The latest global research indicates that losses to fraud average 5.47% of expenditure. When measured across 40 types of expenditure with a total value of £7.22 trillion, and in several different countries, just under 67% of accurate and statistically valid measurement exercises revealed losses of 3% or more.

So, research leaves little room for doubt that fraud represents a significant cost. In respect of the charity sector, it is important to state that there is good reason to believe that the real average losses figure may be greater than the global average of 5.47%, referred to above. Research studies concerning the resilience to fraud of different sectors in the UK have shown that the charity sector is significantly less well protected than the public and private sectors.

Charity losses

Consequently, it would be reasonable to assume that losses for charities will be greater than the average. Despite this, for the purpose of our research into the cost of fraud (and the savings to be made) in the charity sector we have applied the 5.47% which can be assumed to be conservative.

Turning to the nature of the problem, research shows that the greatest proportion of the cost of fraud comes from high volume, low value fraud, which individually appears less significant than it is. As a result organisations sometimes do not respond proportionately, because they are unaware of the volume of such frauds or their cost.

Organisations have been measuring and reducing other types of cost for decades – usually with progressively smaller reductions as time has gone by – but frequently they do not do this in respect of the cost of fraud. Indeed, it is still possible (although more rarely now) to hear those leading sizeable private or public sector organisations comment that "there is no fraud in my organisation".

Such comments show a lack of understanding that the first step to solving a problem is to stop being in denial about it. Even where such attitudes are not prevalent, it is still common that organisations have a purely reactive approach, acting primarily after fraud has taken place and after the losses have been incurred.

A purely reactive approach can lead to fraud causing a triple adverse impact:

  • Losses are incurred due to fraud.
  • A further cost is incurred to investigate what has happened.
  • The case reaches court and reputational damage is caused.

Cost reduced

Fortunately, with a concerted effort the cost of fraud can be reduced. Clearly, the speed of reduction of losses will vary from organisation to organisation, but evidence suggests that it is not unreasonable to assert that losses can be reduced by 40% over a two year period.

We should be clear that to achieve such reductions it is necessary to go beyond a purely reactive approach. Organisations need to:

  • Know how much they are losing and how.
  • Know how well they are protected (or fraud resilient) they are.

These are the key factors in reducing the cost of fraud. It is not just a question of how quickly or efficiently an organisation reacts after fraud has taken place and losses have been incurred. What matters is the extent to which an organisation protects itself and seeks to pre-empt fraud.

In the charity sector, fraud has a significant effect on the resources available for charitable purposes. The 842 UK registered charities with expenditure of over £10 million per year had total expenditure of £30.1 billion. Applying the global average loss rate (5.47%), derived from where losses have been accurately measured, would imply that losses total £1.65 billion per year across these charities.

What would happen if these charities followed the successful path of others in reducing the cost of fraud – where reductions of up to 40% (or better) have been achieved over two years? It can be seen that the financial benefits for the charity sector would be dramatic:

  • Across the 842 charities which were the subject of the recent study, the financial benefits would total £659 million per year of additional funding for charitable purposes.
  • For the ten largest charities the financial benefits would total £112 million.

In respect of groups of charities working to benefit particular charitable purposes, the position is also clear:

  • The financial benefits across the ten largest cancer charities could total £20.2 million.
  • The financial benefits across the ten largest children’s charities could total £24.2 million.
  • The financial benefits across the ten largest animal charities could total £8.4 million.
  • The financial benefits across the ten largest charities for the blind and deaf could total £13.5 million.

Real gains

These would be real gains for charitable purposes and illustrate the importance of countering fraud effectively. The benefits to be derived from the measurement and reduction of the cost of fraud could not be clearer. By ensuring that resources are not diverted from their intended destination, significant savings can be made.

We now have the tools to accurately measure fraud as a cost and to focus our skills and resources on reducing that cost. Rapid reductions have been shown to be possible and there are very significant financial benefits which can be delivered. As with any new way of doing things, the question initially is "Why would we do that?" – it is now becoming "Why wouldn’t we do that?".

It is imperative that charities start to manage their fraud costs, just as they routinely manage other costs. The research indicates that the charity sector has much to gain from this approach. As with other significant developments, the new approach is simply a result of looking at a problem in a different way, and then developing the related methodologies.

The barriers to progress are often in the mind, not in reality. If you consider fraud just to be a crime, then you police it; if you think of it as a cost like any other then you manage and reduce it. The new approach has now been tested in organisations from across the world and has delivered proven results. Those which follow next will reap the greatest advantage.

BDO's Jim Gee - it would be reasonable to assume that fraud losses for charities will be greater than the average.
"...research shows that the greatest proportion of the cost of fraud comes from high volume, low value fraud, which individually appears less significant than it is."
"It is imperative that charities start to manage their fraud costs, just as they routinely manage other costs."

Nurturing the people in your charity

Without people, charities simply wouldn't exist – and we're not talking about the donors. The staff in a charity are its number one asset, including both full time, paid staff and the armies of volunteers who give up their time to support worthy causes. This doesn't just include the public-facing staff. Employees and volunteers in the back office are just as necessary – these people empower charities and can make the difference between a good charity and a great charity.

However, human resources and talent management (performance and potential related people management) departments in charities often experience lower levels of resourcing than their public or private sector counterparts. There are a number of causes for this, but an equal number of solutions available to savvy talent management professionals – and a few ways to try and secure funding for the future.

People are your greatest asset

The people on the front lines of both social networks and "real" physical interactions define how charities are seen and understood. From the incredibly creative minds behind the "Follow the Frog" campaign by the Rainforest Alliance, to the community support given by the Dog's Trust digital team, to the volunteers on the streets collecting for charities like the NSPCC, they give a charity its culture and "feel".

People who work for charities are – by and large – quite passionate about the causes. 99% of the time, this is an incredible boon; staff give their time without reservation. However, this can mean that not only is there less focus on self-development – because it can feel "selfish" – charity staff can experience "burn out" and fatigue faster than in other sectors.

Similarly, with tougher economic conditions than in years gone by, many charities are underfunded, some significantly so. This has meant that in a large number of charities there's an overwhelming focus on fundraising and volunteers rather than education, training or information.

For example, on one charity home page, 76% of the links in the "get involved" section refer to direct or indirect donations and support, rather than information about the initiatives themselves or how the charity supports its volunteers or workers. This information is given later on, but it is indicative of the somewhat lopsided focus on fundraising.

However, it is not all doom and gloom; there are also many organisations which do talent management incredibly well. St Mungo's Broadway, a well known homeless charity, has a great understanding of HR and not only involves homeless people in 360 appraisals, but invests heavily in training, development and an "always on" appraisal system, rather than simply reviewing once a year. For St Mungo's Broadway this investment has had a measurable impact, with a sickness rate almost four days lower than the average charity (6 days versus 9.6 days per year).

The drop in donations and altruistic aims of charities also mean that they often pay less well than their public or private counterparts. However, this is not without impact. In a 2011 study, employment in the charitable sector fell by 8.7% in the UK alone - a drop of 70,000 workers. However enthusiastic the workforce, charities may be missing out on recruiting the best staff if they cannot pay competitively, and may also struggle to retain staff for the same reason. There are ways around this, which we will explore later.

Talent management within charities can also be underfunded because of policies and procedures. In many situations, donations must go directly to the cause rather than the supporting parts of the charity, forcing staff to put complex billing and support processes in place.

Finally, charities are not without their share of grievances – in fact, many admit that charities experience a much higher number of disputes than other sectors. Without a well trained, well educated talent management and HR team, these disputes can be poorly handled, withfestering and damaging relationships across the organisation.

Although there are problems, there are also solutions and ways around these issues which do not necessarily need high levels of investment.

Solutions and remedies

Good talent management can be an effective way to empower and motivate your staff, but also to attract new talent, especially when sector salaries are lower. HR practitioners in charities should consider lateral ways to encourage training and performance management.

For example, more senior employees – particularly those who have worked in other sectors – tend to have a wealth of experience and knowledge that they can pass onto their colleagues. A smart way of utilising this is to spend half a day conducting a skills audit, simply by interviewing your staff, creating a database (or spreadsheet, Google document or similar asset) and then work out how to use these skills to educate other workers.

Many senior staff will be flattered when asked to run training sessions across the group, but it is important to keep HR involved so that these sessions are as organised and productive as possible!

A significant amount of free training and courses can also be found via MOOCs (Massively Open Online Courses) like those run by Coursera and Udacity.. Many of these courses are completely free, although HR staff do need to carefully manage the process. A number of these courses are introductory tasters rather than professional qualifications, and being self-motivated in many cases, MOOCs are well known for high drop out rates.

However, by pre-selecting MOOCs for staff and integrating a motivational system within HR processes for MOOCs, they can act as a solid way of developing and motivating employees.

Succession planning is also a good retention and development tool. If talent management staff spend time planning career paths for their staff, actively involving these people in discussions about progression, skills usage and succession planning, workers can feel very "bought in" to the charity. They usually have a better understanding of how their role at the charity will evolve, giving them a sense of direction.

However, all of these initiatives need to be supported by senior management. Leadership in charities should give direction, focus and a sense of unification. Even during tough times, strong leadership can reassure staff that not only will times improve, but that the workforce is striving for something incredibly worthwhile. This can both bind people together and motivate them, helping to aid retention and give the charity shape and a feeling of culture.

One other often neglected source of talent management support can come from other charities. Although charities sometimes see themselves as competing for donations from the public, there is great value in back office staff - including HR, finance and operational workers - collaborating and discussing best practice, hints, tips and shortcuts to get around some of the difficult issues facing underfunded internal departments.

Finally, it’s also very important to shout about the success of these initiatives – a well publicised venture will not only help to communicate its success, but may also attract additional support or uptake for later training courses etc.

Famous saying

Cultural anthropologist Margaret Mead famously said: "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has." This is certainly true for talent management teams in charities as well. Although nothing will ever replace a well funded talent management team, there are a number of clever, often "free" ways around a few of the challenges we have discussed, requiring nothing but the time and dedication of the HR team.

In many of these cases, planning and carrying out measures which result in a positive change will result in a positive feedback loop. The senior team will have better visibility of what you've done with a little money and time, and will feel more inclined to tip the budgetary balance in your favour during financial planning the following year.

Although talent management neglect may not have reached epidemic levels, none of us can predict the financial conditions which the coming years will bring. Consequently, preparing clever ways to streamline and make the most of your talent management assets to empower, motivate, train and support your charity's workforce is an extremely savvy move in what is an extremely uncertain climate for the charity sector.

Cornerstone OnDemand's Vincent Belliveau - good talent management can be an effective way to empower and motivate your staff, but also to attract new talent, especially when sector salaries are lower.
"Even during tough times, strong leadership can reassure staff that not only will times improve, but that the workforce is striving for something incredibly worthwhile."

Making procurement work better for your charity

Ongoing economic uncertainty and brutal government funding reforms have inevitably caused charities’ resources to become stretched to the limit. However, figures published in April 2014 by The National Council for Voluntary Organisations (NCVO) have revealed an even bleaker picture than we may have thought, signalling that charities must urgently bring their spending under control if they haven’t already done so.

As charities face increasing pressure to find new ways to deliver maximum value to their beneficiaries and donors, they can only do this if they are equipped to receive value from their supply chain in return.

According to the latest data available from the NCVO, income from government to UK charities fell by £1.3bn between 2010/11 and 2011/12. This fall represents a loss of almost 9% and highlights that government has cut spending with charities at a faster rate than overall spending cuts. The reality, at least in the short term, is that charities will be further pushed to breaking point given that the UK has to date experienced only approximately 40% of total funding cuts with more on the horizon up to 2017-18.

While these statistics paint a gloomy outlook, by introducing robust systems and automated processes charities can not only survive, but thrive, increasing funds and tightening cost controls to drive future growth. Just as the public sector has had to adapt to similar funding challenges, more charities are utilising technology to adopt a best practice approach in areas of procurement and finance to meet increased demand for their services.

Procurement challenges facing charities

In order to control spending, now more than ever charities need to eliminate inefficient financial processes and reduce their reliance on spreadsheets which often contain out of date information. They must also seek to reduce the burden of administrative costs by automating paper-based processes and replacing standalone systems which hinder their ability to accurately identify budget shortfalls, overspending and purchasing anomalies.

The symptom of limited government funds and grants has been increased competition for donations in the charity sector. Long established charitable organisations are now vying for public support against a steady wave of emerging good causes and working twice as hard to maintain and grow the donations they rely on. With individuals being more cautious about how and where they choose to spend their disposable income, charities must keep adapting to attract a more consistent flow of donations from a diverse set of funding sources.

Retaining regular donors is therefore essential if charities are to continue to provide the services that their beneficiaries so desperately need. Of equal importance is the need to gain a higher return on investment from fundraising activities and increase visibility and loyalty with donors and other stakeholders, to demonstrate value for money is being achieved from purchasing spend. This is vital to not only ensure resources can be used as efficiently as possible, but to keep donors loyal and satisfied.

Business technology can play a critical role here in helping to retain donors by ensuring every penny that comes in is used to maximum effect. Integrated finance and e-procurement systems provide increased visibility of purchasing to enable charities to manage their resources more efficiently and provide vital feedback to financial supporters by demonstrating how their services are impacting their intended beneficiaries.

As the majority of their income comes from grants, fundraising and public donations, charities also have an obligation to manage funds effectively. E-procurement solutions assist by helping charities to maximise efficiencies in supplier relationships and accurately report on their expenditure and financial performance to remain compliant.

An effective procurement strategy

Implementing an effective procurement strategy has never been more important, yet this is an area where some charities have traditionally lagged behind in comparison to the private sector.  Although many charities are being more efficient in the way they run their operations, sufficient controls and visibility of their procurement process which are vital to keeping costs under control still evade some.

Associations such as the Charities Sector Procurement Group have been formed to promote the significant cost savings and associated efficiency gains that charities can benefit from by undertaking a more commercially astute approach to sourcing suppliers. For example, historically, some charities have remained loyal to existing suppliers and have been reluctant to move away from legacy relationships and contracts which may not have been negotiated with value front of mind.

Without robust controls, compliance and visibility across purchasing processes, charities could be left vulnerable to contracts and relationships that may not be mutually beneficial.

By focusing more on improving savings instead of predominantly driving revenues, there is an opportunity for charities to take a more procurement led approach to protecting funds. However, research conducted by Expense Reduction Analysts (ERA) highlighted that staff from more than half of UK and Irish charities (52%) which were surveyed admitted that they lacked the time, experience and energy to secure the best deals from suppliers.

The ERA findings are understandable, particularly when considering that some charities may operate with only one or two procurement team members. As long as charities are making purchases on intuition and using manual processes and physical paperwork, their insight into spending and any opportunities to realise best value will be restricted. Encouragingly a number of technology solutions exist to help even smaller charities to automate administrative processes and introduce robust spend controls at all levels of their organisation.

How technology can help

Specialist e-procurement software solutions offer charities a means to improve their viability and long term survival prospects by increasing purchasing control and compliance. Integrated purchase-to-pay tools enable charities to maintain tighter financial control through more accurate reporting of spend, providing clear visibility of who is spending what and when, and the ability to quickly identify spending patterns to prevent wasteful use of resources.

Web-based purchase-to-pay solutions enable charities to easily submit requests for purchases through an online supplier portal across multiple product and service categories, and also track the status of requisitions, confirm the receipt of goods and the approval of supplier invoices to reduce time and complexity. Advanced functionality enables charities to build approval hierarchies to prevent unauthorised spending and provide enhanced visibility of purchasing commitments.

By automating time consuming manual processes, purchase-to-pay solutions also enable charities to gain efficiency savings by reducing paper-based administration costs which can be reinvested into supporting front line services.

The more charities can control and accurately monitor their spending, the more effective they will become in tailoring activities to maximise the impact for their target causes. To succeed, charities must also drive value from supplier sourcing, contract management and the effective management of suppliers.

Electronic sourcing (e-sourcing) technologies can help significantly here by connecting procurement professionals, finance managers, budget holders, employees and suppliers to create a collaborative buying network. Specialist e-sourcing tools also provide high levels of visibility and auditability that are necessary to ensure charities adopt best practice procurement. Indeed by providing mini tenders, e-sourcing tools improve efficiency of the entire tender process and support the identification and evaluation of suitable suppliers to maintain legal compliance.

The success of these solutions lies in their ease-of-use. Buyers can use the system to own the process and the efficiency savings both in time and costs – the benefits quickly become self-evident to ensure widespread adoption levels.

Creating an ethical supply chain

With increased competition in the market, maintaining donor and public trust is vital for charities to reassure their stakeholders that funds are being used optimally. E-sourcing solutions can enable charities to check the environmental and ethical credentials of suppliers in an auditable manner, ensuring they only operate a supply chain which fully supports their organisation’s codes and objectives while still encouraging best practice procurement processes.

E-sourcing platforms help charities to demonstrate that they are maximising the social value and social benefit available to the community from their commissioning and procurement activities. Examples may include a local charity providing services to government demonstrating "social value" in the supply chain by sourcing local suppliers, or an environmental charity only selecting ethical suppliers which can proactively demonstrate evidence of energy reduction and lowering their carbon footprint.

By forcing suppliers to adhere to charitable organisations’ compliance guidelines, e-sourcing solutions help to safeguard good governance and compliance at all times.

Intelligent procurement makes sense

As long as new worthy causes are established because of a growing need for charitable help, charities must explore new avenues of income generation and become more business-minded in the way they approach procurement to manage resources. Technology therefore has a fundamental role to play in providing charities with the visibility they need to increase efficiency and gain valuable insight into each pound of spending.

Passion and belief in the cause, which may once have formed the cornerstone of a charity’s success in the early stages, can quickly be undermined by a lack of automation and information, which leads to uniformed decisions being made. Pursuing a risk averse approach like this to purchasing is doomed to fail against a backdrop of continued austerity – just as a poorly managed commercial business will not make it in the long term.

To not only survive, but thrive, charities must centralise their procurement processes to intelligently review how they purchase goods and services, and ensure there are strict controls in place to keep spending in check and drive greater value.

Specialist procurement solutions are vital in assisting charities to maximise efficiencies in their supplier relationships and purchasing processes. By providing accurate information to be on hand modern procurement technologies ensure charities are in a much stronger position to manage resources effectively, report back to their supporters and stakeholders and, most importantly of all, help them to deliver more to their beneficiaries.

Wax Digital's Daniel Ball - advanced functionality enables charities to build approval hierarchies to prevent unauthorised spending and provide enhanced visibility of purchasing commitments.
" more than ever charities need to eliminate inefficient financial processes and reduce their reliance on spreadsheets which often contain out of date information."
"Without robust controls, compliance and visibility across purchasing processes, charities could be left vulnerable to contracts and relationships that may not be mutually beneficial."

Being careful in your relationship with volunteers

Volunteers are an extremely valuable resource, which are heavily relied upon by many charities. Volunteers can be flexible and motivated so it’s important to look after them. Volunteers should be made to feel appreciated and as part of the organisation. Care should however be taken when managing volunteers so as to not inadvertently create an employment relationship. It is important that both parties are aware of the volunteer’s employment status at the outset.

There have been a number of cases where voluntary workers have brought claims, arguing that they have a right to be considered as employees when claiming both discrimination and unfair dismissal. So, whilst charities will want to avoid creating a formal contract with their volunteers, it is good practice to set out in writing the intentions of the parties, such as a description of the volunteer’s role, clarifying the intentions and expectations of both parties so as to minimise the chance of any misunderstandings. The language should be carefully constructed to ensure the agreement is flexible and not a binding contract of employment.

Although ideally charities will want certainty about the time a volunteer can commit to providing their services, imposing a fixed work pattern will risk being seen as a contractual obligation. It is therefore better to set out a preferred schedule, while making it clear that the organisation is flexible about time commitment.

Case law has confirmed that a usual minimum time commitment will not create an obligation on volunteers to work at least those hours where it simply outlines an expectation. It is therefore advisable to describe such matters as "hopes, intentions, policies" rather than "rights and obligations". It is advisable to include an express statement, making it clear that neither party intends any employment relationship to be created.

Beyond the written document

The written document is only the starting point; the tribunals will look beyond this, particularly at how the relationship works in practice. The relationship can and often does evolve over time so it is therefore important that the relationship with each volunteer is regularly reviewed to ensure that it does not become a contractually binding employment relationship.

A key factor in being a volunteer and not an employee or worker is the lack of remuneration. Whilst it is logical to think about remuneration in monetary terms, the interpretation does go further and would include for example, an offer of training unrelated to their work in return for, say, two months’ work or other perks such as even providing a "free" lunch.

Volunteers should be reimbursed for any out of pocket expenses incurred as part of their role subject to the provision of a receipt or suitable evidence in order to identify how much has been paid and why. Any payments over and above actual expenses may be regarded as consideration for services provided or income, and suggest that the volunteer is in fact a worker or employee, so particular care should be taken to avoid this.

A balance should be struck between making volunteers feel part of the charity and differentiating between them and other paid staff. Volunteers should be given more free rein to decide how to spend their time than employees. You cannot "require" your volunteers to carry out duties and care should be taken when dealing with volunteers who fail to fulfil expectations. Should a charity require volunteers to carry out certain duties within set timescales, a tribunal may consider that there is in fact an employment relationship.

Not same control as for employees

Charities will need to allow volunteers to decide when or if they will be working, and not have the same degree of control as they would have over employees. It is however important that volunteers are subject to some policies such as data protection, health and safety, and criminal records checks, where necessary.

VOLUNTEERS ARE NOT PROTECTED BY ANTI-DISCRIMINATION LAWS. Judgment in the case of X v Mid Sussex CAB was handed down by the Supreme Court on 12 December 2012, in which it was held that volunteers do notqualify for protection from discrimination under the employment provisions of European or domestic anti-discrimination law.

X was a volunteer legal adviser with the Citizens Advice Bureau, and she alleged that she was discriminated against because of her disability (X being HIV positive). X said that this discrimination was against European law and argued that her voluntary work at the CAB constituted an “occupation” and so she was covered by the legislation which protects workers and people in, or trying to access, an occupation.

The CAB disputed her allegations of discrimination, but also argued that in any case X was not protected by EU anti-discrimination law or domestic law, because she was a volunteer with no binding contact with the CAB. The CAB successfully applied to strike out her claim, and successfully defended its position before the Employment Appeal Tribunal and the Court of Appeal.

The Supreme Court agreed that neither domestic legislation nor European discrimination law applies to persons in X’s situation. If the decision had gone the other way and allowed volunteers to be covered by anti-discrimination laws, it would have brought new rights to many millions of volunteers in the EU.

Many charities and volunteering organisations supported the decision made by the Supreme Court. It reasoned that volunteers do not need discrimination protection because they are not reliant on earning a wage. Volunteering England said that having the same protection as employees would "undermine the nature of volunteering, create practical barriers and additional costs" and create a "formalisation" that would be "unwanted by most volunteers".

Vocational training is difficult

On the other hand the Supreme Court was aware that there are also workers who are unpaid but who undertake work in a vocational training context. The ruling makes clear that in the vocational training context, discrimination law will apply to interns involved in vocational training. However, it did not give any guidance as to what sort of internships will be covered.

Further it did not address what protection will be afforded volunteers outside the employment provisions. During the passage of the Equality Act 2010 through Parliament, the Solicitor General stated: “Volunteers are currently protected from discrimination, victimisation and harassment in respect of the provision of goods, facilities and services to the public.

As recipients of services, for instance, from an agency that arranges placements, there would be protection, which has been extended to cover age. Such discrimination might be highly relevant. Changing the laws proposed would provide a remedy in an employment tribunal instead of a county court, but there is a remedy already…”

The logic being that volunteers are members of the public and if the organisation they are working for is a service provider, the claim can be brought in the county court by any type of volunteer. It is not necessary for the volunteer to demonstrate that they undertook duties which were substitute employment or akin to those of an employee (which was the case advanced by the Appellant in X).

Moral obligation over discrimination

Therefore whilst the ruling of the Supreme Court gives clarity as to the status of most volunteer workers, it is worth considering the moral obligation to prevent discrimination suffered by volunteers. With the increased use of volunteers, there is likely to be increased pressure for the Government to cover them under the anti-discrimination legislation. It is therefore worth considering putting in place an equal opportunities policy that covers volunteers, but to not make them subject to the charity’s disciplinary and grievance procedures.

Cripps Harries Hall's Erica Dennett - it is important that the relationship with each volunteer is regularly reviewed to ensure that it does not become a contractually binding employment relationship.
"A balance should be struck between making volunteers feel part of the charity and differentiating between them and other paid staff."