The value of investments and any income from them can fall and you may get back less than you invested.

What you've been saying

Running a charity, be it in an employed or voluntary capacity, brings many responsibilities and a vast array of topics. In this round-up of our 2016 seminars we bring you some of the insights from our own presentations and those of our fellow speakers and a number of questions trustees and staff have been raising.

We and our fellow presenters, from other charity providers including lawyers, auditors, other adviser and some charity speakers, have covered a number of financial, legal and best practice topics. They all answer some questions key to many, but perhaps the best barometer of what is of interest and concern to the attendees are the questions they raise and some insight into areas of concern. So what follows includes some of those too.

MANAGEMENT

The demise of Kids Company has given rise to many charities revisiting their governance structures as well as their sources of income. Such high profile cases may prompt others to wonder if it could happen to them and this particular case has enlivened the debate about why charities invest. It has served as a good reminder of two key principles: firstly the duty to provide for the urgent needs of today as well as the needs of future beneficiaries; secondly two of the fundamental duties of trustees, to be prudent and to diversify.

RISK

Charities spend considerable time contemplating and planning how best to manage risk, in all its forms. One of our legal speakers helpfully summarised the categorisation of risk as best considered within the following matrix: terminate, tolerate, outsource or treat. In investment matters, we spend a lot of time (as does our regulator) considering the types of risk, the ability to tolerate volatility in the value of investments and the tactical approach to managing it day to day within an investment portfolio. The Charity Commission, in their CC14 investment guidance, also summarise the types of investment risk faced by trustees and their CC26 guidance on risk management has a helpful Risk Heat Map for classification and planning purposes.

In the wider context, the questions regarding risk posed in 2016 were on geopolitical events, mainly on Brexit and the US election. Whilst charity regulation itself is not driven by EU legislation, and nor are all the tax issues, they can hinder or help a UK charity. But there are a raft of unknowns and some areas where alignment with the EU approach or determining the UK’s own way need to play out, such as date protection, anti-money laundering initiatives, VAT and employment law, to name a few.

Speakers urged charities not to panic, to keep informed and to consult relevant sector bodies on key topics. You cannot avoid risk; it is more a question of how best to manage it.

A ROUND-UP OF OTHER TOPICS

The new fundraising regulator gave rise to questions from attendees, with its voluntary registration and scaled payments.

For those who have registered, they are entitled to use the new regulators’ logo, a helpful hallmark for donor relations.

Crowdfunding is appearing on the charity scene (did you know that Nelson’s Colum in Trafalgar Square was crowdfunded?). Some charities are exploring its use as a way of matchfunding, where grant makers match crowdfunding to reach the charity’s target. You can also give tax-efficiently subject to the usual ‘benefit’ rules. One for those already using social media in their charity work.

Charity Fraud is on the minds of many. Sadly, the accounting and audit profession has plenty of examples in this area. It has increased considerably in recent years, much of it internal fraud though the rise in email communication. Procurement of services, fake invoices and financial controls all areas to watch as well as the potentially to put in place a whistleblowing policy. Fraud generally in the UK is on the rise, the estimated £193bn last year up 25%, of which £1.9bn impacted charities.

Ethical investment is a topic we regularly get questions about and decision with clients. In Charity Commission guidance terms, trustees are obliged to have a debate, though they may decide not to adopt and specific ethical screening criteria to their portfolio (though half our client do have ethical criteria within their Investment Policy Statement). The important thing is to have the debate and to revisit it from time to time. Also, any criteria put in place should relate to the charitable objectives and be sufficiently pragmatic to be capable of being implemented.

An overarching theme for the events was the reminder to professional service providers of the significance of trust and confidence in managing charity arrangements. To be effective, boards and management need to be capable, curious and probing, asking the difficult questions when required.

There is plenty of guidance available, form the Charity Commission, Charity Finance Group (CFG) and other bodies, some of which are listed below:

Charity Commission: CC3 (The Essential Trustee); CC14 (Investment matters); CC19 (Reserves); CC26 (Risk) CFG: http://cfg.org.uk/

If you would like to be added to invitation list for any of our regional seminars and conferences, please just let your Brewin Dolphin contact know or email charities@brewin.co.uk, with an indication of your preferred regional location.

By Ruth Murphy Head of Charities ruth.murphy@brewin.co.uk

 

The value of investments can fall and you may get back less than you invested.

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