Leading the Modern Charity Charitable aims over financial adversity 28 January 2010

Regulatory update Philippa Pinkerton

Introduction 3 Heritage Assets – FRS 30 The Charities and Benevolent Fundraising (Scotland) Regulations 2009 Other legislation – Where are we now?

4 Heritage Assets – FRS 30

5 Issued – June 2009 A/c periods beginning OOA 1 April 2010 Enhanced disclosures Not just applicable to charities FRSSE accounts excluded

Heritage Assets – FRS 30 (cont’d) 6 Definition “ a tangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture ”

Heritage Assets – FRS 30 (cont’d) 7 Includes: o Historic buildings o Archaeological sites o Paintings/ book collections

8 Heritage Assets – FRS 30 (cont’d)  When to capitalise? o Where cost or value information available  What if cost / value info not available? o Obtain external valuation o Obtain internal valuation or; o Enhanced disclosures

9 Heritage Assets – FRS 30 (cont’d) Internal valuations o “by any method that is appropriate and relevant” o No prescribed minimum period between valuations  No depreciation if lives are indefinite

Heritage Assets – FRS 30 Disclosures o Nature / scale of heritage assets o Policy o Carrying value of assets (cost or valuation) o Valuation details o Five year history of asset transactions 10

11 The Charities and Benevolent Fundraising (Scotland) Regulations 2009

12 The Charities and Benevolent Fundraising (Scotland) Regulations 2009 Apply from 1 July 2009 Written agreements Fundraisers must supply info to donors: Who they are raising money for How funds will be distributed How much the fundraiser will receive in payment for services. 28 days to pass money over to the charity

13 Other legislation – Where are we now?

14 Other legislation – Where are we now? Companies Act 2006 o Now fully in force o Audit reports – signed by Senior Statutory auditor o 9 month filing deadline o Black ink o Co. number on balance sheet, not just front cover SORP 2010 o Consultation phase o 2011 implementation expected o IFRS for SMEs

15 Other legislation – Where are we now? SCIOs o Alternative legal form o Consultation closes 26 February 2010 o Regulations due to be passed later this year o Introduction in 2011 OSCR o Integrated Reporting o Rolling Review – Phase 1b

If you need to find out more...       

Governing commercial risk and sustainability Kenneth McDowell

18 Introduction Commercial risks facing the modern charity Impact on governance/governance developments Sustainability – practical guidance and actions

19 Commercial risks

20 Commercial risks Context January 2009 Status of economy UK in recession / Sterling 24 year low Banking collapse / “credit crunch” Institute of Directors “We are well into the financial crisis but the economic crisis is only just beginning”

21 Commercial risks (cont’d) Issues identified January 2009 Impact on services Impact on income Uncertainty

22 Commercial risks (cont’d) Empirical evidence 56% of charities affected by economic downturn Income 69% experienced decrease in investment income 31% experienced decrease in grant income 26% experienced decrease in fundraising income Source: Charities commission: Charities and the economic downturn (September 2009)

23 Commercial risks (cont’d) 17% experienced increasing demand for services 52% of charities have taken steps to counter effects of downturn Outlook – 71% optimistic Source: Charities commission: Charities and the economic downturn (September 2009)

Commercial risks (cont’d) Our own experience Pressure on services o sector increases: children/family support /mental health/housing Public sector funding o stable whilst contracts remain o most anxiety in larger charities o impact of election (especially Scotland) 24

Commercial risks (cont’d) Our own experience (cont’d) Corporate and private donors o corporate commitment remains an issue Investment capital and yield o recovery evident o proactive governance in year/cautious optimism Legacies o stable in volume / less predictable value 25

26 Commercial risks (cont’d) Our own experience (cont’d) Fundraising  remains difficult  grant making trusts and foundations - mixed experiences In summary:  correction has happened  income remains an issue  continued active governance requirement

27 Governance

28 Governance Reminder on Governance definition “the systems and processes concerned with ensuring the overall effectiveness, supervision and accountability of an organisation”

29 Governance developments (cont’d) Governance best practice in the charitable sector Public Sector – Good governance standard for public services Private Sector – Combined code on Corporate Governance Charitable Sector – via SORP and greater monitoring – code for the voluntary and community sector Governance Code Steering Group August 2009 – refashioned principles

Governance developments (cont’d) Refashioned principles A good board will provide good leadership by: Understanding their role Ensuring delivery of organisational purpose Being effective as individuals and a team Exercising control Behaving with integrity Being open and accountable 30

Sustainability 31

32 Sustainability – a practical guide The questions Trustees need to ask (15)* Key areas to address  Strategy/opportunities/Risk  Financial Health  Making best use of resources *Source: Charities Commission

33 Sustainability – practical actions (1)  Immediate Drawing on reserves Efficiency savings / expense reduction Use of volunteers / alumni / contacts Awareness of financial assistance

34 Sustainability – practical actions (2)  Medium term / strategic Development of alternative income stream Less reliance on traditional funding models More business like Alternative routes to outcomes Formal collaborations / mergers Philanthropy engagement

In Conclusion Downturn has affected charitable sector Many commercial issues remain New reality / New governance Consider wider sustainability solutions Optimistic outlook 35

Andrew Muirhead Chief Executive Inspiring Scotland 36

37