Good governance is all about understanding the options facing the organisation and their implications. In this guest blog, Peter Kelly, Business Development Director at Charity Bank, provides an introduction to loan finance for charity trustees.
Charity trustees and management need to understand what loan finance can offer to determine whether it is a suitable option for them.
Indeed loans are not right for all situations or organisations and careful consideration of the financial commitment should always be taken. In the right circumstances, however loans can be a valuable tool for a charity to further its charitable mission.
A loan can help organisations become more sustainable. For instance, it can allow you to buy a property rather than continuing to pay rent. This is one of the most common uses of Charity Bank loans.
Loans can help a charity to grow its income. Borrowing to invest in a new activity that increases income can be a fast track to growth, with the additional income helping to repay the loan. In this way, loans can reduce reliance on grants and donations, whilst allowing you to broaden your range of services.
Loans can help bring in grants. In Charity Bank’s latest social impact study 46 per cent of respondents from its existing borrowers reported that the loan helped them unlock funding they couldn’t have accessed otherwise.
Loans can be useful in the short-term. A loan can also be used to bridge the receipt of retrospective grants or payments under service delivery contracts. This can help smooth cashflow deficits and make it easier to plan and manage your finances.
In short, in the right circumstances a loan can empower charities to: seize opportunities, extend their reach, smooth cashflow, improve financial sustainability and leverage additional funds.
Before applying for a loan, it’s useful to know what a lender will look for when considering a loan application. Some of the key factors considered in the due diligence process are as follows.
First and foremost, a lender will be looking for evidence that a borrower can afford to repay the loan. The charity will need to be sustainable and ideally have several streams of income so that repayment isn’t reliant on any one source. The charity will also need to demonstrate that it can continue to repay the borrowing following external events such as rises in the general level of interest rates.
As part of the loan process, a lender would expect to see a business plan including financial projections. Once overheads, expenses and any plans to generate future revenue are considered, will the charity have sufficient surplus income available to afford the loan repayments?
The governance of a charity is important and will be taken into consideration: who are the management and trustees, how long have they been involved and do they collectively have the breadth of experience and skills to manage the organisation?
Reach Volunteering provides a template to allow you to perform a skills audit with your board. A skills audit will capture the current skills of the trustee board and highlight possible gaps in trustee skills or where professional guidance is required.
A lender will need to see evidence that a charity’s governing documents (this may be a Trust Deed or Articles of Association) give the legal powers to borrow and, if necessary, to pledge assets as security for the loan. This is not always clear, so you may need to take professional advice.
Unincorporated organisations have an implied power to borrow but may still require a specific power to charge assets. Changing your powers to allow borrowing or the giving of security is usually a relatively straightforward process and your legal advisers will be able to guide you through this.
Social lenders, such as Charity Bank, will also wish to understand the social impact of a charity and of the proposed use of the loan. They will want you to provide evidence of the good work your organisation is doing with tangible examples that it delivers social benefit.
Loans will usually require security. Examples of security offered against a loan could be property, cash deposits or a guarantee from a trading subsidiary.
Whatever your situation or proposal, the best guidance we can give is to open a dialogue with potential lenders at an early stage. This will give you the best possible chance of finding a loan that’s suitable for you needs and of ensuring you have sufficient time to get it approved.
Peter Kelly is Business Development Director at Charity Bank, the ethical bank that lends solely to charities, social enterprises and other organisations where the loan is for social purpose. Charity Bank is run for the sector and owned by the sector, as all its shareholders are charitable trusts, foundations and social purpose organisations.
Gina shares her thoughts on the impact of skills-based volunteering.
The intangible benefits of giving have been explained and demonstrated in a variety of ways. They never lose their relevance. Giving a helping hand to those in need is welcome in most circumstances, but when you get to apply your skills to help not one person but many, the satisfaction multiplies.
Skills-based volunteering is a win-win concept that contributes to the development and success of many charitable causes. Simultaneously, it re-energises and revamps the talents and skills of the volunteers. It is an impactful way of giving back by channeling volunteers’ passions and abilities for the benefit of people who are true in need of them.
The value generated by this kind of relationship is priceless.
Together skills-based volunteers and non-profits are meeting a broad range of needs such as trusteeships, accountancy, digital marketing, media, communication strategy, finance and management, to name a few.
From the perspective of a volunteer’s career, according to Linkedin, 41 per cent of hiring managers consider volunteer work to be equally as valuable as paid work; 20 per cent of hiring managers in the US agree that they have hired candidates because of their volunteer experience, and 27 per cent of job seekers are more likely to be hired when unemployed if they are volunteers.
Reach Volunteering works in partnership with Linkedin to recruit volunteers from the millions of professionals registered with this professional platform. Whether you’re a marketing executive at a large company, a business owner who runs a small local shop or even taking a career break, volunteering your skills could offer you that rewarding feeling you have been looking for. The Reach self service platform is the perfect way to find the opportunity that suits you – and once you are registered, charities can find you too.
By creating a profile and searching for volunteering and trustee opportunities, you can contribute to social good and multiply your potential!
This blog first appeared on the Charity Bank website in June 2017.
Finding ways to strengthen your board is never easy and there is no single solution that will work for every board.
To be more effective, however, boards do need to ask themselves searching questions regarding:
A good board makes all the difference to your charity’s future. Poor governance can lead to loss of strategic focus and ineffective oversight of a charity’s management. On the other hand, a strong board will create a shared vision, renewed purpose and ensure that the charity makes the right strategic decisions. Only the board itself can improve its governance, so it is important that it takes this responsibility seriously.
1. Reflecting on the Code of Good Governance
Creating a time and space in which your board can collectively reflect on their work is absolutely essential for ensuring that you are carrying out your duties properly.
The Code of Good Governance is a wonderful tool to help you do this. The Code centres on seven key themes:
By adopting the Code, board members are committing to a shared understanding of their duties and responsibilities as well as gaining a framework with which to structure a thorough, self-reflective and on-going analysis of their work.
It’s worth noting that inviting an external expert to facilitate the process (either an experienced volunteer or paid consultant) can enhance this process, providing additional impartiality and objectivity especially useful to a board reviewing itself for the first time.
2. Regular skills audits
Making sure that the board is aware of the skill sets it has and those it needs should also be an on-going process. You should set aside a time at least once a year to appraise your composition in relation to anticipated projects and plans.
This will allow you to clearly see where the organisation is going and what expertise you will need, as well as helping you to intelligently anticipate challenges and opportunities.
3. Strong recruitment and induction processes
Recruitment isn’t just about bringing on board valuable new expertise, it’s a process that implicitly sets the tone, culture and expectations of the board.
A strong recruitment process should include open recruitment, induction, training, mentorship and support. These factors combine to directly demonstrate to new trustees how it is they are expected to contribute their expertise and will ultimately result in more engaged, conscientious and capable trustee placements.
4. Create a succession plan
As most trustees well know, recruitment is an on-going process. All too often it can feel like, just as one trustee joins the board, another is preparing to leave. Anticipating this by coaching and mentoring existing trustees to take on important roles such as those of Chair and Treasurer can be a great way of limiting the impact of trustees leaving.
It’s a good idea to make plans for finding suitable replacements for retiring trustees well in advance so they can hand-over their responsibilities and duties properly.
A succession plan is also a great way to avoid the opposite challenge: too little turnover. Trustees should not stay on forever – bringing new trustees on board with fresh perspectives is healthy part of the organisation’s development and should be an integral part of your board’s strategic planning.
5. Training, development and networking
Whilst many boards may not have a budget for training their trustees, you should at least consider some of the courses and networking opportunities out there.
You don’t have to spend your entire governance budget to receive guidance from an expert: Small Charities Coalition, Civil Society and NCVO all offer great opportunities to learn from experts and other trustees.
Similarly, joining appropriate professional and support networks like the Association of Chairs and The Honorary Treasurers Forum can be great ways of meeting and learning from your peers. By joining the UK Charity Trustees group on LinkedIn you can connect directly with an active and friendly online community that is always willing to respond to questions with support and guidance. In addition, annual events like The Trustees Conference and the Trustee Exchange can also be helpful.
6. Constructive criticism & critical friends
Fostering a culture in which trustees are empowered to constructively challenge each other is the cornerstone of a well functioning board. Whilst it’s always incredibly important to respect each other’s opinions, avoiding awkwardness by not addressing potential issues with a given strategy can potentially lead the organisation down a far more precarious path.
Cultivating a culture in which all board members are empowered to challenge each other’s assumptions is a great way of making sure that strategies are tested and re-tested before being implemented and executed. This process is equally important for the Chair’s relationship with the CEO which should include support and challenge in equal measure.
Allowing board members the opportunity to voice their opinions and to challenge each other’s ideas not only reinforces inclusiveness, but can stimulate new ideas, uncover hidden pitfalls and generally refine an organisation’s strategy like no other discursive process.
We’re excited by the results of 2016, our first full year of operating our new online service.
Reach Volunteering supported over 930 placements last year, an increase of over 30 per cent on 2014, the last full year of our ‘offline’ service. And we estimate the total value of the skills transferred to the sector by our volunteers last year to be £13m.
Want to know more? Our latest annual review has all the detail.
The stories from this year’s Charity Governance Awards winners and entrants are a vivid illustration of the difference a good board can make. They tell of boards that have brought fresh thinking, integrity and a clear vision to their charity’s work, strengthened its impact and, sometimes, averted disaster. The charities themselves range from tiny to large, and their causes are diverse. The governance categories they entered include digital, diversity, impact and turnaround.
They are all stories of great leadership, exercised as a team, for a common cause.
This is quite at odds with the way that we, as a sector, usually talk about trusteeship. Often the focus is on the fiduciary and the language is all compliance, liability, duty. For a long time, I was deeply uninterested in anything to do with trusteeship: it had a fusty, almost Dickensian connotation, and the link between trustees and the work of the charity – the difference it made – seemed tenuous.
However, as the entrants for this year’s awards (and last year’s too) clearly demonstrate, good governance involves so much more than just getting the basics of compliance and scrutiny right.
A common theme of these stories is of trustees keeping hold of the bigger picture and not being afraid to think afresh about how their focus should shift in the context of a changing world. In some cases this meant deciding to narrow their remit to key strategic activity, and stopping anything that did not contribute to this. (This can be so hard to do in practice!) Dementia UK decided to focus on exclusively providing care through specialist Admiral Nurses. For others this meant broadening their mission to create a more holistic approach. For example, Off The Record expanded its work from providing counselling services for young people to a mental health service for the same audience. Body & Soul widened the focus of its services from young people with HIV to a broader range of beneficiaries. Always, the board were careful to keep true to the overall purpose of the charity, and to the needs of service users.
Another strand (and a refreshing change from the stereotype of risk averse boards) is the willingness of the trustees to be ready to try new things where this helps them achieve their goals. Voluntary Arts’ BAME Advisory Panel incorporated shared meals into their meetings to help build inclusivity, Raise the Roof has embedded the use of several off-the-shelf platforms to deliver services and increase participation at board level. There are stories of boards taking bold decisions, based on calculated risk to achieve more – for example, Preston Road Women’s Centre took advantage of the Empty Homes Partnership to develop a new programme providing safe accommodation for women escaping domestic abuse.
The entrants share an evident belief in the value of collective, and collaborative, action; a willingness to look outwards and work in partnership with other organisations. There is also a real seriousness: clarity about the change that the board wants to achieve and determination to draw on the right information and processes to achieve this. These are boards who are interested in the impact of their organisation’s work, who seek evidence of the difference their service makes and take corrective action where necessary. They are also boards who are willing to step up to the plate when the going gets tough. Witness the courage and commitment shown by the trustees of Kentish Town City Farm when faced with a seemingly hopeless situation.
These stories are important for three reasons. They show how there is more to being a trustee than scrutinising accounts. They also offer a counterpoint to the bad press that governance has had in the last couple of years – the plethora of stories about people doing it wrong and a focus on the ‘problems of governance’. This negative focus is problematic, and not only because it creates an unbalanced picture of trusteeship. It actually contributes to the problem: underlying much of the existing bad governance. From poor trustee recruitment to lack of board engagement, there is a lack of appreciation of, or even belief in, the difference that a good board can make to a charity. Sharing examples of good governance is one of the most powerful ways to help people to understand the value of good trusteeship. It makes it tangible. These stories demonstrate that good governance really does matter, that it really is possible, and that it is worth striving to achieve. So, please read and enjoy these stories, and share them widely.
The Charity Governance Awards is organised by the Clothworkers’ Company, in partnership with Reach Volunteering, NPC and Prospectus.
The winners were announced at a ceremony at the Clothworkers Hall in London on Wednesday 24 May 2017.
Reach is excited to announce a new partnership with Community Impact Bucks (CIB). Through this partnership skilled volunteering vacancies in Buckinghamshire will be streamed live on Community Impact Bucks’ dedicated volunteering website. This will make roles easier to find and more prominent.
As the accredited Volunteer Centre for Buckinghamshire, Community Impact Bucks promotes volunteering, and also helps and advises organisations to find the volunteers they need.
Posting vacancies for trustees and other skills-based volunteers will give local charities and non-profit organisations access to the thousands of skilled volunteers registered with Reach. CIB will also continue to promote Reach to prospective volunteers in Buckinghamshire.
Nick Phillips, CIB chief executive, says: ‘We are really excited about our new partnership with Reach. They have over 35 years of experience of making worthwhile connections between charities and experienced volunteers. I know this will be of real benefit to our local organisations.’
Janet Thorne, Reach chief executive officer, adds: ‘Our volunteers can make a real difference to a charity or non-profit group. They have several years of experience and a huge range of expertise. They are interested in using it to have a positive impact in communities and society. I’m thrilled that charities and organisations in Buckinghamshire will benefit from our new partnership.’
The trustee and skills-based vacancy streaming will be going live this spring. In the meantime, Buckinghamshire organisations are encouraged to make use of Reach and to post all appropriate vacancies on the Reach website.
We are really pleased to read the recommendation in the House of Lords Select Committee on Charities report, that charities should have a digital trustee. If charities are going to really engage with digital (and they really must!) they need leadership that understands the opportunities as well as the risks. Boards that do not understand how digital is changing the world that their charity operates in will never invest sufficiently in it. Having a trustee with expertise in this area can make a big difference.
Reach launched a programme last year to tackle this very issue. Supported by the Charity Commission, Zoe Amar and IBM, building boards for a digital age provides charities with the guidance, inspiration, and, most crucially, a pool of keen, prospective digital trustees. We have recruited some great candidates, but the uptake from charities has been slower. Research last year found that trustees ranked digital skills as the most needed on their boards. And yet this skill set remains one of the least demanded in our trustee recruitment service, despite our campaign. Perhaps boards find it all a bit daunting?
Elsewhere the report seeks to encourage a stream of more diverse and skilled trustees, recommending that ’employers should be encouraged to give greater recognition to trustee roles in recruitment and progression of their staff’. This would be great – but from where we sit, there is also a need to encourage charities themselves to invest a bit more time and effort in how they recruit trustees. Not many charities do it well. How you recruit is a key part of getting the right people, with the right motivations. The traditional tap on the shoulder approach is problematic not just because it limits diversity, but also because it fosters a ‘hobbyist’ culture.
The supply of willing trustees is only part of the problem.
The report also looks more broadly at how charities are taking to digital. This is the third report published in one week which focuses on this issue – see Lloyds Bank Foundation’s Facing Forward report on smaller charities, and Charity Digital Skills which hones in on the sector’s lack of digital skills. The Committee’s recommendation that the Big Lottery provides support to infrastructure bodies ‘to share knowledge and best practice on innovation and digitalisation’ is very welcome. The suggestion that the tech sector provides training and development opportunities is also right. However, I think that the report misses a trick by not seeing the connection with volunteering. There are many people with the right expertise willing to donate their skills for a social purpose, and they could play a big role helping smaller charities develop their capability and capacity. Volunteers could help breach the digital skills gap.
On the subject of volunteering, the report takes the enlightened and all-too-rare approach of recognising that the chief challenge is not in finding more volunteers, but in finding sustainable ways to support and manage them.
‘Investing in volunteers is a way of respecting their contribution as well as increasing their value to the charity’, says the report.
I couldn’t agree more! However, I think that the report’s exclusive emphasis on volunteer managers is wrong.
Many smaller charities do not have a dedicated volunteer manager because volunteers are embedded within different teams, and centralising the role may not be appropriate. The answer is more investment in volunteer recruitment and management, regardless of organisation structure.
Throughout, the report keeps the needs of small charities in its sights, and makes many welcome recommendations about governance, finance and commissioning. Infrastructure organisations are called on to do quite a bit more, although there is scant reference to the fact that many are dwindling or have closed altogether. Still, recognition of their role is something.
Reach will continue to run its programme, supporting charities to recruit trustees that can help embed digital at a strategic level. We will also encourage charities to recruit volunteers that can lend their expertise to implementation.
We are pleased that the House of Lords Charity Select Committee report has helped focus attention on digital, and particularly on digital trustees. We hope that more charities will now act on this recommendation.
Susana Morgado Gomez shares her experience of how being a trustee benefits both volunteer and charity.
‘Every year Mind In Camden provides a range of services to some 1,000 people with serious mental health needs and the staff who work with them, in partnership with national and local organisations, and the NHS.
‘I work in the banking sector and wanted to use my skills to make a contribution to a cause I believe in, as well as increase my Board exposure in a different sector. Mind In Camden were looking for a new trustee who, along with financial acumen, would bring strategic skills. They really wanted someone that shared the charity’s values, especially around the core principle of seeing mental health as a continuum on which we are all at different points, at different times in our lives. This means there is no ‘us’ (= well) and ‘them’ ( = ill).
‘In joining Mind In Camden as a trustee, I feel I am making a contribution to an organisation where people are very passionate about their work, but are working under very different circumstances and resources to my day job.
This is a highly complementary experience to the commercial and financial background that I have.
‘Being a trustee is a strategic role, it is not a day to day role, and it’s important to understand the difference. Trustees are ultimately accountable to the public and regulators – so it is important that the fit is right between the charity, the trustee and the chief executive.
‘From a practical perspective a trustee is expected to attend and actively contribute to effective Board meetings and decision making, in his or her area of core competence. A considerable part of the trustee role is about self-education in the sector and the charity to which he or she belongs. This is paramount to help you support and challenge the management team, as necessary. The support angle is very important to maintaining the motivation of the team, but it is equally important to challenge, helping them recognise any blind spots and mitigate risk, or not miss opportunities.
Additionally, a Trustee is a representative of the Charity and should not only be available to represent the charity as required, but also act as an Ambassador for the organisation.
‘In this particular experience I enjoy the different kind of environment and diverse background of the Board – the diversity contributes to you growing as an individual and a professional. In joining a team like the Board of a charity, you have to adapt to contribute – and use your transferable skills.
‘Being a trustee is an extremely personal experience that requires passion and energy. It is very rewarding and very energising.’
For more information on Mind services visit Mind In Camden.
To find a trustee or a trustee role, visit Reach Volunteering.
Parkinson’s UK Chair of Trustees, Mark Goodridge shares his thoughts on what digital means to his organisation and the opportunities it offers. This blog is published as part of the building boards for a digital age campaign.
Mark’s approach to leading Parkinson’s UK is open and exploratory, and this is reflected in his approach to digital. From his perspective, technology has always influenced how organisations are structured, so the challenge any organisation is to make sure that they are structured around today’s technology rather than yesterday’s. This offers Parkinson’s UK some exciting opportunities.
‘The way things are is often shaped by the legacy of older technology,’ says Mark. ‘This is why we should keep asking if they are fit for purpose. Like many large charities, Parkinson’s UK has many branches which provide a localised way to fundraise, to connect with individuals on the ground, and to offer peer support. To some extent, this structure is, in itself, a product of the technology available at the time it developed. But times change and so we have to look at that structure in today’s context.
‘People are diagnosed with Parkinson’s at an earlier age and these people often have jobs, families, commitments, that mean that face-to face group sessions may not be the best option for them. But it’s not just younger people who want digital services.
There is a tendency for people to assume that older people are not online – but they are.
‘Digital offers opportunities to do some things much better. Local groups will always play a valuable role, and we can further support these groups through digital channels by helping them to collaborate and share good resources. But there is a huge range of different kinds of people who need to access quite detailed information from us – from people with Parkinson’s to carers to Parkinson’s branch secretaries – and we need a very sophisticated information architecture to accommodate this effectively.
‘We have great content on our website – very well respected information – but Parkinson’s can be a complex illness which affects people in quite different ways.
Online services can offer greater personalisation – and this is crucial in helping people with difficult and complex needs which often cluster in quite individual ways.
‘Parkinson’s UK has great reach – we have over 35,000 members – but this still does not constitute the majority of people with Parkinson’s, and their carers. We want to support many more people, and digital offers us some intriguing ways that we might do that – connecting and mediating mutual support for example, or bringing together particular demographics such as young people with Parkinson’s.
We will never be able to do it all, all by ourselves, but we can play a role in enabling others to do more, and digital can help us do this.
This blog is part of the building boards for a digital age campaign.
Are you thinking about becoming a digital trustee? Or perhaps you have you just begun the process? Here, Reach digital trustee Dominic Tinley, offers some advice based on his own experience.
In my case, Reach wanted a trustee with digital expertise to support the board overseeing the major digital redevelopment of the Reach service and website. Others may need someone at Board level to ensure that existing digital operations are performing at optimum level or help develop an entire new strategy to achieve the charity’s objectives.
Is the charity seeking website experience or is it a long-term strategy for digital communications, customer service experience and business improvements? Do they have a clear idea of what they do want or need?
You’ll be taking on a long-term commitment at a board level. Unlike short-term projects you may have taken on as a digital expert, board responsibilities may consume more time than you can give. Boards traditionally meet four to six times a year, but additional time may be required on an ad hoc basis. Do inquire what might be expected.
Technology is developing quickly, but many small charities are a few steps behind, so you need the patience to explain technology to others and support them in building their knowledge. As a digital expert you may be used to working on well-funded projects, or in a team environment where there are other specialists to provide support. In a small charity, you will need to be more self sufficient, but this also provides a great opportunity to expand your knowledge. You’ll be learning about all other aspects of running a charity and build your skills in other areas – from fundraising to marketing, from accounting to volunteer recruitment.
Unlike short-term projects, this will be an ongoing relationship. It’s important everyone can get along. As a prospective digital trustee it’s important to meet the other board members, to meet the Chair and the Chief Executive Officer. Take your time over this. In joining the board as an observer you can get a feel for the organisation and others can get a feel for you.
Are the charity’s objectives those that your feel passionately about? Not only will you have helped the charity become more sustainable, but you will benefit, too, in knowing that you have contributed to a cause you care about.
Dominic Tinley is a digital expert and trustee of Reach Volunteering. Read more about the Reach story.