CHARITY FINANCE DIRECTOR

By the word 2nd or 3rd tier charity, I mean the charities those primary purposes are to speak for, or support member charities. These are often also referred as networking or coordinating organisations and exist from local to national level.

A disturbing trend is being developed as a large number of these charities are focusing too much to sell their or their affiliate commercial company services to member charities.  I was speaking to the CEO of a medium size charity, and he reckons that at least 80% of  correspondence he is receiving is some kind of marketing communication to sell something. One such (very well known) national level membership charity has at least sent him 10 email advertising just for one training course.  Member charities are puzzled and one director commented that.

“We seem paid our membership fee to receive targeted marketing e/mail shot.”.

He questioned that perhaps these 2nd/3rd tiers charities lost their purpose of existence i.e. to serve and speak on behalf of members.  While speaking to marketing director of  a leading national level networking charity recently, I got the sense evangelism in their marketing approach.

“Well if that is the case, soon they are likely to lose members and the very reason for their existence”  said my CEO friend.

Charities/NGOs  are taking hard look into their organisational structure in this credit crunch climate. Interestingly, I find that while almost everyone is in some kind of notion to do something for the credit crunch, though they are not very clear how actually they are affected if at all. However, I think this is a good sign as the credit crunch is at least forcing charities to think differently. Yesterday, I had a chat with one charity CEO, whom I supported around 2 years ago while they were going through a restructuring/ redundancy process due to falling general reserve. At that point of time, the charity had 27 staffs, and it seems that all of them were busy with no spare times. Now after two years the staff level came down to 15 and interestingly the charity income has not reduced or even increased slightly. Relevant stakeholders including internal are happy with the services being received and the general reserve is increasing slowly. The reduction of 12 staffs equated roughly £ 350k savings.

I asked the  CEO “exactly what is missing here” – he replied that we certainly got rid of unnecessary meetings as we were used to conduct in every Monday. It does not seem that the mission or level of service delivery has been affected at all. Does it bring us to the point that a lot of time, there are self generating jobs within charities, and often it is just to make people busy? In general charity/NGO has a culture of meeting often without knowing what exactly that is for. This particular charity would have been bankrupt by now if this far sighted restructuring approach  were not initiated by the CEO two years ago. Who know how many  charities are there facing crisis but a hard look into the way they structure might keep them alive ?

In my experience an organisation always benefits from having a diversified trustee board. In the simplest terms, you get different views, a wider perspective while discussing issues at meetings and the benefit of a range of different personal experiences. A while ago I joined a board whose trustees were all about 70 years old, white, and from an affluent economic and professional background. It was a great learning experience for all of us – I was surprised how welcoming they were to me, and they frequently sought my views on subjects, as I could provide a different perspective.

However, there was one significant problem. The trustee meetings were held at 10am on a working day, and to attend them I had to take a day off work, which I couldn’t afford to do. I wanted to stay on the board and pointed out that the meeting time was a major barrier for many younger people who might be interested in becoming a trustee but were employed full time or self-employed. The trustees were keen that I should remain a trustee, and also to attract new people to the board so agreed to change the meeting time, which made a huge difference. By the time, I left the board after four years, they had two more “different” people. I believe that as a result the board is younger, more vibrant and that all the trustees are enjoying the work they do for the charity.

This was also published in the first of a series of short pieces in e-newsletter August 2008 published by Charity Trustees Network where I shared my experience as a trustee.

Have you ever raised the question ! Charities with limited resources often spend more % than their rich fellow charities to count the money (i.e accounting). In second day of my work with a charity CEO, I asked him how much he spends to count the money and precisely what proportion of their income? In this instance, two full time people were employed in accounting where organisational annual income was around £600k. Those work in London are not going to be surprised to hear that only payroll cost of employing these two staffs were around £ 60k. My follow up question with the CEO was “will you spend 10% of your income to count the money if you were running your own small business ?” Offcourse the answer was “no”, then why this level of spending has to be justified in charities. I often hear that this is because donor, as they are very demanding etc etc. This goes back to the essence of our existence – do we exists for staff or for the mission we believe. If the answer is mission, then there are plenty of options to minimise these costs – why don’t you start exploring now, its not rocket science.

You can visit Charity Accounting Services who provide affordable accounting services mainly to smaller charities/NGOs in Greater London area.

Atmosphere is tense in the organisation as it is going through a major change process resulting one fouth of its staff’s redundancy. Lot of them has worked for many years and found it hard to believe the position they are in now. While, making a cup of tea in the kitchen, I over heard a discussion between two staff member. One member was telling about the organisation s/he moving on and the other person immediately enquired whether their funding is secured ! I instantly commented ‘there is nothing called secured funding” – both looked at me and nooded head with agreement. This is the third organisation, I involved in that particular point of time facing similar situation, yet peole in each organisation are in the impression that they are in unique position and sometimes consider victim of donors lack of farsightednes. One the way home, while waiting for the tube, I spotted one of my prevsious aquintance. he looked a bit pale and compared to his usual cheerfulness. We were board member in a leading charity in London and he is the CEO of another charity. After, exchnage of usual greetings, I was informed that they are going through unique (in his view) situation i.e making a large portion of their staff redundant. 

This picture is increasingly common in third sector organisations. I started asking myself why, other then the usual response you get “the funding environment is highly competetive”. The fact is that, the arrival of new generation of organisations are challenging the established organisations with traditional way of working. Ovbiously, now donor have more choice to shop around. While third sector organisations do excellent work as perceived by public but I often struggle to get a simple one sentnece response about what they do while enquiring with any specific organisation. In my view if this not availbale then the organisation should definitely face funding crisis. Charities often spread their wing too far just to fetch all the available funds, though not necessarily become successful. This certainly, put them with impossibilty to meet expectations of donors as well as the benefiniaries (if this is the right word). Focuing on what you are good at and existed for is a solid foundation for funding. As someone from a donor agency once told me that if  your are not clear about your organisation then forget any funding, let alone so called secured funding.    

Many CEOs have indicated that they often find difficult to manage FD’s and feel embarrassed to ask financial question which might reveal CEO’s lack of grasps on accounting issues. CEO has also very few place to turn up for advice or confidential discussion. Being other sides of the I would like to share following

TIPS for CEOs.

1. Do not try to be an accountant but be financial manager.
2. Have you got the right people ? You should first work out whether your FD believe the charities mission and is s/he can participate in organisational overall direction without talking too much numbers. If the FD feel superior than rest of the people – you have got a problem here.
3. Agree on Regular Reports, its formats/contents and deadlines that you feel comfortable. If you do not understand them, then there is a problem about communication and others are unlikely to understand this. The Regular reports should not be more than 5 pages and must contain 1 page narrative highlighting major issues.
4. You must insist to get a cash-flow statement, which must be rolling and at least reflect six months ahead.
5. Once you agree on the above, and then you should insist to get the report within time – no excuses should be accepted.
6. Share these reports in teams meeting and that will ensure the further checks and balances.
7. Make the best use of your Treasurer and insists that s/he presents the finance reports at trustee meeting and always spent some time with the FD before the paper goes to trustees.
8. Remember that if you can bring money then you are no less qualified to count it.

SOME USUAL SYMPTOMS

• If you hear too much reference to systems – you are likely to be assure that books are not updated regularly.
• If find too many reference of auditors – your FD is not sharing everything with you.
• If you hear that they are often working longer hours – either they are inefficient or you have to address the resources issue immediately.

Disclaimer: These are based on my experiences and not a definite suggestions for you to follow without considering you circumstance.

Location: Outside the hotel meeting room in Jinja, Uganda where Nile originated.

Scene: I organised a workshop for an NGO’s finance managers from Africa wide offices. Between sessions, I sat outside the meeting-room while I noticed that cars (almost all of them are four wheel drive) are entering the hotel, dropping passengers and leaving. Occupants of these cars are well of people that is visible immediately from their appearance, cloth and over weight. While, checking with one of my colleagues, I was confirmed that all of them work in NGOs or some kind of development projects. While all these people are meeting inside air-conditioned room, the life outside the hotel are very different – bare footed people carrying their skinny bodies with a sign of long walk.

My Thinking: I continued chatting with my colleague and we all know that they are the people with the best paid jobs the country. I found that there is a direct correlation between country’s level of poverty and pay level in international NGOs. For example, someone working in international NGOs are likely to be paid ten times of their counterpart in local government. This is something like if a homelessness charity in London pays its outreach worker £ 150,000/year and this person drive a Bently car.

International NGOs operating in third world countries always argued to appoint people with unsustainable salary structure. This has just attracted an army of NGO workers those mainly come from English/French speaking privileged class in that country. While they live in that country but far away form the reality of the poor’s life. This immediately makes average person suspicious about NGOs objective. I have yet to find an international NGOs that their financing structure survived after they left.

I often encounter the discussion about how to maximise trustees endangerment. Obviously, there is no short supply of ideas and often based on the theory and more frighteningly from the people who have no experience of being a trustee him/herself. People often miss the point by highlighting the only facts that trustees are sacrificing their valuable time on voluntary basis. However, the fact is that when anyone signs up as a trustee they have a personal objective and to gain from trusteeship. It could be just to spend time, networking to gain further contact, enhance CV, to gain access to insight knowledge of particular situation and so forth. In my view, the trustee will be only effective when organisation finds a way to meet their inner personal objective. There is nothing one way – while charity gain, trustees must get something and that does not have to be financial. As long you can strike the balance – I can gurantee from my experience that they will be engaged.

Scenario:In one of my interim assignments, I attended the trustee meeting along with the outgoing Finance Director. The Finance Director has a very uncomfortable relationship with the Treasurer and is a bit frightened of the prospect that the Treasurer is going to pick an issue to embarrass him in the meeting. Actually the meeting went well without any drama and my outgoing friend was relieved.

My Observations;

• The Finance Report given to trustees were around 25 pages which include only one page narrative.
• Treasurer did not have any advance knowledge what is being presented.
• It was not easy to reconcile the top page with the supporting pages.
• Trustees were not clear about how exactly various calculations were made and which jargon mean what.
• The discussion was quick and some trustees were keen to finish the item ASAP.

My further investigation discovered that the 25 pages are the accumulation of various points raised by trustees in meeting in the past and Finance Director tried his best to accommodate all of these views.

Steps I took: I start with the following steps to improve the situation;

1. Spent time with the Treasurer to find her personal preference regarding the structure and content of the finance report for the trustee meeting.
2. I produced a draft report based on her idea which she took to the trustees for their endorsement. While individual trustees have special preferences but they settled with a new report and they felt the ownership. It was also agreed that the Treasurer would present the report while Finance Director will be assisting and supply relevant explanation in the meeting.
3. The report was reduced to 5 pages starting with a brief highlights of issues including graphs in 1st page. In additional to budget variance reports, it also included a section highlighting major risks anticipated by the organisation in coming days.
4. Produced a brief explanation of internal jargons used in the report.
5. I agreed and scheduled time in advance with the Treasurer to go through the report before it presented to trustees.

Out Come: Treasurer felt engaged, trustees did not have to navigate through mountains of information and could grasp the broad picture of the organisation. My relationship with the Treasurer was amicable, and we still exchange emails.