CHARITY ISSUES – RECENT DEVELOPMENTS (SEPTEMBER 2009)
OPERATION OF CHARITY SHOPS

Many charities operate their own shops as a means of raising significant funds.  Such shops face a range of issues, which are highlighted in a recent survey, reported as a supplement by Charity Finance.  In summary, the profile of an ‘average’ shop would be as follows:

Floor space                                      500-750 sq feet
Rent pa                                             between £14-£16,000
Number of paid staff                         2 (including part time)
Staff costs as a % of turnover          30%
Number of volunteers per shop        14 Non –hospice
                                                         21 Hospice
Weekly hours per volunteer             6 Non-hospice
                                                         4 Hospice
Percentage of donated goods          80-85%

The survey highlighted a number of key points:

1. Profitability has increased

There has been an overall increase in profitability which is the result of a number of factors, the most important of which is improved cost control.

2. Paid Staff

For an individual charity, the quality of its paid staff is paramount in any bid to professionalising its retail function and inspiring its volunteers.  The survey suggested that most charities believe that the quality of their paid staff is increasing.

3. Volunteers

Due to the recession, there are more volunteers available, whilst their quality appears to be higher.  Hospice charity shops appear to attract more volunteers than non hospice shops, although they work fewer hours, possibly the consequence of there being more volunteers.

4. Stock

Obtaining good quality stock constitutes the biggest problem currently facing charity shops.  There are a number of issues; a general shortage (more people ‘making do’); problems with quality; competition from commercial collectors (both scrupulous and unscrupulous).
Against this, charities are making more from the sale of ‘Rag’ to commercial concerns, although the increasing value of rag has resulted in greater competition from commercial collectors.

5. There has been a marked increase in the number of charities claiming gift aid on the sale of donated goods

Charities are increasingly claiming gift aid on the sale of donated goods.  Although this requires technological investment in order to record details of donors and transactions, the investment appears to pay for itself in a number of months.  It also has the benefit of formalising and strengthening the relationship between the charity shop and the donor, via appreciations and the acknowledgement of donors.

IT ISSUES 

There appear to be two separate major issues for charities:-
• Accounting Software
• Charity-specific functionality, in particular relating to accounts production

Of the charities using computerised accounts software, the vast majority use versions of SAGE and Quickbooks.  In both cases, whilst the systems deal with the basics well, there are issues when it comes to more specialised accounting functions such as fund accounting, and partial exemption VAT calculations.  It would appear to be a question of functionality versus cost.  The more one invests in an accounting system, the greater the functionality of the system is likely to be.  For most small charities a basic system is sufficient and reports can be derived by exporting data to Excel and manipulating it there.

However, the key area where a basic system probably is not sufficient is the area of accounts production.  Surveys show that many charities are frustrated by what they see as a lack of software that will easily produce statutory accounts (both for unincorporated and incorporated charities).  However, part of the problem, to quote John Tate (founder of Citra and special adviser on IT to the Charity Finance Discussion Group) is, Charities expect simple products to deal with complex needs.  A lot of smaller charities just don’t have the accounting expertise to really do the job as it is very complicated and, to be fair to the vendors, if they build in extra functionality it costs a lot of money.  No one has come up with a solution to this problem, and I don’t know if anyone can.

Accountancy firms in practice also struggle with such formatting (especially with the enhanced requirement for group accounts) and resort to WORD documents, which bring the problems of keeping templates up to date and running disclosure checklists.

GOVERNANCE ISSUES

Many smaller charities are just happy that somebody has consented to be a trustee, and therefore do not place too high an importance on governance, thus it does not become an issue unless circumstances dictate – e.g. the Chairman retires.  However, there are specific areas which charities should keep under review;

Trustee training - Are the trustees given adequate induction and kept informed of developments in the charity sector?

Financial Reporting - Are the finance reports sufficient to allow the Board to manage the charity effectively and proactively?

Trustee succession – Do trustees have any idea who will, one day succeed them?

INDEPENDENT SAFEGUARDING AUTHORITY

New rules have been introduced requiring all those who, as a result of their work or social activities, have regular contact with children or vulnerable adults to be registered with the Independent Safeguarding Authority.  Activities that will require adults to be registered include:-

• Workers in education involving contact with children/vulnerable adults
• Fostering and childcare
• Any activity that involves people in certain areas of activity - school governors, trustees of certain charities, directors of social services
• Workers in the Health industry

Regular contact is deemed to be where the activity is frequent (once a month) or intensive (takes place on three or more days in a 30 day period).  This therefore affects those parents who help out with their children’s activities e.g. driving for sports and social clubs, hosting foreign exchange students, etc. 

Failure to register could result in fines of up to £5,000.