We have all experienced huge upheaval and disruption over the last two years. What many of us hoped would be a temporary change to our lives has proved to be ongoing. With this in mind, our Charities and Not-for-Profit Team highlight below some key areas of focus for charitable organisations as we move through 2022.
Taking a fresh look
Sally Appleton, partner, Harrogate
The start of the year can be a good time to take a step back and re-evaluate key strategic priorities, challenges and goals. Trustee recruitment and succession planning are high on the agenda for many of our clients. Looking afresh at board composition and performing a skills audit could help to clarify necessary requirements. Does the board reflect the organisation’s values today? Is it able to meet the organisation’s current and future needs? Re-assessing what is required will help you to build the right team when recruiting staff and to allocate resources effectively when setting next year’s budget. Having a clear, shared vision of the organisation’s priorities and goals is particularly helpful where difficult decisions need to be made.
Great attrition or great attraction?
Cara Turtington, partner and Head of Not-for-Profit, London
An article published by McKinsey in September 2021 commented that a record number of employees either quitting or thinking about doing so. The pandemic has made most people re-evaluate their lives and priorities in some way. If this is something your organisation is already seeing or sensing, it’s worth taking the time to investigate the true causes of attrition and make sure that your organisation is offering a package that meets people’s true needs. Understanding what employees actually want has never been more important. Empathy and compassion have always been values that the charity sector identifies with and so perhaps, by better understanding employees and their needs, there will be an opportunity to capitalise on the pool of talent looking for a change.
Building trust and attracting support
Eunice McAdam, partner, Inverness
The Office of the Scottish Charity Regulator (OSCR) recently reported that trust was the second most important factor for the public in deciding whether to support a charity. With this in mind, now is a good time to think about how your organisation’s annual report can help to build trustworthiness. Being transparent about costs is helpful, but it’s not enough. Providing a compelling story can be much more impactful. Focus reporting on demonstrating the difference your organisation makes to its beneficiaries, use case studies and quotes if that is appropriate, and focus on bringing out why the organisation does what it does. Link these back to strategic objectives and be honest in what has not been achieved and why.
Sustainability is the key watch word
Kenneth McDowell, partner, Edinburgh
It is clear from COP26 that climate change affects us all; internationally, nationally, locally and at an organisational and individual level. Sustainability is the key watch word for private, public and third sectors. Key considerations for charities include:
- Risk assessment and governance.
- Just transition and charitable objects.
- Supply chain and funder expectations.
Decision making will be under more scrutiny with future decisions, whether strategic, procurement or organisational, requiring consideration through this climate lens. Charities need to be open and accountable and demonstrate their values in all stakeholder communications, including the annual report. Trustees will also need to agree their charity’s role and objectives in relation to the Just Transition Declaration. Collaboration will be required to achieve an environmentally sustainable economy that is well managed and contributes to the goals of decent work for all, social inclusion and the eradication of poverty. No one should be left behind in the pursuit of net zero.
Here we go again… the ongoing challenge of cancelled events
David Humphrys, director, London and Claire Wills, partner, London
Many of our clients had to cancel events last year, and this continues as we progress in early 2022. We have seen that organisations need to be flexible, be ready and able to communicate on a large scale with all stakeholders, and be prepared to rip up forecasts (again!). Converting ticket refunds to donations is one way to mitigate the impact of cancelled events. Provided the rules are followed, HM Revenue & Customs (HMRC) will treat donations made from a waiver of a right to either a refund or loan repayment as eligible for gift aid. For charities with trading subsidiaries, think about making the corporate gift aid payment as soon as there is a definite number (and still sufficient reserves), don’t wait until the full nine months after the year-end, because it’s impossible to know what might happen.
Challenge your VAT position
The burden of irrecoverable VAT on the charity sector is estimated to be in excess of £2 billion per annum. In 2022, with inflation rising, this figure will only increase. By challenging your organisation’s current VAT position, you could uncover opportunities such as, for example, employing an alternative VAT recovery method, making better use of/maximising VAT reliefs and minimising output tax by reviewing the way that your funding arrangements are structured.
Please do get in touch with one of our experts if you would like more information or advice on any of the issues raised here.