Charities are facing hard times: they must not passively wait for something good to turn up

There was a very grim prediction towards the end of last year when the Charities Aid Foundation warned that as many as one in six charities believe they may close in the coming year while nearly half of all charities said they will be forced to dip into their reserves. One in three fear that they will have to cut services.

BHT is amongst the one in three. Cuts to legal aid funding will result in a reduced service with a corresponding reduction in the number of cases of homelessness that we will be able to prevent.

An earlier survey by the Charities Aid Foundation and the National Council for Voluntary Organisations reported that charitable donations in the United Kingdom had dropped by one fifth over the last year. As a result, two in five charities fear they may have to close if the economic situation does not improve. Nearly three quarters believe that they will be unable to fulfil their goals while one in four have cut staff.

So what should charities be doing if they begin to run into trouble. A few years ago I was heavily criticised for taking action to control BHT’s costs when we changed our terms and conditions of employment and reduce salaries for three quarters of our staff. It was probably the most unpleasant thing I have ever done but it was absolutely necessary.  As a result, BHT is not in the precarious position that many of our partner organisations are in, although cash is tight and we are far from complacent about the challenges we are facing.

This uncertain future does not just affect small, local charities, but also large ones.  In November we saw a large national charity, People Can, sadly fold as a result of a black hole in their pension pot.  It did amazing work and had an inspirational Chief Executive in Maff Potts, and its sad demise is in no way a reflection of its work or of Maff himself.

Others who have been successful in securing contracts from the NHS and local government are being left with large residual liabilities as contracts are decommissioned rather than recommissioned.  Fortunately, taking on large pension liabilities is not something BHT has ever exposed itself to.

It is inevitable that some charities will fold when the economic climate is as difficult as it is today. Trustees have a particular responsibility at this time to ensure that, in the event of services being closed or the organisation folding, that the best possible planning is in place to protect and transfer services. I read an article over Christmas by the always interesting Craig Dearden-Phillips, the managing director of Stepping Out. In the very readable Third Sector magazine, he wrote that there are five possible responses by trustees. I paraphrase:

• deny that there is a problem;
• admit there is a problem and use your reserves in the hope that “something turns up”.
• accepted the charity is probably doomed so begin speaking to funders and potential merger partners
• be told that it is a bit late for that
• receive a bill that the charity cannot pay and being forced to put the organisation into receivership.

Craig says that it is “far better to decide calmly and rationally to wind up before the water starts slopping over the sides and everyone is in a flap. Remember that a messy end to a charity can be a lot more harmful than ordinary business liquidation. As trustees, part of your job is to be captains of the ship – to get your arms around the problem quickly and assess the best course of action so that the fate of your particular vessel can be sorted out in a sane and rational way, even if that course of action is to abandon ship”.

There is another reason why trustees need to remain on top of the situation: to protect their own position. Trustees must be proactive if they are to minimise the risk of personal liability. There are several basic things the trustees should do, particularly if there is likely to be cash flow problems:

• obtain clear and reliable financial information, ensuring that cash flow forecasts are realistic and regular;
• ensure that an overdraft facility is in place;
• establish whether there is scope to bring forward the timing of grant receipts;
• explore other sources of income; and
• contact the Charity Commission to see whether they will agree to restricted funds being used for general purposes.

At the first sign of problems, act. The corner is unlikely to be turned in the foreseeable future, calm waters aren’t ahead, and “something” is not likely to turn up.

Would you like to help BHT’s work by becoming a Board member?

BHT is recruiting four new members for our Board.  We are looking for members who are enthusiastic about our work in preventing homelessness and supporting vulnerable men and women.  We need at least one member who has a thorough knowledge of all aspects of finance, another with experience of business planning, and someone with a good understanding of legal advice services.

We are particularly keen to get applications from women, members of the BME and LGBT communities, and from those living outside Brighton and Hove.

We are also recruiting two representatives of current and former users of our services.

If you are interested in finding out more about the work of the BHT Board, we are holding an open evening for potential Board members.  It will take place at 5.30pm on Thursday, 27^th September.  For further information regarding the open evening, and for an application pack and further information, please email me.

The closing date for applications is 12 noon on Friday 5th October and interviews will take place during the day and in the evening of Monday 22^nd Ocober.

Taking a long term view to survive the cuts

(This is the text of an article published in the Business Argus on 1st February 2011)

I received an invitation the other day to attend a seminar entitled “How to Survive the Cuts”.  It was not a cheap seminar which made me think that one way to survive the cuts is to organise expensive courses on surviving the cuts.  It is a bit like the fad a few years ago when everyone bought the book “How to declutter you life”.  We bought two copies but it didn’t work.

I have been speaking to other organisations recently about how to survive the period of austerity that we are in.  Some are still taking the “let’s wait and see” approach, hoping that things will be alright.  Others are embracing difficult choices and are beginning to make people redundant.

I am reminded about the old joke about a traveller asking a local how to get to a big city.  The local replies, “You don’t want to be starting from here”.  To survive the challenges facing us, you really don’t want to be starting now.  I am fortunate to work with a Finance Director, Nick Childs, who in 2008 (before the banks went belly up) advised me that unless we took some action over the next year, we would have trouble in 2012.

As a result of Nick’s advice, BHT put in place a number of measures to control our costs (including, controversially, reducing salaries), to diversify and increase income streams by moving into new areas of work (geographically and in terms of services/products), and to spread risk.

It isn’t enough to baton down the hatches and wait for the storm to pass.  This storm is likely to linger.  At BHT we are not risk averse.  We are risk aware.  The managers and trustees of charities should always be looking at opportunities and risks three to five years ahead, and making plans that are deliverable.  It is no good putting £200,000 fundraising into your budget when you have never achieved more that £15,000 in a year.  Business Plans and corporate objectives must be meaningful.

And key to survival is cash.  More and more worthy, profitable and successful organisations will go to the wall in the next year because they will run out of cash.  So important is this, at BHT we have just undertaken a fundamental review of our cash situation.  Even though we have some comfort regarding our cash reserves, we felt that an external, objective, even harsh review would be wise. 

As a result, over the next few months we will be putting in place measures to strengthen our cash balances.  These measures are not needed this year, not next either.  They probably will not be needed in the three years after that.  At BHT we don’t merely want to survive, we want to thrive, and for that one has to take a long term view.

Reflecting on successes and the need to keep moving forward

Last night was the regular meeting of the BHT Board of Management.  A regular item that I report on is developments.  Last night it was particularly easy to report given that in the three months since I last reported, various initiatives that my colleagues and I have been working on for up to three years have come to fruition. We have:

• developed new services, for example, in the private rented sector, in work and learning, and in profitable social enterprise, thereby attracting income from new sources;
• secured new contracts and expanded our service base;
• strengthened user involvement at all levels of the organisation;
• established a strong base in Hastings having set up a training project, Finding Futures, delivered housing advice outreach, and acquired Hastings Community Housing Association; and
• established BHT Enterprises Ltd., and acquired PR company Blue Rocket and its sister company Green Rocket.

Very often we can’t see the wood for the trees because we are so involved in the day to day management of the organisation.  We may put out a press release or post something on our website, but before you know it, we have moved on to the next thing.

But having to report on a quarterly basis to the Board allows us to take stock of what has been achieved knowing that every service development will help us to tackle homelessness, create opportunities and promote change.

But we are not complacent.  We need to look, as always, at what is next.  What next for the organisation, for projects, for service users? Any achievement is a milestone, not a destination.

We must all prepare for a changing environment if we are to survive and flourish

The next three to five years will see considerable change in social policy and in the public finances.  Traditional models of service delivery will be challenged, and there is every possibility that the entitlement to welfare benefits and public services will no longer be the automatic right that we have come to expect.

I mentioned the prospect of a group or groups being excluded from benefit entitlement to some members of staff.  One came back to me and said it was inconceivable that any group would be denied entitlement to assistance from the state en bloc.  He was taken aback when I said this was already the case for failed asylum seekers who were not being deported because their countries of origin were too unsafe.

Like all other public and third sector organisations, BHT can expect to see traditional income levels fall and the value of public contracts reduce.  Actions taken during 2009/10 will assist BHT to manage these changes, although it will not make us immune from them.

There will also be opportunities, as services will be reconfigured and recommissioned to take into account evolving need and political priorities, and where a new relationship will develop between the state and those receiving services and support through the welfare benefit system.

BHT must now take further steps to prepare itself to meet the challenges that lie ahead.  Actions taken should include:

• preparing the policy and ethical ground to respond to new opportunities that might previously not have been considered;
• reviewing how we present the organisation in an ever changing world (not least technologically) so that it continues to be seen as an entity that people wish to work with;
• reviewing our capacity to respond to and deliver growth opportunities; and
• establishing management and governance structures that allows us to respond to growth opportunities.

These are some of the issues that I am exploring as I prepare papers for BHT’s Board away day in a couple of weeks.  There is nothing fundamentally flawed about BHT, but unless we prepare for a very different landscape that will emerge over the next three years, we, like any other organisation, might find over time that we have left it too late to adapt.

Board meetings open to all members of staff helps produce healthy debate

There is an interesting article in this week’s Third Sector magazine which debates whether members of senior management teams should attend meetings of Trustees / Boards of Management.

Valerie Morton writes: “Some actively encourage senior staff to attend. Others go to the opposite extreme and have only the chief executive in attendance, and even then not at every meeting. The middle ground is for senior staff to be invited to present specific agenda items”.

At BHT, other than when it is considering sensitive commercial or personnel matters, we have an ‘open’ approach to Board meetings.  Not only is there an expectation that senior managers attend, there is an open invitation to all members of staff to attend.  Copies of Board papers are made available to staff before the meeting through the BHT Unison group. Like the tide, attendance ebbs and flows.  Last year, when we undertook a contentious resetting of salaries and terms & conditions, attendance increased.

The benefit of wider attendance is to allow members of staff (and in the case of BHT, the recognised trade union) to be exposed to wider views, perhaps one could call it the ‘mood music’, that lies behind contentious decisions. Formal consultation meetings are important, but it is helpful if there is a wider audience who can understand how decision evolve, rather than merely hearing or reading about a stark decision. 

Where misunderstandings can occur is when a member of staff comes for just one meeting, hears an individual Board member express and opinion, and goes away believing that is representative of the Board or, even, that individual’s views. That is why regular attendance is a good thing.

Sometime new Board members express surprise when 15 or 20 members of staff arrive at the start of a meeting.  Most Board members realise that having ‘an audience’ will ensure that a more informed debate on issues can be held within the organisation.

Board and Trustee meetings are the forums for formal decisions to be made, but often it is where the ethos of an organisation is entrusted.  I know that Board members at BHT found the recommendations I brought to them personally very difficult to decide on.  Our Board members are unpaid, and generously give of their time because they believe in what BHT stands for and the services we deliver.

I don’t envy their role, and anyone who watches the BHT Board in action over a period of time will appreciate the integrity that they bring to their office.

Criminal convictions and Board membership

We have recently completed a PQQ.  What on earth is a PQQ?  A Pre Qualification Questionnaire proceeds bids for funding, usually to public bodies.  The idea is that those wishing to contract with government bodies are fit and proper organisations and, frankly, not a bunch of crooks!  A PQQ submission can run to many hundreds of pages of information, copies of policies and procedures, financial histories, and information about the management and governance of the organisation.

In this particular PQQ we were asked whether any of our Board members had any unspent criminal convictions.  As it happens, they are a bunch of fine, upstanding individuals and we were quite easily able to provide the assurances being sought.

But it got me thinking about service user involvement. It is true that some of our current and former service users may have committed offences in the past.  One of the loveliest person I have ever met had spent almost 20 years in prison having been found guilty of importation of Class A drugs (heroin, in this case).  For the last ten years or more he has been in recovery, alcohol and drug free, in full time employment, and ‘making amends’ for the harm he caused when using.

He is honest, hardworking, has great insight in social issues, and has a strong commitment to making society a better place.  I would be delighted if he was a member of the BHT Board of Management as he would bring specific expertise. I have no idea if his convictions are ‘spent’, but if not, and if he was a member of our Board, would BHT be seen as an unsafe organisation, one where questions would be asked because a PQQ revealed that a Board member has a criminal record?

It would probably be fine and we could explain the situation more than satisfactorily, but it could also lead to a situation where charities hold back from appointing current and former service users to their Boards, no matter how qualified and talented they might be.