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MP Chris Chope’s bill for volunteers shows how difficult reforms of CRB checks will be

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Conservative MP Chris Chope has tabled a
private member’s bill that he thinks will solve the problem of potential
volunteers being deterred by the prospect of waiting for a criminal records
check.

The answer, he says, is simple: we should
ask volunteers to sign a “fit and proper person certificate” saying they have
no criminal record and no convictions. If they do this, he says, charities
should trust them – even if this means leaving them alone with children and
vulnerable people.

The simplicity of Chope’s system is
undoubtedly appealing. As he said in Parliament last week: “A person could
provide one [certificate] this week to volunteer for reading in London and
another next week to work with the Royal National Lifeboat Institution.”

This simplicity has made it popular with
backbench Tories. Chope’s colleague Bob Stewart said during the debate on the
bill: “I want to take my children from school to sports matches, but I am told
by the school that I have to have a CRB check to take two or three people in my
car. I am hoping that this sort of red tape can be done away with.”

Civil society minister Nick Hurd, however,
was quick to point out that the bill made no provisions for checking that
volunteers were telling the truth on their certificates. The government opposed
the bill, he said, because “we think a basic level of protection and
independent verification of claims is necessary.”

But Chope’s idea, although unlikely to make
much progress, gives us an insight into the ways in which some MPs have
misunderstood the sector. 

Chope said in Parliament that he got his
idea from the fit and proper persons test used by HMRC to prevent charity
fraud. He said the government was trusting individuals’ statements that they
were fit to run charities, then simply leaving them to get on with it. He seems
to have forgotten about the role of the Charity Commission, with its statutory
remit to monitor charities’ governance and investigate wrongdoing.

The debate about the bill shows what a
tough time Hurd and other ministers will have when it comes to reforming
criminal records checks, a process they are in the middle of at the moment.
Plenty of MPs and volunteers will think a simple system like Chope’s could, and
should, work. But finding a set-up that also provides reasonable protection for
the vulnerable will be almost impossible.

Valuing unsold charity shop stock won’t work

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“Strategies are okayed in boardrooms that even a child would
say are bound to fail. The problem is there is never a child in the boardroom”

Victor Palmieri, American corporate turnaround specialist

 

A while ago an article on this site
by Ray Jones of the Charity Commission observed that sometimes, in the pursuit
of purity and consistency, accountants lose track of good sense.

It seems to have happened again, in some draft proposals put
forward recently by the Accounting Standards Board, which when finalised will
govern charity accounting for some years to come.

Yesterday, at the Charity Finance Directors’ Group northern
conference, Janet Slade of the Charity Commission told the audience that one of
the proposals in the draft Financial Reporting Standard for Public Benefit
Entities is that charities should recognise donated goods as income as soon as
those goods come through the door.*

This is admirably consistent with principles found elsewhere
in the ASB’s financial reporting standards, and it probably makes sense to a
purist.

But even a child could tell you it’s bound to fail.

It will fail because in practice it would require teams of
little old ladies in charity shops to value donated stock as soon as it comes
through the door. They would have to total the value of that stock. This figure
would have to make its way up through the organisation to the finance
department. This would have to be repeated hundreds of times. Loads of
man-hours and expense would be involved to produce something which would
basically amount to little more than a guess.

And it would all be more or less a waste of time, because
there is a perfectly good system at the moment, which no one seems unhappy
with.

The ASB has a good record of reacting well to feedback, and
it certainly seems likely to get plenty from charities (the PBE standard is
being consulted on until July 31). So it’s likely we’ll end up with the status
quo. But a lot of effort will have been expended in getting back to it.

 

* The PBE standard is a high-level reporting standard
produced by the ASB, which will govern charity accounting at a higher level
than the statement of recommended practice, or Sorp. It is being produced as
part of a move to converge UK accounting standards with international financial
reporting standards, which has been going on for some years.

There’s a long road ahead for social impact bonds

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Will the social impact bond ever attract commercial capital?
At least one professional investor believes it eventually will – although he
doesn’t think it will be quick or easy.

The social impact bond was introduced last year as a means
of funding early interventions on reducing
reoffending, drug use, the number of children in care.

The model for the social impact bond is that  investors gives
charities money to carry out a long-term payment-by-contract. In exchange, they
get any profits the contract generates.

In theory, the benefits go to both sides. If the contract
works, the investor can make a large return on his money. In the meantime, the
charity has a guaranteed income and the freedom to work on its project.

However a key question yet to be answered is whether it will really prove attractive to investors.

A pilot project is being carried out in Peterborough, where
charities are working with ex-offenders. The project has attracted £5m from
philanthropists and foundations. If it works, they will receive up to £8m over
six years.

While this looks like a good return, it’s not attracted anyone
primarily interested in profit. Instead it has attracted philanthropic money.
This is all well and good, but if the bond is to be the game-changer many in the sector hope it will be, it will need to attract commercial capital. So what’s needed before non-philanthropic money gets involved?

I recently had a conversation with a charity investment
manager, Andrew Hunter-Johnston of BlackRock, who says it will need five things
before he considered investing: scale, liquidity, a track record for similar
projects, oversight, and the right return on investment.

Scale means that he would like to see at least £100m
involved. Less cash, Hunter-Johnston says, would mean the work involved wasn’t worthwhile for his
company.

“Even then, we’d do it as a joint venture,” he says. “We’d
work with someone like a big foundation who understood the model.”

Liquidity means a secondary market, so that investors can
withdraw their money if they need to. If a project lasts five or six years,
it’s a much more attractive investment if you can pull your cash out halfway
through.

Then there’s the question of a track record. Unsurprisingly,
Hunter-Johnston says, investment professionals will watch this to see if it
works. Only when it’s clear that it makes money will they get involved.

Hand in hand with that goes governance.

“If I put money in, I understand what’s in it for me,” he
says. “But what’s to stop the charities involved just saying ‘sorry’ and doing
something else? What’s to stop their best people leaving?”

Hunter-Johnston says he would like some control before making
an investment. For example, he says, if a special purpose vehicle is set up to
manage the project and employ charities as needed (as was the case in
Peterborough) then investors should be able to have a seat on its board.

Once all of that is in place, though, the social impact bond
must still pay an attractive commercial return.

“The rate of return on the Peterborough project is better
than bonds or equities,” Hunter-Johnston says. “But the risk is higher. This
looks more like a private equity investment, which would typically pay about 20
per cent a year.

“These will only be an attractive investment at that price
if the failure rate is shown to be low enough.”

For a long time to come, he says, charitable money will be
the main investor, followed by private money invested by individuals, perhaps
partly motivated by a social return.

Only after several years of solid, reliable returns will
mainstream investors such as pension funds and insurance companies begin to dip
a toe into the water.

Battling on with the big society

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People who do not read Third
Sector, or are unlikely to read the full contents of
the Giving White Paper, will be under the impression that yesterday David
Cameron’s slightly ambiguous big society concept was launched yet again.

To name but a few, the Guardian published an article just
before the launch event of the white paper titled ‘David Cameron to relaunch
troubled ‘big society’ project’, while the New Statesman introduced the day
with the story ‘Fourth time lucky for David Cameron’s ‘big society’?’

Yet when I spoke briefly to Nick Hurd, the minister for
civil society, after his speech about the paper, he denied it was another
launch of the policy. He said he saw it as a continuation of something he had
already started to see taking shape.

His anecdotal evidence for this was the fact that, at
numerous events he had attended over recent months, he had met many people
starting up projects that championed the big society concept and would help to
build it.

I can see why this may well be the case. At just one event
yesterday I must have met at least five or six people running new social
enterprises doing really interesting, innovative things.

But for all the great work social enterprises, various
community groups and charities are doing and are striving to do, I worry about
how much progress can really be achieved and sustained unless the wider public
get behind the idea.

Right now my general impression is that most of them still
either do not understand this slightly wishy-washy concept or they already feel
under enough strain over time and money without being preached at by the
government to give more of it away.

It’s a shame, because whether its existence is for political
point-scoring or not, the big society concept is overall a good one. We should
all want to help each other as much as we can.

But I’m beginning to worry that the more giving and
volunteering is associated with a poltical agenda that involves both
championing the third sector and making drastic and often fatal cuts to it, the
more intrinsic, genuine motivations for doing good will begin to ebb away.

 

If charities are so bad, are they really worth saving?

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Kevin Carey,
chair of the RNIB, didn’t hold back yesterday at the CFDG conference. He gave
the sector both barrels, in fact. At close range.

He told
audiences that the sector was cripplingly undercapitalised, focused on helping too
few people, and too often prioritised preserving the organisation instead of
helping the beneficiaries. The sector, he said, thought of itself as a fleet of
speedboats, nimble and able to change direction quickly, but actually, it had
the ponderousness of an oil tanker.

At that last
point, the bloke sitting next to me, FD of a medium-sized charity, shrugged and
nodded. “Getting anything changed in my charity takes forever,” he said. “The
trustees are disconnected from the senior management, and the management mostly
want things to be the way they’ve always been.

“No one wants to
change direction, even if it would suit the beneficiaries.”

Another FD, later
in the day, said that he’d tried getting his charity to assess what its most
effective interventions were, and had been told this was a waste of money.

“Imagine that,”
he muttered sarcastically, “wasting all that cash finding out whether what
you’re doing works.”

It’s interesting
that when Martin Brookes criticised the sector’s fundraising last week, he was
mobbed with indignant protesters. But Carey’s broadside on strategic direction met
with broad agreement from an audience comprised largely of finance directors.

Now this may to
a certain extent be down to the natural character of the two constituencies.
Fundraisers are by nature optimists, FDs not so much. But in any case, they
certainly seemed clear that the sector could do much to improve.

So if charities
are so bad, are they worth saving? Carey himself seems to think so. Possibly
this is because, while the charity sector is not as good at it thinks at
responding to social need, the public and private sectors are both far worse.

It’s time for the sector to get creative about working with companies

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Without wanting to sound like a complete cynic, my first
reaction when I was told about Vodafone and JustGiving’s new free text donation
service for charities was to wonder what the catch was.

The service is being offered to every single registered
charity in the UK – according to the Charity Commission’s website this morning,
this is 162,028 organisations and counting. And from June the service will be
offered to all individual fundraisers as well – suddenly millions will have
access to it.

And the main reason that until now hundreds of thousands of
small charities have had to avoid using SMS for fundraising is because of the
high costs involved in doing so.

I have been quite reliably informed that Guy Laurence, chief
executive of Vodafone, has had a lot of personal involvement in pushing this
through because he genuinely wants to use the expertise that Vodafone has in
this area of technology to help raise more money for good causes.

That may be all well and good, but so far Vodafone has
invested £5m into this, and I can only begin to imagine just how much this
project will have cost the company if it is still going a few years down the
line.

I find it highly doubtful that, even if this was approached
in the best interests of charities by Laurence, all of the company’s
shareholders will see things in quite such an altruistic light.

They must be convinced, or the powers that be at Vodafone
must know that they can be convinced, that there will be a good return on investment
here.

To me this signals just how valuable this kind of publicity
and branding is to these companies. They are happy to spend millions  on it.

This is a huge opportunity for charities
and I think it shows that it’s time for the sector to get very creative and
ambitious when coming up with ideas for how companies can help them.

I’m sure that if a couple of years ago someone had come up with the
bright idea that one of the major mobile networks should fund the development
and running of a totally free text donation service for every charity and
fundraiser in the whole of the UK, they would have been laughed out the door.

But clearly it is possible for such a seemingly impossible
idea to become a reality.

Most charities do not use their investment capital as a tool to do good

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Recently, there have been several instances of charitable
investors using their large portfolios as weapons to promote their beliefs.

This week, a group of major investors including CCLA, the
Joseph Rowntree Charitable Trust, Lankelly Chase and the Sigrid Rausing Trust
have written to all of the FTSE 100 asking them to pay the Living Wage
to all their staff,
and promised to put pressure on them at their AGMs if they did not comply.

Meanwhile the Church Investors’ Group took part in a
campaign to persuade BP to change its ways, and adopt a more sustainable
approach to the environment – a campaign centred around investor pressure at
the oil giant’s AGM.

This is part of a growing trend, but these organisations are
still the exceptions, rather than the rule. Most charities do not use their
investment capital as a tool to do good, and many do not even screen out
investments which may do harm to their cause.

The last time the Charity Finance Directors’ Group asked its
members, it found that half didn’t have an ethical investment policy of any
sort,
and those that did mostly screened out investments incompatible with their
cause area, a process known as “negative screening”.

Recent conversations with investment managers suggest that
relatively few charities go further than this, and actively choose companies
which have socially beneficial products or good environmental, human rights and
labour relations records.

The lack of ethical policies in the sector seems to throw up
two main problems.

One is reputational risk. Rightly or wrongly, people expect
higher ethical standards of charities than they do of themselves, and charities
which have no ethical investment policy are failing to live up to that
expectation.

The second is one of morality. Charities can obviously
choose to invest in any company they wish. But it seems odd that an
organisation which dedicates itself to public benefit in one field would invest
in a way which actually sets back other branches of the sector. If a charity
has no ethical investment policy, then it will almost inevitably have money
invested in companies with questionable environmental, human rights and labour
policies, as well as arms manufacturers, tobacco sellers and strip miners.

Some of the reasons why more charities don’t have ethical
investment policies can be found in a recent report by ethical investment group
FairPensions,
which found that many charities are fearful of ethical investment, or lack
knowledge about it. Trustees feel that they aren’t able to exercise moral
judgements because they have a fiduciary duty to maximise returns at all costs.

The actuality is otherwise. It’s perfectly permissible for a
charity to take a stand morally, if it feels its reputation would be harmed
otherwise. Both the law and Charity Commission guidance make this clear
(although many investment professionals feed the commission guidance does not
go far enough) and there’s also over a decade of evidence which suggests that ethical
investment is not less profitable than regular investment. Many investment
professionals now believe that because it focuses on selecting the best-run
companies, it is actually more profitable.

Despite all this, many trustees are working part-time,
without a lot of hours to devote to relatively complex new ideas, and uncertain
of what they are allowed to do under the law. I suspect many have simply filed
the whole idea of ethical investment in a box entitled “too difficult”.

It is hard to blame them, but it is also hard to believe
that the sector does not suffer as a result.

Being a ‘royal’ charity might be old-fashioned but is a good way of keeping hold of public trust

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There is a fairly obvious link between the
three charities that came top in a survey of charities’ reputations that has
been published this week: the Royal National Lifeboat Institution, Royal
British Legion and Royal National Institute for the Blind.

It’s not the first time charities with the
word “royal” in their title have been shown to be held in high esteem by
members of the public. The Charity Brand Index survey, produced by Third Sector
and PR Week, shows all three charities scored high on “trust and support” in a
poll of more than 3,000 people.

So it might seem surprising that some
charities blessed with the magic word are trying to distance themselves from
it. The RNID is in the middle of a rebranding that will see it renamed Action
on Hearing Loss later this year. Its chief executive, Jackie Ballard, said the
new name “had more relevance and more reach”.

Others, however, think the word has some
value. The Royal Free Charity, which raises funds for the Royal Free Hampstead
NHS Trust, announced last month that it would rebrand with a new logo in a bid
to increase its public profile, but would not change its name.

Being a “royal” charity might seem
old-fashioned, but it seems a good way of keeping hold of the public’s trust, a
highly-valued commodity when it comes to fundraising and campaigning. It’s too
soon to know, but the RNID might come to regret dropping its well-known, and
well-trusted, title.

Smoke and mirrors on the new Work Programme

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Employment minister Chris Grayling issued a
triumphant-sounding statement to mark the announcement of the new Work
Programme providers.

It read: “For the first time, those
charities and voluntary sector organisations across the country with the
know-how to help people with real difficulties in their communities get back to
work are being given the chance to do just that.”

The press release, issued by the Department
for Work and Pensions, said two charities had been made prime contractors to
deliver the government’s flagship welfare-to-work programme and 289 were
sub-contractors.

The DWP’s picture is not, however, entirely
accurate. One charity, the Careers Development Group, is a prime contractor.
The other prime contractor that it labels a voluntary sector organisation is
Rehab JobFit, a partnership between the Dublin-based charity Rehab Group and
the private sector firm Interserve. The charity itself will not deliver any
services under the contract.

Such smoke and mirrors on the
detail is a minor concern compared to the worries of many in the sector when it
comes to the Work Programme. A lack of access to capital and the vagaries of
the payment-by-results system are much bigger reasons to worry.

But it will strike many in the sector, not
least those charities that failed to win prime contractor status, as an example
of the government over-claiming some of its achievements on the big society front.

Cold climate and a government charm offensive at Voice11

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At the start of
Voice11, the biggest event in the social enterprise calendar, the chief
executive of the organisers, the Social Enterprise Coalition stood up and said this
was completely different from any event that had gone before.

He was right, too. It
was the first time the event had been held in London, the first time (at least
for a while) that it’s been held on a single day, and the first time it had
been held, to all intents and purposes, outside.

OK, it wasn’t
actually outside, it was in the O2 Arena. But since the O2 is only a big tent,
it felt like it was outside. Especially by the main stage, which was about 50
yards from the open air.

We had been warned. A
note on page 20 of the exhibitor’s manual said “Please be aware the inside
temperature at the O2 is similar to outside temperatures so please wear
appropriate clothing”.

Judging from the
outfits, I think some readers might not have got that far, because plenty of
people were wearing shirts and ties, skirts and tights. Few were wearing all of them at the same time, though. If they had, it might just have been
enough to keep them warm.

Matthew Taylor, chief
executive of the RSA, described it as “the worst venue I’ve ever chaired an
event in” during a presentation from the main stage. But most of well over a thousand delegates were more positive. They are, after all social
entrepreneurs, and steeped in the power of positive thinking.

At least the weather
was, as one put it without irony, “a good icebreaker”. And it would be a shame
to concentrate solely on the conference centre, because the conference itself
threw up plenty to think about.

One thing was the
personal video message from David Cameron, who said that social enterprise was
a tool to solve our “most stubborn social and environmental problems”.

Another was the sheer
number of politicians keen to offer their two cents. Health secretary Andrew
Lansley spoke at the opening plenary, and business secretary Vince Cable gave the
closing address. Charities minister Nick Hurd chaired a session and also turned
up at a drinks party the night before. Meanwhile opposition leader Ed Miliband
promised to show up at the post-event awards, while Hazel Blears, the most
senior opposition figure to hold a third sector brief, was in attendance for
most of the day.

On the main stages,
the relationship with government ran right through the day. Social
entrepreneurs have been bombarded with a charm offensive by the new regime, and
are attempting to parse it. They are yet to decide what to make of the new
mega-social enterprises spun out from the state, of the new community rights to
buy, build and challenge, of billions promised in new public sector procurement
and of new finance through the Big Society Bank.

Together, these offer
potential ways to solve many of the issues that dominated last year’s
conference. A sceptical sector is now trying to work out if these solutions
really fit its needs.

At least one thorny
problem seems to have largely been laid to rest: the debate over the definition
of a social enterprise. While there is still some disagreement over asset locks
and legal forms, the Social Enterprise Mark seems to have set a standard which
most are happy enough to accept, even if they have not signed up to it
themselves.

This is a welcome
relief. But it’s just one answer in a sector that still contains a lot of questions.