We must not see a rush to charging charities for regulation – House of Lords report

CFG’s Andrew O’Brien reflects on the House of Lords report on the charity sector.

There has been a lot of coverage in the sector media of the voluminous House of Lords report on the future of the charity sector. It is well worth a read, and has a number of positive recommendations based on proposals put forward by CFG particularly encouraging grant making, encouraging commissioners to fund on the basis of full-cost recovery and recognising the potential of tax reform to support the charity sector.


Welcome to CFG’s Small Charities Programme

Everyone benefits from a strong, resilient and sustainable small charity sector, and small charities often don’t know what they don’t know. So let’s get this message out as widely as possible says CFG’s Nicholas Faraday.


In its 30-year history, Charity Finance Group has built up great niche expertise and experience to offer relevant and impactful support in good financial management to large and medium charities across England and Wales. At CFG, we’re passionate about good financial practice that delivers impact across the charity, not just for those who work in finance.

CFG knows that a successful charity is one where everyone who has an invested interest in it knows something about its finances and is aware of basic principles in good financial management.

Up until now CFG has mainly worked with larger charities but is now widening its reach, thanks to a grant from Esmée Fairbairn Foundation to reach out to small charities (those with an annual income of £1m or less) in England and Wales, community accountants and infrastructure organisations.

The newly-launched Small Charities Programme offers robust foundation-level financial management training for small charities to strengthen their existing practice. It is widely recognised that when a charity has relevant and effective financial management in place, the activity and impact across the whole organisation can flourish.

The focal point of the Small Charities Programme is a dedicated website which provides a portal for small charities to browse and book training sessions and access the free-to-download resources and tools: http://smallcharityfinance.org.uk/

Each training session costs just £20. The programme will run from January – July 2017 in London, Birmingham, Bournemouth, Exeter, Yeovil, Frome, Bridgewater and across Wales. All money raised will fund a travel bursary scheme to ensure that all charities, however small, have access to the training.

There are five modules on offer:

  • How to prepare your annual reports
  • Budgets, management accounts and cash flow forecasting
  • Introduction to paying people
  • Bank accounts, record keeping, risk and outsourcing
  • Gift Aid how to claim it

These modules were identified in consultation with experts with over 20 years of experience in the voluntary sector. The proposed outlines were tested with a user group, whose members currently work in finance in a small charity, then modified according to their feedback to ensure that the content, level of detail, approach and methodology is pitched appropriately. We’re now piloting the sessions with charities at different levels of income, to refine them even further.

Feedback has been incredibly positive:
‘Sitting down and getting out our calculators and doing a cash flow forecast really helped as I remember it and can apply it practically in my work now’

Tanya Cracknell, Spitz Charitable Trust


Community accountants

A second vital strand of this programme is to strengthen the invaluable work that community accountants and other infrastructure organisations are doing to support small charities in developing stronger financial management skills and in building confidence levels. CFG is working in partnership with NAVCA to reach out to these infrastructure organisations effectively.  As well as promoting the programme at the Community Accountants’ annual conference, we are connecting with infrastructure bodies to better understand their needs and gaps in their services and identify where we can help with training and collaboration.

Many infrastructure organisations already offer vital, value-for-money financial services for local small charities. The Small Charities Programme is designed to complement existing services and to signpost small charities to their nearest providers.

Nowadays, we hear plenty about governance, fundraising, training and social media etc. and how we need to build capacity in these areas to ensure sustainability, resilience and impact for beneficiaries. Less is said about finance, but it is good financial management and leadership is critical. This core component is firmly on CFG’s agenda and the Small Charities Programme offers a platform to bring this to the fore. So please help to support this programme to reach those who don’t know that they need to know these things,by sharing about it and spreading the message as widely as possible.


Nicholas Faraday, Small Charities Programme Manager, Charity Finance Group


Finances for the terrified?

I work with about 120 voluntary and community groups a year across Bournemouth offering one to one advice and support. Most groups will be very small and three quarters will have an annual income of less than £100,000. I get asked about a lot of things but not very often about financial record keeping and reporting. However if I go into groups for many finances are a thing of terror to be offloaded to a ‘treasurer’ or even outsourced. Many charity trustees complain about not understanding financial reports or seem ‘not bothered’. If a charity is lucky enough to have a treasurer a significant number either feel very unskilled or too confident and so fail to follow legal and good practice (including those who come from a private sector background!). For a number of years I’ve run a ‘Looking After the Money’ course as an introduction to financial management and get new time treasurers and old lags, and a sprinkling of non-financial staff and trustees. The training always goes down well but I know that the people who really need it don’t come because they don’t realise they need it or could benefit from it.

Part of the problem, I think, is that there is little incentive to get it right! The Charity Commission, even if charities have to send in accounts and reports don’t look at them (and probably won’t even if they start charging for the privilege!), many funders don’t look to see if annual accounts are ‘compliant’. I even see chartered accountants producing, or signing off on, accounts that in no way meet legal minimums. If there was a bit more challenge from regulators and professionals it would soon get around that you need to tighten up on your financial systems.

But a stick is not good enough on its own. So where can groups go for advice and support? The most common answer now a days is the web. As with any search you need to know what you’re searching for and many groups will not. If they find useful material (and there is a lot out there!) the trouble is interpreting it for their own group. Training courses do allow for more tailored support and a certain amount of one to one interaction. CFG’s Small Charities Programme is a fantastic opportunity for many groups and will certainly meet some of the needs here in Bournemouth. However each charity has a unique context and needs someone with the skills to translate and adapt general advice to create workable and pragmatic solutions. Some organisations will find that ‘expertise’ from within (amongst their trustees, volunteers or staff), however many will not. There needs to be someone ‘on tap’ to help a charity develop good practice. Luckily there are still CVSs, other locally based ‘umbrella’ groups and Community Accountancy projects that can provide it. But these highly affordable (even free!) and cost effective services are under increasing threat that will mean that many small, and the vast majority of, charities will be left to survive their night terrors alone!

Steve Place
Senior Advisor
Bournemouth CVS

Small charities and the Autumn Statement

On Wednesday 23rd November at 12.30pm the chancellor will deliver the Autumn Statement, the second of the two most important economic statements that the chancellor gives every year, the first being the Budget.

The Autumn Statement is important for small charities as the policies of the Governement announced in the statement can have significant impact on the work that small charities do i.e. changes to devolution and business rates etc.

The statement is the opportunity for the Chancellor to update MPs on the government’s tax and spending plans. These are based on economic projection provided by the Office for Budget Responsibility (OBR) which was set up in 2020 to provide independent economic forecasts.

Every Autumn Statement is one of the key points in the CFG policy team’s calendar and this one is particularly important. It will be the first one that the new chancellor, Phillip Hammond, will present and it is also the first since the UK voted to leave the EU.

Therefore, this Autumn Statement will set the tone for government’s approach to the economy for the rest of the Parliament. For more analysis on this you can download CFG’s economic outlook briefing on the website.

What have CFG called for?
The ahead of the statement we coordinate other leading charity sector bodies (including Small Charities Coalition and NAVCA) to develop a set of proposals aimed at supporting the sector, specifically focusing on small charities, which we then submit to the chancellor for inclusion in the statement.

The proposals focused on three areas: economic growth, supporting people to take ownership of their local areas, and driving innovation in technology.

Economic Growth
1. Reduce irrecoverable VAT for charities – the government should phase in a rebate scheme to enable all charities to reclaim VAT incurred on non-business income over five years and convert existing ‘exemptions’ into ‘zero-ratings’ or ‘options to tax’ so that VAT can be recovered.

2. Introduce a strategic approach to voluntary sector funding to ensure funding for voluntary organisations outside of normal departmental spending is distributed on an impartial basis according to the sector’s strategic needs. This policy was specifically developed in light of the previous iniquitous allocation of Libor fines.

Supporting communities to take ownership of their local areas
3. A Community Capital Fund should be created to provide central support and resources for asset ownership, with a particular emphasis on supporting community asset transfer. This will work to empower communities so that they have a real stake in their local areas and support the delivery of vital services at a time when there is massive pressure on the public purse.

4. Partnership Hubs – these hubs should engender partnerships between local authorities and the local voluntary and community sector in the most deprived areas, with a view to identify and understand needs and solutions in the local community.

Driving Innovation in Technology
5. A Voluntary Sector Technology Fund to support small charities to purchase new software and/or hardware equipment. This would enable charities to fight against fraud, increase their efficiency and potentially develop innovative ways to engage with the people and communities that they support

6. Connect for Good – a programme to bring together graphic designers, interface designers and project managers, to collaborate with charities on software projects in events around the country with specific focus on reaching deprived communities. The aim of this programme is to create ready-to-use products that charities can use immediately as well as identifying and responding to future issues.

For full details of the proposals and the rationale behind them, download the full document sent to the chancellor on the CFG website.
Follow CFG’s live blog for updates
The policy team will be running a live blog from today (Tuesday 22nd November). This will include:
– coverage of the rumours around the statement ahead of Wednesday and what this could mean for the sector;
– key announcements as the chancellor makes them on Wednesday and early analysis of the impact on charities;
Keep an eye on the blog so that you can get the earliest possible insight into what the Chancellor’s announcements mean for your charity and beneficiaries. CFG will also be posting updates via twitter: follow #volsecAS and @cfg_smlcharity

What did the Romans ever know about data protection?

5105305535_723c50945e_qAs usual, quite a lot. Caesar famously used his cipher device to protect important and sensitive military data among his generals. So what can we learn from the famous Roman?

Various high profile charity cases and figures from the Information Commissioner’s Office (ICO) show an overall rise in the numbers of charities who have suffered data breaches. This is an area that could have huge potential consequences for charities.

Protecting your organisation data can also help you to maintain your reputation, both with your donors and the wider public. So what can be done by charities to help protect against this potential threat?


1. Be prepared and plan, plan, plan!

If your charity faces a data breach there are ways that you can potentially mitigate the harmful impact of the breach by having a plan in place for potential data breaches. You should be aware of what type of data you keep, who has access to it, and who out of staff and volunteers have been trained in managing your data. Most data breaches are straight forward or simple mistakes. Also be aware of the potential for a data breach through a third party.
A charity should be able answer these questions:
• We know the types of data we capture, where it comes from and who has access to it in our organisation.
• We know what the data is used for and have asked the subject’s permission.
• We know how to keep it safe, and how to get rid of it when it is not needed (this is especially important for physical data that is not needed anymore).
• We train our people and have put measures in place to be able to trust third parties.
• We have a plan to handle a data breach.
Data protection should be considered a top-down attitude and one where there is shared ownership of good practices. Transparency is needed to ensure that reporting data breaches will be treated professionally.


2. But won’t the ICO be more lenient if I’m a charity?
Short answer, no!
The ICO will not take into account what type of organisation suffers from a data breach, but instead how the breach is handled. The most common advice is to inform the ICO as soon as possible and to start to implement your pre-existing plan. If you can show that your organisation is attempting to do the right thing at the right time, the chances of receiving a heavy fine or other punishment is reduced.
It is now estimated that a breach in data in 2015 cost £120 per compromised record. Charities have made headlines by having to pay fines of up to £200,000 for data breaches.
Charities also have to remember that if a volunteer is handling data that they are recognised by the ICO has having the same responsibilities as permanent staff. This means that volunteers (along with staff) should also receive training on data protection policies your charity has.


3. Modern technology makes everything easier, right?

this-oneThe ability to access work through numerous devices (phones, tablets etc.) has become very important for most charities. These devices still have to comply with your charities data protection policies if you’re using them to access personal or sensitive data.
While a work computer might be encrypted, this is often not the case for personal devices, meaning you organisations should be particularly careful to monitor where this data is being sent.
Another way that data is shared is through various online cloud services. Most of the data stored in cloud services is not sufficiently secured and is headquartered in the USA, which currently is not legal.
A UK charity should try and ensure that any cloud services they use will hold their data only in the EU. One way of countering this is by encrypting any personal or sensitive data that is shared in a cloud service.


4. European General Data Protection Regulation (GDPR)
The introduction of the European General Data Protection Regulation in May 2016 (to update the 1995 Data Protection Directive) will mean significant changes to data protection legislation. Organisations that have already developed an effective data policy security plan will find the new regulation easier to implement.
But wait, won’t Brexit change all this?
Yes and No. In the short term no as the legislation in the GDPR will come into force from May 2018. With the current timeline for Brexit outlined as the UK still being in the EU till March 2019, organisations in the UK will have to implement the changes from May 2018.
Even after March 2019, if the UK agrees any trade relationships that require the transfer of EU citizen’s data than the GDPR will still apply to the UK. Many countries (both inside the EU and outside) are implementing similar standards of legislation as there is an international push towards harmonising data protection to ensure the safe transfer of data across international boundaries.
What are the changes?
Under this new regulation, more data will be classified as personal data (IP addresses, URLs etc.) and anonymised data will be removed and will instead be replaced with pseudonymised data (meaning where a number can be used to identify people instead of a name). Another important difference is that the ICO will be able to audit the private sector, not just the public sector if they fear that data laws are not being upheld.
New rules will also be introduced about organisations gaining consent on collecting data needs to be unambiguous for personal data and explicit for sensitive data. Silence, pre-ticked boxes or inactivity will not constitute consent. The ICO will also have to be notified within 72 hours of a charity becoming aware of a data breach.
Fines for data breaches will range up to £20 million or 4% or annual global turnover, though again if a plan is in place and attempts have been made to prevent a data breach this fine should be greatly reduced.


5. How can the ICO help?
If you’re worried about your level of data protection for your organisation then you can apply to the ICO for an advisory visit. This visit will give practical advice to an organisation on data protection and normally involves a one day visit from the ICO to your organisation. The ICO also has information for charities on their website to help them understand data protection.
So though the type of data and the way we store it has dramatically changed since 52 BC, the idea that important data should be kept out of the hands of your enemies is still the same.

Heather McLoughlin 


Today is Friday, and for most people this means a chance to daydream about weekend plans and forget about work.

Unfortunately for some charities, Friday is not quite as joyful, as they fall victim to the various Friday CEO afternoon frauds. Small charities can be particularly at risk of falling victims to these scams as due to small teams where individuals often work from home, or a reliance on volunteers in the office, or if you have a high turnover of staff and operating with stretched resources.

So what are the Friday afternoon frauds?
Friday afternoon frauds can be varied, and do not always occur on a Friday!

Official looking emails asking for bank transfer:
Often they involve an official looking email from the CEO or another senior staff asking for a bank transfer. These emails will often involve common tricks: nearly identical email addresses, the staff signature (remember CEO’s do not need to sign annual reports for the Charity Commission as fraudsters use the website to copy signatures), often small amounts in the low £1000 for products/services that a charity would use. If you are unsure of whether a transaction is legitimate, you can contact your bank for further advice.

Fake bailiffs and phantom debts:
If you receive a fake bailiff invoice remember you can check with the local court about whether this has been issued. Bailiff’s can only cover certain debt and debt collectors do not have special court authorisation to act. To not feel rushed or intimidated into making a quick decision. You can request details of the debt in writing to access its legitimacy.

Similar to the scams above, a charity might receive an invoice from a company that looks legitimate and might be one that the charity would use. You can counter this type of fraud by creating an internal system that states how invoices are handled. Secondly, read the (often very tiny) fine print! Sometimes these ‘invoices’ are not invoices at all, but rather a subscription to the dodgy companies’ trademark listing directory. So always read the whole document before any action is taken!

Lizard Squad:
Unfortunately this is not a reference to a new Godzilla film, but rather is a type of fraud where a group called ‘Lizard Squad’ will either seize data and information, or threaten a denial of service attack which can bring down a charities website. They demand Bitcoins (a form of online currency) by a certain date and time from a charity to stop this extortion. The Charity Commission has issued a warnings on this type of fraud.

Do not pay the ransom! Instead contact Action Fraud and the Charity Commission by submitting a Reporting Serious Incident form. A charity can counter this by ensuring that they have proper and adequate online protection. Reassess how your systems are protected, and encrypt any sensitive information.

Further precautionary measures:
If any of these emails or letters have phone numbers on them then a quick Google can be useful. Sometimes fraudsters will provide a phone number for a charity to use to seek further information that will direct to themselves or an accomplice. If you are unsure if the phone number is legitimate do not use it!

Double check anything before you send the requested money! Charities should have internal procedures in place that employees should know about when dealing with financial transactions. Sometimes a simple phone call to the CEO that is working from home, or your bank can go a long way to preventing fraud.

Get Safe Online is a great resource for understanding online safety for organisations.

CFG is also hosting a fraud forum to encourage charities to engage with fraud. If you would like more information about this then please contact heather.mcloughlin@cfg.org.uk


Charity Finance Group has over the years built up great niche expertise and experience to offer relevant and impactful support to large and medium charities across England and Wales in good financial management. The organisation is passionate about good financial practice that strengthens all the work a charity is doing not just those who work with the finances.

CFG knows that a successful charity is one where everyone who has an invested interest in it knows something about its finances and is aware of basic good financial management principles.

Up until now CFG has focused its attention on the larger charities but has now been able to broaden its focus to the whole of the charity sector. CFG is able, through a grant with Esmée Fairbairn Foundation, to reach out to charities with an annual income of £1m or less in England and Wales and Community Accountants/Infrastructure organisations.

The Small Charities Programme offers good foundational financial management training for small charities to strengthen what they already do, when an organisation has good, relevant strong financial management in place the rest of what the organisation is doing can flourish even more.

The small charities programme was launched officially on September 14th at Hays Finance and Accountant Recruitment. CFG has created an easy to use website for anyone who works with finances in a small charity to be able to book onto any of the many trainings and where you can also access free relevant resources that cover necessary foundational financial management. CFG is also working with Small Charities Coalition to help the programme reach, efficiently and effectively, as many small charities and groups as possible. These trainings will cost £20 and will run from January 2017 – July 2017 in: London, Birmingham, Bournemouth, Exeter, Yeovil, Frome and Bridgewater still more venues to be confirmed.

There are five key core trainings that are being offered around England and Wales:
How to prepare your annual reports, Budgets management accounts and cash flow forecasting, Introduction to paying people, Bank accounts, outsourcing, accounting principles and managing risk, and Gift Aid how to claim it, trading, and VAT.

These modules were identified in consultation with specialists who have more than 20 years’ experience in the sector. The training outlines were then shared with the programmer user group which is made up of people who currently work in a small charity with finance, they reviewed the trainings gave their feedback and the trainings were adjusted.

Currently we have started to test the training modules, style, and approach very practically with different small charities based on their annual income levels. In July we had 16 different small charities who attended the first pre pilot training which was based on ‘Budgets, management accounts and cash flow forecasting’. The delivery and feedback from those attending the trainings was very constructive and encouraging. As a result of this feedback we are in a great position to trial the remaining four trainings with different small charities with different annual income levels to prepare better for the full role out of this programme across England and Wales.

The other vital component of this programme is to strengthen the invaluable work that community accountantsand other infrastructure organisations are doing in support of small charities having stronger financial management skills and in building confidence levels. CFG is working in partnership with Navca to reach out to these infrastructure organisations effectively. Apart from the annual community accountants’ conference, we plan to have round table and online surgeries across England and Wales to engage with infrastructure organisations that deliver or would like to deliver financial services for small charities. The purpose of these is to better understand what their needs are and gaps in their services so we can strengthen them through training and to foster better collaboration. Many infrastructure organisations already offer vital, good value for money financial services for local small charities, the training this programme offers is to complement existing services and help sign post small charities to their nearest good financial services if they should need advice or wish to outsource to someone who knows what they are doing.

We hear plenty about governance, fundraising, training and social media etc. and how we need to spend time on these things to have a healthy organisation that functions well so that the lives can be changed and supported. But a vital part of what an organisation does is how it manages and reports on its finances. This core component is firmly on CFG’s agenda and this programme gives the platform to bring this to the forefront as good healthy financial management helps to grow and develop a healthy small charity and sector. So please help to support this programme to reach those who don’t know that they need to know these things by sharing about it and spreading it as far and wide as it possibly can go.

Nicholas Faraday is Small Charities Programme Manager at Charity Finance Group