Transcript The Outlook for Asset Markets

The haysmacintyre Annual
Charity Conference
Tuesday 6 June 2006
Welcome
Richard Weaver
Partner, haysmacintyre
Overview – The Sector
• 190,000 charities
• Public trust and reputation
• 88% of people surveyed said the main factor
in their trust of charities was an inherent
belief that they were well managed and
spending their money well
Overview – The Sector, cont…
• 84% said they were more likely to trust a
charity if they'd heard of them - so a charity's
profile affects their trust rating
• 44% of people trust big charities more than
smaller ones
Overview - Regulation
• Regulation and accountability
– Changes at the Commission
– Filing of accounts
– SORP 2005
– SIR
– Guidestar UK
• Increased public scrutiny
Overview – Commerciality
•
•
•
•
•
The fight for funding, especially core funding
Charity fundraising
Maximising investment returns
Service delivery = downside risk
Charities must make a profit…..sorry surplus!
The future
• Charities future role in society
• Financial constraints – full cost recovery
• The need to look forward strategically and
identify new opportunities
• Obligations on trustees to be more active
The days events
• Regulation – Charity Commission
• Legal update – Farrer & Co.
• Investments and the economy –
Rensburg Sheppards
• Fighting for your cause – Diana Garnham
The days events
• New ideas and regulation in fundraising –
Institute of Fundraising
• Effective leadership – ACEVO
• Compliance – Reporting and VAT
• Panel to answer your questions.
Developments at the
Charity Commission
and in charity regulation
Andrew Hind
Chief Executive
Some context - the sector
• 190,000 registered charities
• Annual income £38 billion
• 78% of income accounted for by 3% of
charities
• 600,000 paid staff
• 900,000 trustees
• 27% of population volunteer once a
month
A time of great opportunities
• New Office of the Third Sector
• New Minister for the Voluntary and
Community Sector
• Joint Cabinet Office/HM Treasury review of
the third sector
• CSR 2007
• A new Charities Act (?)
• A rejuvenated Charity Commission
A new vision and mission
Promoting best practice
• We are putting more emphasis on
encouraging charities to improve their
performance
• Creation of Charity Effectiveness Division to
capture knowledge from our casework
• New priority to building partnerships to
encourage innovation and collaborative
working across the sector
• Sharing our brand is now firmly on the agenda
Recent developments in charity
regulation
• Improving standards of governance
• Maintaining independence
• Promoting public trust and confidence
• The Charities Bill
Trustees are the key to good
governance – some facts
• 900,000 trustees
• 76% are over 45; 42% are over 60
• Only 0.5% are under 24
• 55% are male; but 70% for large charities
• 4.8% are from a black or minority ethnic
community
• Average board size is 10; 19 for large charities
Sources: Charity Commission (2005) and Chris Cornforth/NCVO (2001)
Recent developments - 1
• Improving standards of governance
– The new code for the VCS
– Clarity about strategic direction
– Value leadership at all levels
– Ensure trustees are effectively recruited,
supported, developed
– Understand complementary nature of
executive and non-executive roles
Recent developments - 2
• Maintaining independence
– Executives and trustees must ensure
that their charity remains independent
– 37% of sector’s income is from
government
– Most charities are small, with no
public service delivery role
– The ‘Wigan and Trafford’ decision
Recent developments - 3
• Promoting public trust and confidence
– Promoting accountability and
transparency with stakeholders and public
– Role of the SORP and SIR is critical
– Performance of the leading charities on
filing times needs to improve
– Never lose your passion for achieving
change and delivering results on behalf of
beneficiaries
Recent developments - 4
• Charities Bill
– Public benefit test
– Charity Tribunal
– Charitable Incorporated Organisation
– Measures to facilitate fundraising
regulations
– Increases to thresholds, new group
accounts provisions
– New objectives and powers for Charity
Commission
Developments at the
Charity Commission
and in charity regulation
Andrew Hind
Chief Executive
haysmacintyre Charities Conference 2006
Legal update
by
James Carleton
Partner, Charity & Community team
In this session
•
•
•
•
•
Where are we now with the
Charities Bill
Self Regulation of Fundraising
Charities and Trustee Investment (Scotland)
Act 2005
Employment
Other legal developments
Charities Bill – where are we now




Strategy Unit recommendations
Draft Bill, First Bill, Second Bill … more
amendments made and to come
Completed its passage through the House
of Lords
What will happen in the Commons?
Charities Bill

New Heads of Charity

Trading

Charity Commission & Charities Tribunal

Fundraising
Charities Bill
Other charity law reforms

Mergers

Exempt & excepted charities

Small charities
New & developing legal structures

CIOs - Charitable Incorporated Organisations

CICs - Community Interest Companies

Industrial & Provident Societies
Regulation of Fundraising Scheme (RFS)
Administration

Est. of Fundraising Standards Board (FSB)
Initially to be housed within the Institute of
Fundraising

Overseen by Council

Codes of Practice & Donors’ Charter

To become freestanding body

Regulation of Fundraising Scheme (RFS)
Membership

Members’ obligations

Adhere to Codes and Donors’ Charter

Use logo and provide donors with details of RFS

Run compliant internal complaints scheme

Monitoring and reporting

Pay a membership fee
Regulation of Fundraising Scheme (RFS)
Complaints

Stage 1:
Complaint to the body for whom funds are
being raised

Stage 2:
Complaint reviewed by FSB

Stage 3:
Complaint reviewed by Independent
Complaints Reviewer

Stage 4:
Council adjudication
Employment (1)

TUPE Regulations 2006

New unfair dismissal and redundancy limits

Age Discrimination Regulations

Work and Families Regulations

Consultation obligations on changes to pension entitlement

The Employment Equality (Sex Discrimination) Regulations
2005

National Minimum Wage increase
Employment (2)
Volunteers: South East Sheffield CAB -v- Grayson:

Is there a contract?

Is the Charity obliged to provide work?

If the volunteer fails to work would it be a breach of
contract?
Employment (3)

Are they unpaid (other than payment of actual, out of
pocket expenses)?

Can they withdraw their services without notice?

Can the Charity stop the voluntary work without
notice?

Does the Charity deny them the fringe benefits it
provides to its employees?
If all “yes”, they’re probably a volunteer
Employment (4)

Employees and consultants

Contract (need not be in writing)

Legally binding

Consideration

Employee

Consultant
Other legislation
•
Company Law Reform Bill
•
Charities and Trustee Investment (Scotland) Act
2005
•
Finance (No 2) Bill 2006
- substantial donors
•
Freedom of Information Act 2000
- Informational Tribunal
James Carleton
020 7917 7405 (T)
020 7917 7408 (F)
[email protected]
BREAK
Rensburg Sheppards Investment Management
Investment
Outlook and
Strategy
Presented by
John Haynes
June 2006
Rensburg Sheppards Investment Management
Agenda

Introduction….setting the scene

The Economic Backdrop

The Outlook for Asset Markets

Our Strategy

Summary & Conclusions
Rensburg Sheppards Investment Management
The last five years
1 Year
Local
Currency
Long
Bonds
Equities
S&P Composite
3 Year
Local
Currency
£
5 Year
Local
Currency
£
£
7%
4%
35%
15%
1%
( 31%)
FT-All Share
17%
17%
48%
48%
3%
3%
FTSE Europe x UK
21%
21%
67%
58%
( 6%)
5%
Nikkei (Japan)
41%
31%
88%
77%
18%
( 6%)
Emerging Markets
WORLD
41%
37%
146%
110%
131%
59%
18%
14%
59%
36%
23%
( 15%)
UK
Europe
US
Goldmans Index
Commodities Gold
Oil
Cash
UK Libor £
5%
14%
37%
( 1%)
( 7%)
11%
( 12%)
71%
( 5%)
18%
51%
26%
52%
36%
54%
106%
69%
76%
5%
14%
25%
Source Bloomberg & Datastream 30 May 2006
A Bear and a Bull Market in a half decade
Rensburg Sheppards Investment Management
Agenda

Introduction….Setting the scene

The Economic Backdrop

The Outlook for Asset Markets

Our Strategy

Summary & Conclusions
Rensburg Sheppards Investment Management
Economic Outlook
World Growth at a Glance
GDP
Global
2004 2005 2006E 2007E
04 Share Of
Global $
GDP
World GDP Growth
8
8
5.1%
4.5%
4.5%
3.8%
100%
7
Recession Threshold
7
US
4.2
3.5
3.4
3.1
31.0
6
Linear (Long-term
Trend)
6
UK
3.1
1.8
2.3
2.6
4.7
5
5
EMU
Emerging Europe
2.1
6.4
1.6
5.7
2.3
5.6
1.4
5.2
20.2
2.5
4
4
3
3
Japan
2.3
2.6
3.2
2.3
14.6
2
2
8.0
10.1
7.4
7.6
9.9
8.0
7.1
9.5
7.0
6.1
7.5
6.7
13.5
4.3
1.3
1
1
0
0
5.8
4.3
4.4
3.8
6.0
Asia Ex-Japan
China
India
Latin America
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07e
Source: Morgan Stanley
A slow-down in growth, not a collapse
Rensburg Sheppards Investment Management
Inflation
Inflation
CPI - y/y % Chg
14
12
10
8
6
4
2
0
-2
May- May- May- May- May- May- May- May- May- May- May- May- May- May06
04
02
00
98
96
94
92
90
88
86
84
82
80
US
UK
Japan
Europe
But growth is only half the picture
Rensburg Sheppards Investment Management
Global Monetary
Policy
Global Real POLICY Interest Rates
12
11
10
9
8
7
6
5
4
3
2
1
0
-1
-2
-3
M-86
GLOBAL Yield Curves
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
M-88
M-90 M-92
UK
M-94 M-96
US
M-98
M-00
Eur
M-02 M-04
Japan
0
2
4
6
8
UK
10
12 14 16
USA
18 20 22
EUROPE
24
26 28 30
JAPAN
…..there is an increasing risk of a policy mistake
Rensburg Sheppards Investment Management
Agenda

Introduction….Setting the scene

The Economic Backdrop

The Outlook for Asset Markets

Our Strategy

Summary & Conclusions
Rensburg Sheppards Investment Management
Valuation 1
Index Performance Since
Dec '99
US
-14%
UK
Europe
Japan
-5Yr
-3Yr
1%
31%
-11%
2%
46%
-19%
-8%
64%
-2%
27%
101%
Trailing P/E
US
UK
Europe
Japan
Dec '99
31x
24x
30x
143x
-5Yr
25x
20x
24x
101x
-3Yr May '06
19x
16x
14x
13x
17x
14x
54x
21x
Trailing P/E - NORMALISED
US
UK
Europe
Japan
Dec '99
33x
24x
27x
27x
-5Yr
26x
20x
23x
20x
-3Yr May '06
18x
19x
12x
15x
12x
16x
13x
21x
Long Bond Yields
Dec '99
-5Yr
-3Yr
May '06
US
6.4%
5.5%
3.4%
5.1%
UK
5.5%
5.2%
4.1%
4.6%
Europe
5.4%
5.2%
3.7%
3.9%
Japan
1.7%
1.3%
0.5%
1.9%
At first-blush, stocks look appealing . . .
Rensburg Sheppards Investment Management
Valuation 2
Dividend Discount Model (Over)/Undervaluation
US
UK
Europe
Japan
Dec '99
May '01 May '03 May '06
-48%
-34%
-4%
-11%
-38%
-24%
23%
0%
-43%
-31%
36%
-3%
-24%
2%
55%
-2%
Using normalised earnings & long bond yields, long term historic EPS growth rates & equity risk
premia
Market Performance
Dec '99 May '01
US
UK
Europe
Japan
-15%
-13%
-12%
-23%
May '01 May '03
-23%
-30%
-44%
-37%
May '03 May '06
31%
46%
64%
101%
. . . but objectively stocks and bonds now
have similar attractions
Rensburg Sheppards Investment Management
Earnings
Forecasts
. . . With moderating inflationary pressures, growing earnings & forecast
upgrades, both bonds & equities should deliver positive returns
Rensburg Sheppards Investment Management
Risks
• To Growth
- Commodity “taxes” impact worse than expected
- Policy error
- Disorderly $ damages corporate confidence
- (Geo) Political dislocation
- Health scare (pandemic)
- Financial “event”
•
To Valuation
- Inflation
…..Increase with the maturing of the economic cycle
Rensburg Sheppards Investment Management
Sentiment
Global M&A Activity
US Equity Investor Sentiment Index
Bullish Percentage Of Survey Respondants
$Bn + 6m M.av
500
2.20
2.00
450
1.80
400
1.60
350
1.40
300
1.20
250
1.00
200
0.80
150
0.60
100
0.40
May-06
0.20
0
Jun-00
50
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
• Recent evidence of complacency, not of euphoria.
• M&A at record levels, but cash component is high
Investors do not have unrealistic expectations of likely returns
Rensburg Sheppards Investment Management
Volatility
S&P 500 (top) v VIX Volatility Index
1600
90
1400
80
1200
70
1000
60
800
50
600
40
400
30
200
20
0
10
Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec00
00
01
01
02
02
03
03
04
04
05
05
…..but becoming more realistic about increasing risks
Rensburg Sheppards Investment Management
US $
The Dollar is undervalued versus the major currencies
Rensburg Sheppards Investment Management
The Outlook For
Asset Markets
Summary
• Equities / Bonds / Cash now offering average attractions relative to
each other. No “outstanding” value. Broadly “neutral” weightings
relative to benchmarks are appropriate
• Soft landing => Modest positive returns expected for all. Equities
should earn their premium, bonds their coupon with cash setting a
more challenging benchmark than in the past.
• Increasing cyclical risks suggest tactical reduction in exposure to
“higher beta” assets & increasing exposure to more defensive (US
v Emerging Markets / Commodities)
Rensburg Sheppards Investment Management
Agenda

Introduction….Setting the scene

The Economic Backdrop

The Outlook for Asset Markets

Our Strategy

Summary & Conclusions
Rensburg Sheppards Investment Management
Portfolio
Construction
Process
Asset Class Ranking
Equity / Bonds / Property / Other / Cash
Currencies / Geographic Priorities
Equity Thematic Priorities
Large / Small Cap, Growth / Value
Secular & Cyclical Sector Tilts
Investment Selection
Rensburg Sheppards Investment Management
In search of
returns
Equity markets relative valuation spreads
No ‘low hanging fruit’ between equity markets
Rensburg Sheppards Investment Management
Large Cap v Small Cap
Using US data as
the illustration, Larger
companies now look
attractive again…
Rensburg Sheppards Investment Management
In search of extra
return
Growth v Value (US Data)
. . . as do growth stocks
Rensburg Sheppards Investment Management
In search of extra
return
A Possible play on an end to US Monetary Tightening
Rensburg Sheppards Investment Management
In search of extra
return
Emerging Markets
G-7 Nominal GDP as a Percentage of Global GDP
(All translated into U.S. dollars)
69%
Oil bottoms 1999, Asia
Crisis crests, global GDP
growth resumes 1999-2001.
Cold War
ends 1991.
67%
65%
World leaps toward
capitalism until
Asia Crisis setback
1997.
63%
61%
59%
57%
Pres. Reagan begins
to defeat U.S.S.R.
1981.
55%
Non-G-7 GDP per Capita
at Purchasing Power Parity, U.S.$
$6,000
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
53%
G-7 GDP versus Non-G-7 Real GDP Growth, 1980-2005
9.0%
8.0%
$5,000
7.0%
6.0%
$4,000
5.0%
4.0%
Commodity prices
began to rise
extraordinarily fast just
as per capita GDP rose
through $5,000 in the
non-G-7 world.
$2,000
$1,000
2.0%
1.0%
0.0%
Source: U.S. Census, OECD, IMF, Stifel Nicolaus format and opinions.
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
-1.0%
1970
$0
3.0%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
$3,000
Real GDP of the G-7, y/y%
Real GDP of the non-G-7 countries, y/y%
Unlikely to re-submerge
Rensburg Sheppards Investment Management
In search of extra
return
U.S. oil usage in barrels/capita vs. real
GDP per capita, 1904 to 2004.
100 bbl
Real U.S. GDP per capita, expressed in
current year 2000 dollars
Real U.S. GDP per capita, expressed in
current year 2000 dollars
China, India
Real U.S. GDP per capita, in year 2000
dollars
Source: U.S. DOE/EIA, BP Statistical Review of World Energy 2005, USDA, U.S. Census. Stifel Nicolaus format and opinions.
Which has strong implications for commodity demand,
particularly energy & high protein food
$40,000
70 lbs/p.p.
$35,000
90 lbs/p.p.
$30,000
110 lbs/p.p.
$25,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Chi
$0
0 bbl
10 kWh
130 lbs/p.p.
$20,000
1 bbl
Meat consumption
per capita rose
about 90% as real
income per capita
rose from $5,000 to
$20,000, then
saturation ensued.
Since meat is grain
intensive, we
estimate grian-formeat rose about
300%.
150 lbs/p.p.
$15,000
100 kWh
170 lbs/p.p.
$10,000
1,000 kWh
190 lbs/p.p.
$5,000
Electricity
consumption per
capita rose 118fold as real
income per capita
rose from $5,000
to $20,000, then
saturation ensued.
Electricity
consumption per
capita rose 348fold as real
income per
capita rose from
$5,000 to
$20,000, then
saturation
ensued.
10 bbl
U.S. meat consumption, lbs. per capita
10,000 kWh
Oil Consumption per capita in barrels
Per-capita electricity generation
100,000 kWh
U.S. beef, veal, pork, lamb, chicken &
turkey, lbs. per capita, versus real GDP
per capita, 1909 to 2004.
$0
U.S. electricity usage per capita vs. real
GDP per capita, 1904 to 2004.
Rensburg Sheppards Investment Management
Emerging
Markets and
Commodities
China: per capita reserves and consumption of natural resources
(% of World Average)
Per capita reserves
Per capita consumption
160
133.0
140
129.0
120
100
80
80
71.0
62.0
60.0
55
60
46.0
45
40
26
20
26.0
25
9.7
8
4.1
4.6
0
Coal
Zinc
Iron Ore
Sources: State Council (2005), Deutsche Bank Estimates
Copper Ore
Oil
Alumina
Natural Gas
Water
Rensburg Sheppards Investment Management
Agenda

Introduction….setting the scene

The Economic Backdrop

The Outlook for Asset Markets

Our Strategy

Summary & Conclusions
Rensburg Sheppards Investment Management
Conclusions
•
Global monetary tightening is a symptom of the maturing economic
cycle => earnings growth but with increased risks.
•
Reflected in more volatile returns, but still likely to be positive over
coming 12 months.
•
Little advantage from big “bets” on asset classes or geographies.
Select opportunities within asset classes (growth, large-cap equities,
high grade v low grade bonds).
•
Commodities & Emerging markets are strong secular themes, but
overbought & vulnerable near term.
Rensburg Sheppards Investment Management
Stock Markets and
Crisis Events
Incident
Date
J F K Assassinated
Martin Luther King Assassinated
US Bombs Cambodia
Arab Oil Embargo
Nixon Resigns
USSR Invades Afghanistan
US Bombs Libya
Lockerbie PanAm
Iraq Invades Quwait
UK ERM Exit
WTC bombing
Oklahoma City Bombing
Asia Stock Market Crisis
9/11*
22/11/1963
04/04/1968
30/04/1970
17/10/1973
08/08/1974
04/11/1979
15/04/1986
21/12/1988
02/08/1990
16/09/1992
26/02/1993
19/04/1995
27/10/1997
11/09/2001
Average (Mean)
Average (Median)
Max
Min
* S&P Composite
5 days*
1%
2%
-6%
0%
-7%
-2%
0%
0%
-6%
-1%
0%
0%
-2%
-5%
-2%
0%
2%
-7%
DJIA Performance
3m
1m
9%
4%
6%
6%
-1%
-5%
-12%
-10%
-15%
-16%
-9%
4%
-1%
0%
5%
2%
-16%
-10%
-1%
-5%
5%
3%
12%
4%
11%
9%
3%
0%
6m
12%
10%
3%
-10%
-10%
5%
-1%
14%
-6%
4%
9%
15%
25%
6%
0%
1%
12%
-16%
5%
5%
25%
-10%
-1%
1%
9%
-16%
Rensburg Sheppards Investment Management
S&P Return
1 January 1928 to 31 December 2005
Condition
Average Annual Return on Index
Excluding Dividends
%
All 19,333 days
5.67
Exclude best 10 days
4.53
Exclude best 20 days
3.46
Exclude best 30 days
2.55
Exclude best 40 days
1.77
Exclude best 50 days
1.08
Exclude best 60 days
0.44
Exclude best 90 days
-1.32
*77.0 years: Source Ibbotson, LM Capital Management, Inc and Factset
Rensburg Sheppards Investment Management
Contact Details
John Haynes
Rensburg Sheppards
2 Gresham Street
London
EC2V 7QN
Telephone
Fax
email
020 7597 1279
020 7597 1000
[email protected]
www.rensburgsheppards.co.uk
Rensburg Sheppards Investment Management Limited is authorised and regulated by the Financial
Services Authority and is a member of the London Stock Exchange and the RensburgSheppards Group
Please note that the value of investments and the income derived from them may fluctuate and investors may not
receive back the amount originally invested. Past performance is not necessarily a guide to the future. Current tax
levels and reliefs may change and the investments and investment services referred to may not be suitable for all
investors.
Rensburg Sheppards Investment Management
In search of
returns
Japan – a demographic nightmare?
10,000
140%
10,000
130%
130%
1,000
90%
Source: U.S. Census Bureau,
International Data Base; Bank of Japan
for Nikkei data, Statistics Bureau Director General for Policy Planning,
Japan for Japanese CPI data. Format
Barry Bannister, Stifel Nicolaus.
2045
2035
2025
2015
2005
1995
2045
2035
2025
2015
2005
1995
1985
1975
Ratio of 35-49 year-olds to 20-34 year-olds (left axis)
Real (After Japanese inflation) Nikkei 225 index (right axis)
1,000
60%
1985
100
1965
80%
70%
50%
1955
90%
1975
60%
100%
1965
70%
110%
1955
80%
Real Dow Jones Industrials
100%
USA: ratio of 35-49 year-olds
to 20-34 year-olds
110%
Nikkei 225 Index
Japan: ratio of 35-49 year-olds
to 20-34 year-olds
120%
120%
Ratio of 35-49 year-olds to 20-34 year-olds (left axis)
Real (After USA Inflation) DJIA (right axis)
Source: U.S. Census Bureau, International Data Base; Bank of Japan for Nikkei data, Statistics Bureau - Director General for Policy
Planning of Japan for Japanese CPI data. All prices updated to March 15, 2006.
Political campaigning by
charities - effectiveness and
accountability
Diana Garnham
Chief Executive
My talk
• Focus on political campaigning
• Explore the boundaries and areas of
confusion
• Explore the role of trustees
• Identify some pointers to effectiveness and
good practice
Charity Commission guidelines
It is legitimate for charities to campaign to
• raise public awareness and public education
on a particular issue
• influence or change public attitudes
• undertake activities in the political environment
intended to influence Government(s) policy,
legislation, regulation
• to have contact with political parties and
politicians
Political purposes are not
charitable
• A charity cannot exist for the purposes
of furthering the interests of any political
party
• A charity cannot have as a purpose
securing or opposing any change in the
law or policy
Terminology
• Campaigning – marketing, advertising,
political to engage in an operation planned to
achieve a certain goal (crusade, drive, push,
advertising)
• Advocacy - to publicly support or suggest an
idea, development or way of doing something
• Lobbying – a focus on the decision-makers,
to persuade a politician, government or
officials
The rationale
• Improves and widens the debate – an
enrichment of democracy
• Political activity is a justifiable way of
furthering the charity’s objects
• Advocacy on behalf of beneficiaries is a public
benefit and furthers beneficiary interest
• Charities may have detailed and special
knowledge to contribute to debate
What is a political campaign?
• An operation planned to achieve a certain goal
• Clausewitz – it is the continuation of policy, not
an act in itself and the policy determines its
character
• About getting the ‘temperature’ right for a
favourable decision to be made
• Not just the provision of information, education,
communication – advertising, marketing, or
awareness
Lobbying as part of a
‘campaign’
• Focussed on Government and decision-makers
• Probably tied to a particular situation/policy
rather than an ongoing activity
• Lobbyist – cab be perceived as only an
information conduit
• Mainstay for most ‘campaigning’ charities
• Essential platform from which to gear up
• Important to be non-partisan
Trustees responsibilities
• activity must be an effective means of furthering
the purpose of the charity
• expenditure and use of resources must be
justified
• activities must be permissible under governing
document
• trustees must assess the risks and benefits
• must comply with the general rule of law
• must monitor and evaluate effectiveness
Expenditure and resources
must be justified
• Will this emerge as an issue for the SIR?
• for public awareness raising and education, or
seeking to influence a change in public attitudes,
a charity can devote up to all its resources
• for political campaigning “charity trustees must
ensure that these activities do not become the
dominant means by which they carry out the
purposes of the charity” – if not, is it in fact a
charity?
Trustees must assess risks and
benefits
•
•
•
•
•
Impact on reputation
Impact on income
Impact on public trust and confidence
Impact on future ability to influence
Balancing risk - questions to ask
– Will anyone be upset if we do this?
– Who will be upset if we don’t?
– What will we add to the debate?
Reputational risks
• The charity’s most valuable asset - without
reputation there is no influence. Reputation can
be affected by:
– Methodlology
– Level or resources committed
– Independence
– Individuals involved
– Timing and sensitivity to wider agenda
– Differing internal positions/views
– Over claiming
Methodologies - getting it right
• No restriction as long as it is legal
• Be prepared to explain choice and style and
defend the detail of the charity’s position
• Be careful of emotive material and partisan use controversial, oversimplification of complex
issues, headlines without a follow through
• Direct action - bare in mind type(s) of supporters
and those you are trying to influence, know how
you will keep it under control and legal
• Don’t misuse ‘research’
Consortia and coalitions
• Charity Commission “not realistic that a
campaigning alliance will fit with every one of its
members’ charitable purposes”
• But bare in mind that:
– alliances with non-charitable organisations
can increase the risks
– It would be unwise to have an alliance with a
charity with a conflicting object
• Apply all normal tests on value for money etc
Good practice - working with
political parties
• Use the appropriate methodology
• Charities can
– support a policy advocated by only one party
– seek support for policy from all political parties
– deal personally with politicians of any party
• Ideally would aim for cross party support
Good practice - working with
political parties
• Charities should not
– inadvertently run a campaign that results in any
form of partisan support or
– consistently work with or
– enlisted the support of politicians from only one
political party
• Trustees, officers and staff should be
careful about the impact of known political
affiliations
Having effective ‘political’
influence
• Is about having a good case
• At the right time, in the right way with the right
information
• Comes from being respected and trusted
• Is about not wasting time, resources and effort
• Having good radar - knowing where your
position fits in the wider world
How to evaluate impact
•
•
•
•
•
•
•
Media inches and minutes
Parliamentary ‘friends’ and levels of knowledge
Citations in debates
Invitations to participate in consultations
A seat at the table
Impact on the legislation, policy or regulation
Public opinion/awareness will be much harder to
track
Good practice
• A political campaign will be for impact not
process or outcome
• Will have a clear objective appropriate for the
campaign
• Consulted stakeholders and have a clear
mandate
• Good radar - understand the views of members,
beneficiaries, the general public, other nonprofits and your opponents
Good practice
• Research your position thoroughly and present
the case, and facts and figures?
• Always make the link to charitable objects and
your beneficiaries
• Provide adequately resources for the exercise to
succeed
• Research the position of political parties and
individual politicians
• Learn and build - share, pass it on and get better
at influencing - don’t depend on individuals
LUNCH
Self-Regulation of Fundraising
Megan Pacey
Director of Policy and Campaigns
[email protected]
Background
• Trust and Confidence
Role of Fundraising as the Public Face of Charity
Gulf between perception and reality of fundraising
Contribute to the wider work of impACT Coalition
• Endless Consultations !
Used process to create ownership beyond the fundraising community
We only have one go at this!
2
How the Scheme will Work
• Public Facing
Concentrating on reaching donors and supporters via fundraising charities
• Independent of Sector
Independent Chair and majority of Board not from the sector
Scheme to be floated off from Institute once established and within 12 months
• Capturing Complaints
Required to complain directly to charity first
• Donors’ Charter
Set by the scheme
Public focused
• Codes of Fundraising Practice
Set by the sector through the Institute of Fundraising.
Practitioner focused
3
What it Means?
The Balance Between Benefit and Burden
• Engagement with Trustees
Require Trustee sign off
• Complaints and Internal Audit Procedures
Require procedures for both of these to be in place
• Obligation to Promote
Carry scheme “logo” and donors charter in all appropriate places
• Part with Money
Scheme to be self financing within 5 years
Fees range from £30-£1,700
Pilot of schemes for small community based organisations being considered
• Annual Renewal
4
Codes of Fundraising Practice
• Explain the Law
Act as a useful reference tool to support fundraisers
• Prescribe Best Practice
Use the descriptors MUST, OUGHT and SHOULD
• Useful Reference Tool
• Consultation
Widely publicised and goes beyond membership or sector
• On-going Development
Codes are organic and open to improvement and change in regulations. Will respond to
challenges coming from self-regulation
5
Next Steps
• Funding from Whitehall Departments and Scottish
Executive
• Board have been appointed. First board meeting recently
held
• Recruitment of staff progressing
• Charity Launch Summer 2006 - Public Launch in Autumn
2006
• Secretary of State to impose Regulation if not successful
6
Fundraising Standards Board
Jon Scourse
Director
0845 402 5442
[email protected]
www.fsboard.org.uk
7
The Third Sector CEO
Effective leadership and performance
Nick Aldridge, Director of Strategy, acevo
24th May 2006
acevo
 Charities and social
enterprises
 From small community
organisations to multimillion pound enterprises
 From former FTSE-100
directors to first time
leaders
acevo membership (%)
60
50
40
30
20
10
0
As
so
ci
at
Se
io
rv
ns
ic
e
De
l..
.
Ad
vo
ca
Gr
cy
an
tm
ak
in
g
 2000 third sector
Chief Executives
For a modern, enterprising third sector
Priorities for the chief executive
• Funding and finance
• Governance
• Leadership and management
Doing good and doing well?
Acevo annual conference Nov 30th
– Success: goals
• defining,
• measuring,
• reporting
– Governance:
• Board
• Chair and CEO
relationship
– Leadership:
• CEO’s role
Success: emerging issues
• Responding to funders’ demands:
– Reluctance to support new ideas
– “a war with funders” over what
counts
• Too much emphasis on tools and
systems:
– must fit the strategic goals,
– leave space for change.
Success: emerging issues
• Reporting:
– honesty and realism,
– impact vs outputs
– relationship with service users.
Governance: emerging issues
• Deficits in skills needed to perform
scrutiny
– Recruitment by word of mouth: 85% of
very large charities
– 77% of boards not appraised;
(83 % CEOs are appraised)
• Professionalism or
accessibility/involvement
– Accountability: down or up
Governance: emerging issues
• Governance roles:
– leadership and guardianship
– Exec and non-exec
• CEOs as gatekeepers of
information
– Trustees neutralised
Leadership: emerging issues
• Time given for strategic thought
vs. day-to-day fire fighting
– Shocks as catalysts
• Balancing demands:
– Internal: staff and volunteers
– External: stakeholders
Internal leadership
You project an image
• Communication style
• Respect
• “Nobody likes you”
• Leadership
External leadership
• Be an ambassador for your organisation
• Networking is a core competence
–
–
–
–
Be
Be
Be
Be
known
seen: contribute
organised: manage your contacts
useful: offer ideas
• Take the opportunities
– Make contributions
– Don’t be too grand!
Professional Development
• “Chronic underinvestment”
– So invest: more than 1%!
• And don’t stop:
– 360 Degree Appraisal
– Cranfield and Ashridge: acevo courses for
experienced CEOs
– IoD/acevo Chartered Director
– Alongside Cass Business School New CEO
courses
Key messages
• Create space for strategy: steer,
don’t drift;
• People are key: no skills, no
development = no results;
• Leadership is external, not just
internal: prioritise and invest.
The Third Sector CEO
Effective leadership and performance
Nick Aldridge, Director of Strategy, acevo
24th May 2006
BREAK
haysmacintyre Charity Conference
VAT Claims Update
Graham Elliott
Partner, haysmacintyre
Background
Over-arching Principles
VAT on purchases can only be reclaimed if (and
to the extent that) the purchases relate to
taxable supplies made.
Thus
•
Costs solely linked to taxable supplies:reclaim VAT
Background continued
•
Costs solely linked to non-business
activities and exempt supplies: No VAT
reclaim
•
Costs shared between these activities:
Claim part (in most cases).
“Lennartz”
• If a major asset has some taxable use then
VAT can be fully reclaimed; BUT
• Proportion of use of asset for non-business
activities is reimbursed over the life time of
the asset (up to 20 years)
• Only applies to substantial assets and does
not affect partial exemption
VAT on Fund-raising Costs
a) Where such costs solely relate to generating
grants and donations, they are treated as an
overhead of the wide aims of the charity
b) This is because the costs only serve those
aims, and not the aim of fundraising for its
own sake.
Fundraising is not an activity per se.
VAT on Fund-raising Costs continued
c) VAT recoverable to extent charity’s primary
purposes involve making of taxable supplies
d) HMRC may allow costs to be treated as
overhead of wider activities of charity (this
is questionable).
Special Partial Exemption Methods
• Currently have to be negotiated “upfront”
with HMRC, but once agreed HMRC accept
consequences of agreement.
• Methods become “obsolete” where they fail
to cover all aspects of activities of taxpayer.
• New proposal to enforce “Fair & Reasonable”
certification on the application for special
method.
Richard Weaver
Charities Partner, haysmacintyre
Topics
•
•
•
•
•
New reporting requirements
Implications for trustees, CEO’s and FD’s
Strategy
Financial matters
Governance
New reporting requirements
• Charities SORP
• Charitable Companies – CA85 Sec 234ZA(2) to
(4):
• ‘So far as each director is aware, there is no
relevant audit information of which the
company’s auditors are unaware.’ and
• ‘each director has taken all the steps that he/she
ought to have taken in his/her duty in order to
make him/herself aware of any relevant audit
information and to establish that the company’s
auditors are aware of that information.’
The trustees duty
• They must exercise overall control over its
financial affairs. They should ensure that the
way in which the charity is administered is
not open to abuse by unscrupulous
associates or employees; and that their
systems of control are rigorous and
constantly maintained.’
(CC3 :Responsibilities of Charity Trustees)
What can you/should you be doing?
• Securing knowledge and availability of
information
• Reviewing strategic direction
• Financial planning
• Continual monitoring
Strategic Planning
• Who is responsible for strategy?
• What should a strategic plan contain?
– Aims
– Objectives
– Strategies
– Financial implications
– Risk areas
What you should receive financially?
• Checklist for Trustees and CEO’s:
– Income and expenditure (by key activities)
– Balance sheet information
– Funds analysis
– Cash flow
– Prior year comparisons
– Commentary/explanations
– Key indicators/benchmarks
What you should receive financially?
Cont…
• Do you understand the information you
currently receive?
Governance
•
•
•
•
Board structure
Sub committees and delegated authority
Reporting lines
Helping to ensure that staff, management and
trustees are working towards a common goal
Panel Q & A
ACEVO, AIB, Farrer & Co, haysmacintyre,
Science Council
Closing remarks
Bernie Watson
Managing Partner, haysmacintyre