Archived decisions
HAMPSHIRE COUNTY COUNCIL
Proposed Executive Decision:
Decision Maker: |
Executive Member for Adult Social Care |
Date of Decision: |
31 October 2008 |
Decision Title: |
Adult Services Grants Consultation |
Decision Reference: |
333 |
Report From: |
Director of Adult Services |
Contact name: |
Mark Allen | |||
Tel: |
01962 845056 |
Email: |
||
1) Summary |
The following decisions are sought: |
1.1. That the Executive Member for Adult Social Care accepts the outcome of the consultation on Adult Services Grants. |
1.2. That the Executive Member for Adult Social Care agrees the proposals outlined in Appendix 1 for changes to the Adult Services Grant processes and criteria following formal consultation and detailed in this report. |
1.3. That the principles of the Charity Commission Guidance in relation to reserves be adopted, subject to amendment better to reflect the profile of Adult Services grant applicants. |
1.4. That the work of the Corporate Grant Officers Network be supported, to enable the outcome of this consultation to promote consistency in grants programmes across the County Council. |
1.5. That officers be encouraged to share this policy and approach to grants programmes in their partnership working with District Councils (HALC) and the Primary Care Trust. |
2) Reasons for the decision |
2.1. The outcome of the consultation and following recommendations are the final stages of the review of the Adult Services Grants Programme which was approved by the Executive Member for Adult Social Care on 25 April 2008. |
2.2. The proposals detailed in the report will enable Adult Services to manage the Grants Programme more effectively, develop a focus toward supporting well-being, support innovation and transformation through Personalisation and Self Directed Support and continue to support the voluntary and community sector within Hampshire. |
2.3. The review of the Adult Services Grants Programme links to all three of the corporate priorities: Maximising Wellbeing, Enhancing our Quality of Place and Hampshire Safer and more Secure for All. |
3) Other options considered and rejected: |
The purpose of the consultation was to explore the options available for the development of the grants programme. This report represents the outcome of that process. |
4) Conflicts of Interest: |
4.1. Conflicts of interest declared by the decision-maker: |
None |
4.2. Conflicts of interest declared by other Executive Members consulted: |
None |
5) Dispensation granted by the Standards Committee: |
None |
6) Any reasons for the matter being dealt with if urgent : |
None |
7) Statement from the Decision Maker: |
Approved by: -------------------------------------------------- |
Date: 31 October 2008 |
Executive Member for Adult Social Care Councillor Hindson |
HAMPSHIRE COUNTY COUNCIL
Decision Report :
Decision Maker: |
Executive Member for Adult Social Care | ||||
Date of Decision: |
31 October 2008 | ||||
Decision Title: |
Adult Services Grants Consultation | ||||
Decision Reference: |
333 | ||||
Report From: |
Director of Adult Services | ||||
Contact name: |
Mark Allen | ||||
Tel: |
01962 845056 |
Email: |
|||
EXECUTIVE SUMMARY
1) Summary of Decision Area:
1.1. This report makes recommendations for changes to the Adult Services Grants processes and criteria following consultation.
2) Issues Covered in Report:
2.1. A report of the findings of the consultation undertaken from 6 May to 28 July 2008 in line with the requirements of the One Compact for Hampshire
2.2. Background information about the Adult Services Grants Review and how the consultation was undertaken.
2.3. Outcome report on the findings of the consultation against individual proposals and recommendations for actions following this.
3) Recommendations:
3.1. That the Executive Member for Adult Social Care accepts the outcome of the consultation on Adult Services Grants.
3.2. That the Executive Member for Adult Social Care agrees the proposals outlined in Appendix 1 for changes to the Adult Services Grant Programme following formal consultation and detailed in this report.
3.3. That the principles of the Charity Commission Guidance in relation to reserves be adopted, subject to amendment better to reflect the profile of Adult Services grant applicants.
3.4. That the work of the Corporate Grant Officers Network be supported, to enable the outcome of this consultation to promote consistency in grants programmes across the County Council.
3.5. That officers be encouraged to share this policy and approach to grants programmes in their partnership working with District Councils (HALC) and the Primary Care Trust.
MAIN REPORT
1) Purpose of the Report:
1.1 This report details the outcome of the consultation on proposals for changes to the Adult Services Grants Programme. The consultation was undertaken over a twelve week period between 6 May and 28 July 2008 in line with agreed processes within the One Compact for Hampshire.
2) Contextual Information:
2.1 In April 2007 the Executive Member for Adult Social Care approved a recommendation that a review of Adult Services Grants programme should take place. The purpose of the overall review, of which this consultation is part, is to ensure that AS grants are used in the most effective and efficient way possible, that the opportunity to receive a grant is available to all third sector organisations, that the programme is as fair, clear and transparent and that the grants programme supports the Hampshire County Council corporate priorities of Maximising Wellbeing, Enhancing our Quality of Place and Hampshire Safer and more Secure for All.
2.2 The grants programme also contributes towards the Adult Services Department's delivery of the seven outcomes of Adult Social Care which in turn leads to improved performance and delivery of better services and outcomes to vulnerable Hampshire residents.
2.3 The purpose of this consultation has been to seek views on the proposed changes to (1) the grants criteria and (2) the processes, from currently funded voluntary and community organisations and to actively seek the views of groups which are not in receipt of Council funding, volunteers and Hampshire residents.
2.4 The consultation consisted of 12 proposals for changes to the way Adult Services grants are managed and administered.
2.5 The consultation information was placed on the Hantsweb consultation pages, distributed through the Community Action Hampshire Health and Social Care Network, posted as hard copy to voluntary organisations and all Hampshire Parish Councils and provided to all Members of Hampshire County Council.
2.6 There were 39 formal responses to the consultation (received via e-mail, post and through the online survey tool) together with group responses from three meetings (one a formal consultation event and two voluntary sector forum meetings).
2.7 There was strong support for eight of the proposals as they were presented in the consultation (strong support defined where a positive response rate above 64% was received). For the remaining four, whilst there was agreement that amendment was appropriate, there was no clear consensus on the precise nature of this. In these cases, account of the detailed comments through the consultation has been taken and, where appropriate, proposals amended.
2.8 A summary of the responses is attached as appendix 2 and the consultation questions are included as appendix 3.
2.9 Section three of this report details the individual proposals for recommendation. These proposals were put before the Executive Member in April 2008 when permission to consult was approved.
2.10 The outcomes from this consultation and the recommendations have been made available to other departments within the authority and other partner organisations, including Hampshire PCT.
3) Key Issues
3.1 Proposal 1: To ensure that Adult Services grants funding meets the strategic priorities of the department and supports a move toward the priority of well-being. We will agree annual priorities for the grants programme within this framework. Do you agree with this approach? Do you have any other suggestions about how we could agree annual priorities?
3.1.1 This was strongly supported.
3.2 Proposal 2: To ensure that Adult Services grant funding encourages new and innovative activity and is able to assist in developing the capacity of the voluntary and community sectors we are proposing that this is included in the criteria for assessing grant applications. Please tell us what you think of this proposal?
3.2.1 This was strongly supported.
3.3 Proposal 3: To ensure funding is available for new and/or innovative services we would like to propose a minimum percentage of the annual grants budget is used for this purpose. This could be within a range from 5% to 25% What are your views of this proposal? Do you feel this is the right approach to encourage innovation? What percentage do you feel would be an appropriate amount?
3.3.1 The principle of this proposal was supported but there was also a significant degree of discussion of the appropriate percentage of `ring-fence' for innovation and the extent to which a top-slicing of the existing budget is desirable. Many respondents expressed the view that on-going funding is more difficult to obtain than funding for innovation. It is proposed, therefore, that no specific ring-fence is imposed but that up to a maximum level of 15 percent of the existing budget is used in this way, circa £90,000. Also, if Adult Services Grant funding is identified in future years all or a proportion of this could be used to fund new and innovative activity and support transformation under Personalisation, enabling the department to provide on-going support to the voluntary and community sector at current levels as well as stimulating new and innovative activity.
3.4 Proposal 4: We wish to amend the criteria to state that reserves that could be considered as excess will be those that are undesignated. Please tell us what you think of this proposal?
3.4.1 This proposal was seeking to ensure that where organisations carried reserves that these funds are not unreasonably in excess of the requirements of the organisation. In addition, that funds are allocated for legitimate purposes.
3.4.2 There was significant support for a reserves policy. However, the precise nature of this varied. Many of the organisations working in Hampshire and funded by Adult Services through the grants programme are registered charities and already operate within the guidance of the Charity Commission. It is recommended therefore that the Charity Commission policy on reserves is appropriately adapted and adopted for use within the Adult Services grants programme (copy of the Commission's policy is attached as appendix 4, Para's 40 to 49). This policy states that organisations should have up to date, appropriate and proportionate reserves policies that outline why particular reserves are held and for what reason. Judgement can then be made through the grants allocation process whether these are justified or not. This would allow the department to make fair judgements without unwittingly penalising prudent financial management and could be triggered where in excess of three months reserves are identified within an organisation's audited accounts.
3.4.3 This proposal is being discussed within the Corporate Grants Officers Network group for consideration across County Council grants programmes.
3.5 Proposal 5. To seek to provide pump-priming funding to new and/or innovative activities for a period of up to two years. We will also assess the requirement for continued funding during this period and review this at the end of the funding arrangement. Please tell us what you think of this proposal?
3.5.1 This proposal was strongly supported. This is viewed as particularly important in relation to the changes for the future of Adult Social care under personalisation and to support related transformation of services.
3.6 Proposal 6: We wish to have the ability to fund new and/or innovative services at full cost in order to pump-prime , where this is required and judged appropriate, for a period of up to two years. We would also like to amend the criteria for Adult Services grant accordingly. Please tell us what you think of this proposal?
3.6.1 This proposal was strongly supported.
3.7 Proposal 7: It is proposed that as part of the formal monitoring and evaluation of funded activities that account is taken of the work that organisations have done to secure other and/or alternative funding for the activity currently supported by Adult Services. Where funding has been provided for a three year or pump-priming agreement the final year review will evaluate what future funding arrangements are most appropriate. Please tell us what you think of these proposals?
3.7.1 This proposal was largely supported although there were some alternative views. The principal concern here was that this is undertaken as a developmental process and not simply as an opportunity to remove funding. The underlying rationale for the monitoring and evaluation framework is that it is developmental, supportive and proportionate and allows all partners to understand what objectives are being met and how these are achieved. In addition, on-going funding beyond an agreement can never be guaranteed and organisations need to demonstrate what their long-term funding plans are when applying for Adult Services grant funding. Therefore, the examination of on-going funding options is part of this process and it is recommended that this proposal is adopted.
3.8 Proposal 8: To seek to issue 3 year funding agreements where these are appropriate, with annual renewal subject to demonstration of meeting agreed outcome or performance measures. Please tell us what you think of this proposal?
3.8.1 This proposal was strongly supported.
3.9 Proposal 9: Where 3 year grant agreements are awarded, we will replace the need to reapply annually for renewed grant funding with annual reviews. We will also conduct an in-depth final year review that will be used to inform any potential renewal or change in any future funding agreement. Paperwork for this process is contained in appendix 1-4. Please tell us your views on this proposal.
3.9.1 This proposal was strongly supported.
3.10 Proposal 10: To adopt the new draft paperwork (review format) at Appendices 1-4 (of the full consultation document) to support the efficient and consistent monitoring and review of grant funding. Do you have any comments on the draft paperwork?
3.10.1 This proposal was strongly supported.
3.11 Proposal 11: We will consider the possibility of moving the grants application deadline forward to before Christmas. This would mean that the deadline moves to a point within the period September to November. Please tell us your views on this change and when you think would be the best deadline for application and decisions?
3.11.1 This proposal was largely supported. However, there was significant discussion concerning the closing date for applications and the subsequent dates for notification of rejection of application or award of grant. It is recommended that the closing date for applications be set at the beginning of November. Whilst this is prior to the period where the grants budget is set, this date would facilitate appropriate time for internal Adult Services processing and decision making and is close enough to the next financial year for organisations to realistically assess their future funding requirements. With introduction of the Grants panel and the process of consulting internal stakeholders the current timescale of mid January closing date for applications and March Executive Member approval is no longer realistic.
3.11.2 In order that decisions are communicated, grant agreements prepared and payments scheduled prior to the beginning of the financial year it is recommended that the decision cycle is moved forward one month. Currently the decision cycle culminates in the Executive Member Decision Day in March. The recommendation would move this to February.
3.11.3 If the recommendation in 3.11.2 is not approved it is still recommended that the application date is changed in line with 3.11.1.
3.12 Proposal 12: To encourage the submission of applications electronically and make this method of application the norm by 2009/10. Please let us know your views on this proposal?
3.12.1 This proposal was strongly supported. However, it should be noted that some small organisations do not have the IT resources to meet this requirement. Some paper based applications and processing will still need to take place. Work will also need to be undertaken to ensure receipt of appropriate signatures and supporting documentation when required.
4) Implementation:
4.1
The majority of proposals will be implemented during 2009/2010. However some will require the setting up of new processes which will require implementation over a longer period, for example proposal 12.
4.2 Proposal 11 will be implemented for the 2010/2011 grant round. This proposal represents a significant change. The need to provide sufficient time and publicity for voluntary and community groups means that this is not achievable for grant allocations for the next financial year. In addition, consideration needs to be given to the internal implications of moving the decision for Adult Services grants to the February Executive Member Decision Day.
5) Outline of Options:
5.1 The purpose of the consultation was to explore the options available for the development of the grants programme. This report represents the outcome of that process.
6) Conclusions:
6.1 The proposals in this report represent the final amendments to the Adult Services Grants Programme, would complement the internal changes to processes implemented in 2007/2008 and are compliant with the One Compact for Hampshire.
7) Summary Recommendations:
7.1 That the Executive Member for Adult Social Care accepts the outcome of the consultation on Adult Services Grants.
7.2 That the Executive Member for Adult Social Care agrees the proposals outlined in Appendix 1 for changes to the Adult Services Grant Programme following formal consultation and detailed in this report.
7.3 That the principles of the Charity Commission Guidance in relation to reserves be adopted, subject to amendment better to reflect the profile of Adult Services grant applicants.
7.4 That the work of the Corporate Grant Officers Network be supported, to enable the outcome of this consultation to promote consistency in grants programmes across the County Council.
7.5 That officers be encouraged to share this policy and approach to grants programmes in their partnership working with District Councils (HALC) and the PCT.
8) Appendices:
8.1 Appendix 1. Proposals
8.2 Appendix 2. Consultation Responses
8.3 Appendix 3. Consultation Questions
8.4 Appendix 4. Charity Commission, Reserves Policy
Section One: Criteria
Proposal 1: Adult Services grants funding is in place to meet the strategic priorities of the department and support a move toward the priority of well-being. We will agree annual priorities for the grants programme within this framework.
Proposal 2: We will include in the grants criteria a clause stating that Adult Services grant funding will be used to encourage new and innovative activity and to assist in developing the capacity of the voluntary and community sectors.
Proposal 3: We will aim for up to 15% of the Adult Services grants budget to be used to support new and /or innovative activity and contributes to the transformation of services under personalisation.
Proposal 4: We will appropriately adapt and adopt the Charity Commissions Reserves policy to enable the department to assess where reserves are legitimately held.
Proposal 5: We will include in the criteria for Adult Services grants the ability to provide pump-priming funding for up to two years. We will also ensure that on-going monitoring and review of these activities takes place to assess the need for and appropriateness of future funding streams.
Proposal 6: We will amend the criteria for Adult Services grants to enable the ability to fund at full cost, for a period of up to two years, for the purpose of pump-priming new and/or innovative activity.
Proposal 7: We will amend the criteria for receiving a grant to take into account the work that organisations have undertaken to secure alternative funding. Where three year grants have been made this will form part of the final year review.
Proposal 8: We will amend the grants criteria to allow some three year grants to be made.
Section Two: Process
Proposal 9: Where three year grants have been awarded we will replace the need to re-apply annually with formal annual reviews. We will also conduct an in-depth final year review that will be used to inform any potential renewal or change in any future funding agreement.
Proposal 10: We will adopt the review framework (presented in Executive Member report April 2008) to support the efficient and consistent monitoring and review of grant funding.
Proposal 11: We will set the grants application deadline to November and move the Executive Member Decision date forward to February.
Proposal 12: We will accept and encourage applications electronically.
Proposal |
Response Ratings % |
Key Themes / Comments (Respondent No.) |
Action/Implementation | |
1 |
P+ N- N A NA/Com |
77% 3% 8% 0% 13% |
1. Multi-agency/stakeholder priority setting "Local priorities set by district health and well-being partnerships, which should be linked to the Adult Services headings " "Who will HCC be seeking to agree the annual priorities with?...That said, workshops or other opportunities to facilitate dialogue with those parties with whom you are seeking to reach agreement would be helpful" "Annual priorities should be set after wide consultation " "Consultation with stakeholders " "Priorities are for commissioning only and apply across the full length of any funding decision. Annual priorities should reflect both LAA targets and consultation with 3rd sector organisations working on the 'front line' " "Known needs, properly researched and based on user feedback, aspiration and experience " "Knowledge regarding how Parish Councils might work with Adult Services is very sketchy - where do we start? " "Some discussion around who `we' is - suggestion for involvement from other agencies other than HCC officers and members, perhaps VCS representation, to contribute in setting priorities. " 2. Broad & flexible priorities "Annual priorities to be as broad and flexible as possible to encourage and enable bids from smaller organisations " "Early consultation is essential. Discussion on meaning of wellbeing, but felt a definition might remove flexibility. " 3. Implications of Discrimination? "What impact would a Freedom from Discrimination and Harassment priority have on a Scheme with a wider well-being agenda? " 4. Clear & well defined priorities & criteria "Key issue is that everyone understands what the criteria are, and they are as clearly explained as possible. Clarity - It gives organisations a better idea whether or not their project is likely to be funded " 5. Alternative/suggestion "Well being for adults 75+ " |
Strongly supported |
2 |
P+ N- N A NA/Com |
69% 10% 8% 0% 13% |
1. Preference towards funding established projects & services over innovation "Organisations should evolve naturally rather than be forced to change to get funding. Many could do more simply by being better funded " "Be wary of over stimulating the 'bright ideas' dept. Too many can subsequently dilute ongoing financial support to sustained, established projects " "Not be at the expense of highly valued and well-established projects " "If new projects are only funded, we would have great difficulties developing existing projects " "Provided that good existing projects survive " "Good to have but not at the risk of maintaining existing services " "Whilst innovative activity is laudable, there is already much humble & regular provision - we can't always be doing 'new' things " "Encourage quality services meeting local needs, which are not exclusively new ideas/services " "There are far fewer streams which are suitable for 'ongoing projects', regardless of how successful they are " Event Grp 3 supported this view 2. Agree with the proposal but with caution "Fine, so long as it is not a mandatory criteria " "Not as a means of hitting a prescribed target. Flexibility is the key " "The definition of what is 'innovative' should be broad and the ability to show 'innovation' should not prejudice funding against existing and successful schemes " 3. Alternative/suggestion "Can Stakeholders propose groups that could be considered for funding?" "Vol. Orgs. may also receive direct financial income from people in receipt of services through Personalisation. " |
Strongly supported |
3 |
P+ N- N A NA/Com |
21% 18% 15% 13% 33% |
1. Preference for a low-medium percentage (many existing grant schemes fund only new or innovative projects, so leaving limited grant schemes to apply for maintenance/sustenance funding) "10% - It is important to bear in mind that the majority of charitable Trusts, Big Lottery funds, etc, are focused on new initiatives " "Should be set low, say 5% " "No more than 7.5% " "Between 10% and 20% - should be an "aspiration" rather than a clear target to be achieved " "Would not like to see this money 'ring-fenced'. It should be an aim only. 25% is too high 15% in order to allow enough funding to sustain funding levels for groups that meet current criteria " "Minimum percentage target be just 5% " "5% is an appropriate " 20% 10% 25% 10% 20% 10% 5-10% 10% "Would agree to 15%, but this will depend on the take-up/applications received " "No more than 15% " Event Grp 3 supported this view 2. Preference for a higher percentage "A minimum of 20%. Innovation is vital " 50% 3. Alternatives/suggestions "A better way would be to identify needs and ask how organisations could help " "A phased introduction of the targeted amount i.e. 5% yr 1 12% yr 2 20% yr 4 and 25% from yr 5 " "Would like to see phased " "11 awards of up to £1000 each? " "There should be flexibility " "No fixed %. % could be compromised through financial commitments in any 3-year Agreements. Ought to be scope for innovation in existing grant agreements also." |
Split opinions |
4 |
P+ N- N A NA/Com |
41% 3% 15% 15% 26% |
1. Negative view of existing reserve criteria "3 months is too stringent anyway " "The existing reserves policy is too harsh " Event grp 3 expressed this view 2. Reserve issues for smaller organisations "We are a very small charity and have little or no reserve, especially for core costs and therefore we should be allowed to work a year in advance for security of the charity " !"Agree, but this could be an issue for small groups " 3. Alternative/suggestion "Guidelines as the Charity Commission " "It may be helpful to view this in conjunction with risk management statements of the individual organisation " "The important thing is that the organisation is viable and in a position to deliver " "There will need to be some careful examination of what is 'designated' in organisations accounts " "Even 'undesignated' funds are not excess if they are part of normal running costs. With Lottery funding often taking up to eight months to process, it is not unreasonable to hold at least nine months staff costs " "Not in favour. Bound by existing Charity Commission rules. Felt such a move could prove a disincentive " |
Supported |
5 |
P+ N- N A NA/Com |
67% 0% 0% 5% 28% |
1. Preference for longer term / 3-yrs "I think three year agreements would be better, and are somewhat standard nowadays " "For our financial stability it would be better to have designated funds over a period of time " "Our charity has now taken some of the work once carried out by Adult Services, therefore we need continuous funding in order to maintain the services as requested by the service users " "Agree, but 3 years preferred " 2. Alternatives/suggestions/general comments "Some flexibility for innovative services where the start is delayed " "HCC must recognise that pump-priming can create headaches " "Organisations should be encouraged to look at exit strategies and alternative funding sources to work towards early in the application process " "Reviewing the need for continuing funding is key " "It could be one year- then the desire must be fixed in real terms " "Two years is usual and the format described above works well when deployed by national funders " "2 year pilots inhibit risk-taking, ie if a pilot then there should be an acknowledgement of need to amend spec. if required. Also, usually a 6-9 month implementation period necessary and view that a full year's operation is necessary to prove the case for the work, and to attract additional sources of funding thereafter. Also issue of statutory staff notice requirements if grant is not to continue. " "Felt that the start-up period of a project needs to be taken into account, which can very variable depending on the nature of the project and organisation - 2 years may be sufficient for some, but not all. As much clarity is needed as early as possible about the arrangements of the pump-priming project (around development and support from HCC) to properly plan for it and undertake. Felt that objectives/milestones for the project should be set as early as possible." |
Strongly supported |
6 |
P+ N- N A NA/Com |
64% 10% 3% 8% 15% |
1. Negative concerns - cost to ASD, unfairness to `non-innovative' projects "This could be costly, perhaps full cost funding should be capped to a certain limit? " "Expensive?! We would have cost Adult Services 25k over our 1st 2 years. Help new projects develop, build confidence but beware feeling of over reliance on this source " "I would suggest that the time limits are short and sharp however (perhaps as little as 3-6 months) as this will encourage organisations to begin seeking out match funding or replacement funding asap and not build a reliance on the ASD fund I feel that there are more sources of funding for new/innovative services than there are for ongoing services. It does not therefore seem correct that new/innovative services have the possibility of receiving 100% funding if others do not." Alternative/suggestion "Major funders criteria should not be drawn too inflexibly" "There also needs to be clear guidance on the relationship and differences between Adult Services Grants and Contracts" "Agree, but again 3 years preferred" "Welcome, but because of the factors in 5 above, 2 years is felt to be too short a pump-priming period. 3 years was felt to be more appropriate." "Generally agreed. Some standard guidance around submitting/putting together a project proposal would be welcomed. Comments made that funders (HCC and others) normally seek evidence of additional funding being sought from other sources in grant applications, concerns that the fact that full cost would be paid needs to be explicit so the application can be completed to suit (perhaps a different application form, or a section in the application that can highlight the purpose of the application). Comments around what the definition of `full cost' is, if it's a new project initial planned costs/budgets may change (increase/decrease) through the life of the project, full costs may be difficult to predict - how can this be factored for. " |
Strongly supported |
7 |
P+ N- N A NA/Com |
26% 5% 5% 3% 21% |
1. Assistance/support from HCC in fundraising welcomed "Any joint partnership to secure funding should be encouraged. " "Hampshire VCOs have a particular difficulty in evidencing priority for national funds on the grounds that our pockets of deprivation are not fully recognised. " "Good - especially if organisations receive assistance in seeking other funding sources" "Agree - would like to see phased approach" "Maintaining the project after the agreement finishes can be a difficulty - support welcomed coming towards the end of an agreement." 2. Clarity in expectations, outcomes "A good level of clarity will be needed " "Clear outcomes need to be expected and delivered. If it is in line with Adult Services work, then asking the organisation to prove they have sought money elsewhere may be unproductive" "Where appropriate and possible. Expectation needs to be stated explicitly " 3. Individual arrangements "Would like to see this operate in addition to any more specific arrangements that may already be in place and working well " 4. Concerns over inconsistency "This view perpetuates the to-ing and fro-ing experienced by organisations who are at the mercy of varying beliefs with regard to responsibility for funding...Whilst these sources of revenue will always be sought to provide added value to any project; the public who are in need deserve better and consistency" |
Split opinions |
8 |
P+ N- N A NA/Com |
82% 3% 0% 0% 15% |
1. Preference for rolling 3-year grants "Funding should be in line with a clear process for re-engagement at the end of those three years without a gap which could lead to staffing crises " A call for 3-year rolling grants |
Strongly supported |
9 |
P+ N- N A NA/Com |
79% 0% 5% 0% 15% |
1. Desire for proportionality & non-bureaucratic approach / capacity/cost issues "A balance must be struck between accountability and stifling ability to deliver through monitoring burdens It is important that paperwork reflects the level of grant provided, and small organisations with less capacity are not over-burdened with monitoring requirements " "It must not become a bureaucratic, time consuming or expensive resource burden " "Indepth should not mean excessive paperwork " "Monitoring/review costs need to be factored into overall costs. " |
Strongly supported |
10 |
P+ N- N A NA/Com |
33% 0% 26% 8% 33% |
1. Too excessive for smaller grants "£2-5K seems low for annual review - suggest a light touch for anything below 10k " 2. More monitoring "Personally I would want all organisations to go through the most detailed version (£5k plus) " 3. Alternative/suggestion "An effective and responsive ongoing review process to change, amend or update as required through experiences in use should be included " "Need to clarify insurance requirements. " "Monitoring appears to be proportional to the level of funding. Welcomed that if these documents are provided upfront, expectations will be set of what is required throughout the duration of the grant, these documents can support a `no surprises' way of working. " |
Split opinions |
11 |
P+ N- N A NA/Com |
64% 5% 8% 3% 21% |
1. Preference for late, rather than early, autumn "Application deadlines in September could be difficult for VCOs in terms of budgeting for the next year. It would help if this was at least later in October " "Best deadline 30 Nov. Sept too early. " "September is too early. November would be more realistic." "November Sept November October November October " 2. Any change to be clearly, timely & well publicised "Provided deadlines are notified well in advance " "Feel the most important point is that organisations are informed of the funding decision with sufficient time to enable planning and any necessary process to take " "Provided the change is well advertised " "Supported, as long as the decision is brought forward. Very important where Grant Agreements are in place because of potential HR - staff notice periods - implications. " 3. Suggestion/alternative "Propose 2 application periods per year " I"ssue with annual reports not being produced until Autumn time " |
Strongly supported |
12 |
P+ N- N A NA/Com |
77% 5% 8% 0% 10% |
1. Signature issue "Consider signature? " "Signature requirements " 2. Flexibility & ease of use "It is essential that they can be done in Word " "Make it easy to save the document half way through" 3. Allowance for non-IT literate orgs "Not all the Voluntary Sector is that IT literate yet! " "Paper based system for those small organisations/clubs which as yet do not have access to electronic communications Electronic application should never become mandatory " 4. Allowance for electronic submission of supporting documents (declaration at application stage & submission if grant awarded) 5. Security "Broad agreement, though some concerns about security of transmission. An acknowledgement of receipt was regarded as necessary. " |
Strongly supported |
Consultation questions
Please note: all of the information that you provide will be used anonymously for the purpose of this consultation.
Section One; Criteria
Proposal 1: To ensure that Adult Services grants funding meets the strategic priorities of the department and supports a move toward the priority of well-being. We will agree annual priorities for the grants programme within this framework. Do you agree with this approach? Do you have any other suggestions about how we could agree annual priorities?
Proposal 2: To ensure that Adult Services grant funding encourages new and innovative activity and is able to assist in developing the capacity of the voluntary and community sectors we are proposing that this is included in the criteria for assessing grant applications. Please tell us what you think of this proposal?
Proposal 3: To ensure funding is available for new and/or innovative services we would like to propose a minimum percentage of the annual grants budget is used for this purpose. This could be within a range from 5% to 25% What are your views of this proposal? Do you feel this is the right approach to encourage innovation? What percentage do you feel would be an appropriate amount?
Proposal 4: We wish to amend the criteria to state that reserves that could be considered as excess will be those that are undesignated. Please tell us what you think of this proposal?
Proposal 5. To seek to provide pump-priming funding to new and/or innovative activities for a period of up to two years. We will also assess the requirement for continued funding during this period and review this at the end of the funding arrangement. Please tell us what you think of this proposal?
Proposal 6: We wish to have the ability to fund new and/or innovative services at full cost in order to pump-prime , where this is required and judged appropriate, for a period of up to two years. We would also like to amend the criteria for Adult Services grant accordingly. Please tell us what you think of this proposal.
Proposal 7: It is proposed that as part of the formal monitoring and evaluation of funded activities that account is taken of the work that organisations have done to secure other and/or alternative funding for the activity currently supported by Adult Services. Where funding has been provided for a three year or pump-priming agreement the final year review will evaluate what future funding arrangements are most appropriate. Please tell us what you think of these proposals?
Proposal 8: To seek to issue 3 year funding agreements where these are appropriate, with annual renewal subject to demonstration of meeting agreed outcome or performance measures. Please tell us what you think of this proposal?
Section Two; Process
Proposal 9: Where 3 year grant agreements are awarded, we will replace the need to reapply annually for renewed grant funding with annual reviews. We will also conduct an in-depth final year review that will be used to inform any potential renewal or change in any future funding agreement. Paperwork for this process is contained in appendix 1-4. Please tell us your views on this proposal.
Proposal 10: To adopt the new draft paperwork (review format) at Appendices 1-4 (of the full consultation document) to support the efficient and consistent monitoring and review of grant funding. Do you have any comments on the draft paperwork?
Proposal 11: We will consider the possibility of moving the grants application deadline forward to before Christmas. This would mean that the deadline moves to a point within the period September to November. Please tell us your views on this change and when you think would be the best deadline for application and decisions?
Proposal 12: To encourage the submission of applications electronically and make this method of application the norm by 2009/10. Please let us know your views on this proposal?
1. Most charities are keenly aware of the need to secure their viability beyond the immediate future. To provide reliable services or funding over the longer term, charities must be able to absorb setbacks and to take advantage of change and opportunity. Many provide for this by putting aside, when they can afford it, some of their current income as a reserve against future uncertainties.
2. Underlying much public discussion of charity reserves is the belief that holding significant amounts of reserves is tantamount to hoarding. This belief is likely to persist unless charities justify and explain their reserves position. Our regulatory studies on reserves (studies RS3, RS5 and RS13) show that too many charities still do not explain their reserves, with the most recent study RS13 indicating 57% of charities had no policy but held £3.6bn of reserves. The giving public are not generally concerned with the legal and accounting technicalities. But they are entitled to be reassured that a charity with reserves has good reasons for keeping funds in reserve, and to know what those reasons are. Ideally, a charity would want to show donors and others that it would be irresponsible not to hold the level of reserves it holds.
3. The fact that a charity holds, or does not hold, reserves is not in itself reason either to criticise or to commend the charity. In our view a charity should be judged on whether or not its level of reserves, whatever it is, is justified and clearly explained. Justifying reserves - a central theme of this guidance - does not mean excusing or being defensive about reserves. It means being able to demonstrate, by reference to a charity's current position and future prospects, why holding a particular level of reserves is right for the charity at that time.
4. We explain in this guidance what we think a charity should do to justify its reserves in that sense. Our aim is also to help trustees and senior staff make decisions about reserves levels in a way that is consistent with the legal requirements for the use of charity income, which are explained in paragraphs 29 to 35.
5. Charity trustees are publicly accountable for their stewardship of charitable funds through the preparation of an Annual Report and accounts. Specific requirements are placed on charity trustees to describe within their Annual Report the policies adopted in relation to reserves. These reporting requirements are explained in paragraphs 55 to 57. The key elements that we consider appropriate for a reserves policy are set out in paragraphs 42 to 47 and some of the factors that will inform the trustees in their setting a policy are set out in paragraphs 48 and 49.
6. Responsibility for establishing an appropriate reserves policy lies with the trustees of each charity, as does the responsibility for justifying and explaining what the charity is doing in that respect. It is not for us to substitute our own judgments for those of reasonable trustees who know the business of their charity, who have taken care to plan properly and who have justified their plans.
7. It is our responsibility to concern ourselves with the way in which trustees are managing their resources. Our powers of intervention arise when resources are mishandled or put at risk. But we do not think it helpful to do nothing until things reach that point. Accordingly we believe it our duty to encourage trustees to apply the principles set out in this guidance.
8. If we come across a charity where the trustees have not done this, or where the level or use of reserves seems unjustifiable by any reasonable measure, we will begin by exploring the reasons with the trustees. We will continue to encourage them towards the principles of this guidance. Cases where we have to use any of our statutory powers to secure the necessary changes are likely to be those few in which mismanagement or misconduct persist, charity resources are at risk, or breaches of the law remain uncorrected.
9. For more detailed coverage of the issue and how we discharge our role, you can read our Operational Guidance (OG 43 - Charities' Income Reserves, written primarily for our staff) on our website.
Meaning of words and expressions used
SORP 2005
10. 'SORP 2005' means Accounting and Reporting by Charities - Statement of Recommended Practice. SORP 2005 sets out recommended practice for charities in the preparation of Annual Reports and accounts, the key elements of which are underpinned by the 2005 and subsequently the 2008 Regulations. SORP 2005 and a range of related guidance are available on our website.
11. The following terms are used in this guidance with the same meanings as they have in the SORP 2005. Readers not familiar with SORP 2005 will need to study these meanings carefully to make the best use of this guidance.
Capital
12. In the context of charity law 'capital' means resources which become available to a charity and which the trustees are legally required to invest or retain and use for its purposes. 'Capital' may be permanent endowment, where the trustees have no power to convert it into income and apply it as such, or expendable endowment, where they do have this power.
¬ Permanent endowment has a statutory definition (in s96(3) of the Charities Act 1993) and is explained more fully in SORP 2005. Following is the first part of the SORP 2005 explanation:
'An endowment fund where there is no power to convert the capital into income is known as a permanent endowment fund, which must generally be held indefinitely' (SORP 2005 App 3, para 3.3).
¬ Expendable endowment is an endowment fund where the trustees have the power to convert the property (ie land, buildings, investments or cash) into expendable income. It is distinguishable from 'income' by the absence of a positive duty on the part of the trustees to apply it for the purposes of the charity, unless and until this power to convert into 'income' is actually exercised (SORP App 3, para 3.3).
Income funds
13. Income is used in this guidance to describe all resources which become available to a charity and which the trustees are legally required to apply in furtherance of its charitable purposes with a reasonable period of time. Income funds represent that unexpended amount of such resources. Income funds may be unrestricted or restricted to a particular purpose of the charity.
Restricted funds
14. Restricted funds are funds subject to specific trusts, which may be declared by the donor(s) or with their authority (eg in a public appeal) or created through legal process, but still within the wider objects of the charity. Restricted funds may be restricted income funds, which are expendable at the discretion of the trustees in furtherance of some particular aspect(s) of the objects of the charity. Or they may be capital (ie endowment) funds, where the assets are required to be invested, or retained for actual use, rather than expended (SORP 2005 App 3, para 3.2).
Unrestricted funds (including designated funds)
15. Unrestricted funds are expendable at the discretion of the trustees in furtherance of the charity's objects. If part of an unrestricted fund is earmarked for a particular project it may be designated as a separate fund, but the designation has an administrative purpose only, and does not legally restrict the trustees' discretion to apply the fund. Some trustees have power to declare specific trusts over unrestricted funds. If such a power is available and is exercised, the assets affected will form a restricted fund, and the trustees' discretion to apply the fund will be legally restricted (SORP 2005 App 3, para 3.1).
The 2005 Regulations
16. These regulations are The Charities (Accounts and Reports) Regulations 2005 SI 2005 No 572. The 2005 Regulations cover the legal requirements in a number of areas including:
¬ the form and content of accruals accounts;
¬ the form and content of Annual Reports;
¬ the accounting methods and principle which must be followed in preparing accruals accounts; and
¬ the further information which must be provided in the notes to accounts.
What are a charity's reserves?
17. The term 'reserves' has a variety of technical and ordinary meanings, depending on the context in which it is used. As in SORP 2005, here we use the term 'reserves' (unless otherwise indicated) to describe that part of a charity's income funds that is freely available. 'Reserves' are therefore the resources the charity has or can make available to spend for any or all of the charity's purposes once it has met its commitments and covered its other planned expenditure.
18. More specifically SORP 2000 defines reserves as income which becomes available to the charity and is to be spent at the trustees' discretion in furtherance of any of the charity's objects (sometimes referred to as 'general purpose' income); but which is not yet spent, committed or designated (ie is 'free'). This definition of reserves therefore normally excludes:
¬ permanent endowment;
¬ expendable endowment;
¬ restricted funds;
¬ any part of unrestricted funds not readily available for spending, specifically:
¬ income funds which could only be realised by disposing of fixed assets held for charity use and programme related investments.
19. There is an argument for saying that expendable endowment and designated income funds ought to be counted as reserves. The argument is that in each case the trustees are free to regard the funds, if they so choose, as available for general purpose expenditure. There are no legal restrictions preventing trustees treating those two types of funds as free, general purpose funds. But there are practical reasons, explained below, why the funds should not normally be regarded as free (though there are exceptions).
20. By contrast, restricted funds can never be regarded as general purpose funds. Restricted income funds do not fall within the scope of reserves as the term is used in this guidance. Nevertheless, the legal principles on the retention of income apply to restricted income funds, as do the principles of justifying and explaining any retention. For the purpose of applying the principles in this guidance it is suggested that trustees treat each restricted income fund as if it were a separate charity. Thus, each material restricted income fund could have its own 'reserve', reflected in an unspent fund balance which should be justified and (if practicable) explained in its own right.
21. When invested an expendable endowment, like a permanent endowment, provides a relatively secure and predictable stream of income. The advantage of an expendable, over a permanent, endowment is that it also gives trustees the option of spending all, or part, of the endowment itself.
22. In reality many charities with an expendable endowment depend on the income it produces to fund core or continuing activities. Expending any of the endowment itself would reduce the income from it and might jeopardise some of those activities. The charity would then either have to increase its income from other sources - which, if that were readily feasible, the charity would surely have tried to do anyway - or have to cut back its activities. The endowment cannot be regarded as free funds if a charity has that degree of dependence on income from it.
23. Trustees who make a regular practice of reinvesting some of their income with a view to building up the principal of the endowment will need to think very carefully about the justification for doing this, since the income should normally be spent.
24. Reinvesting income generated from capital funds does not have the effect, legally, of converting the income into extra capital. The reinvested funds remain income funds and must be treated as such: adding them to the principal does not overcome this obligation.
25. Designation is an administrative act by which trustees may earmark unrestricted funds for a particular project or use, without restricting or committing the funds legally. The designation may be cancelled by the trustees if they later decide that the charity should not proceed or continue with the use or project for which the funds were designated.
26. The act of designating particular funds neither:
¬ allows those funds to be used for a purpose for which they could not previously be used; nor
¬ by itself provides a justification of their use for the designated purpose.
27. SORP 2005 requires the reserves policy statement in the trustees' Annual Report to quantify and explain the purpose of any material funds which have been designated, and where these are set aside for future expenditure the likely timing of the expenditure (SORP 2005 paragraph 55a). SORP 2005 also states that if the trustees set up a designated fund the notes to accounts should explain why trustees have set up such a fund (SORP 2005 para 75b) and be fully described (SORP 2005 paragraph 329) in the note to the accounts. It further states that a brief description should be given of the different types of fund held by the charity, including an explanation of any transfer between funds and allocations to or from designated funds (SORP 2005 para 75d). We expect charities to follow this recommendation and to ensure that the amount of any funds held as designated funds is appropriate to the purpose or use for which the funds have been designated.
28. A charity will not be justified in creating, or transferring resources to, a designated fund where the main purpose of doing that is to allow the charity to show a reduced level of reserves.
Legal basis for holding reserves
29. 'Income reserves' are defined in the 2005 Regulations as "those assets in the unrestricted fund of a charity which the charity trustees have, or can make, available to apply for all or any of its purposes, once they have provided for the liabilities of the unrestricted fund, together with any commitments of the charity and other planned expenditure intended to be met from the assets of the unrestricted fund". There is, however, no specific legal rule about the amount or proportion of a charity's income funds which it is allowed to hold as a reserve.
30. Trustees are under a general legal duty to apply charity funds within a reasonable time of receiving them. With income funds 'apply' can, in practice, be taken to mean 'expend' unless the governing document specifies otherwise.
31. Before trustees can use income funds in a way which does not comply with this duty, they need to have a legal power which overrides this general duty. Holding income funds in reserve rather than expending them is one use that does not comply with the duty, since the trustees are delaying the application of the funds beyond what the law would normally accept as a reasonable time. Trustees therefore need a legal power to hold income funds in reserve.
32. A small number of trustees have an express legal power in their charities' governing document to hold income in reserve instead of expending it promptly. Much more often, trustees will not have an express power and will have to rely on their implied power - a power not written into the governing document but one which the trustees possess in order to take actions which are necessary for the charity to function properly. As with all discretionary powers, trustees are justified in exercising their power to hold income reserves - whether express or implied - only if in their considered view it is necessary in the charity's best interests to do so.
33. If it is done without justification, the holding of income in reserve may amount to a breach of trust. In paragraphs 40 to 49 we give our view on what steps trustees should take to be sure that they have justified the holding of reserves.
34. Some trustees have in their governing document a power to convert income into capital, which is not the same as a power to hold income in reserve. Converting income into capital takes the converted resource outside the scope of reserves (since our definition of reserves does not include any capital funds).
35. Some charities have reinvested income regularly over a number of years by adding it to the principal of their expendable or (as the case may be) permanent endowment. If they have not kept precise records they may now be unable to specify exactly what portion of the invested funds represents income and what portion represents capital. We would nevertheless expect a charity to be able to make an estimate of the size of the respective portions. We will not, as a general rule, require charities to draw up plans for spending the income portions immediately. But we may ask a charity to justify any plans it has for continued retention of those income funds. If in future the charity intends to reinvest income as it arises we may ask it to justify that too.
Charities with more resources than they need
36. If a charity has more resources than it could reasonably need to fulfil all of its purposes, the trustees should contact us. The law requires that charitable resources are applied for charitable purposes, even if trustees cannot find a way of using those resources within their existing objects. In the case of an unincorporated charity, we can help by making a Scheme altering the governing document to allow the charity to use its resources more widely than its existing objects permit. Trustees have a legal duty (under s.13(5) of the Charities Act 1993) to apply for such a Scheme where it is appropriate. Our guidance Changing your Charity's Governing Document (CC36) gives more information. Further information is also contained in our Operational Guidance (OG1 - Orders and Schemes, written primarily for our staff) on our website. An unincorporated charity whose income did not exceed £10,000 in its last financial year and which does not hold designated land can use section 74C of the 1993 Act to amend its purposes so it is able to apply its resources. Charitable companies can also amend their objects provided they obtain our prior written consent under section 64 of the 1993 Act.
37. Income is generally exempt from direct tax if it is both applicable, and actually applied, for charitable purposes only. H M Revenue and Customs normal practice is to allow tax exemption on income which either has been expended for charitable purposes or has been invested for the benefit of the charity.
38. Tax exemption is not available if either:
¬ the income has been invested in an investment which is not a 'qualifying investment' (within the meaning of Schedule 20 to the Income and Corporation Taxes Act 1988). Investments made for the benefit of a charity and not for the avoidance of tax are likely to count as qualifying investments, but trustees in any doubt whether or not an investment is a qualifying investment will need to take advice; or
¬ the income is retained in the charity's hands without being placed on deposit or otherwise invested.
Donations and legacies: are they income or capital?
39. People who give or leave money to charities do not usually specify whether their donation or legacy should be treated as income or as expendable endowment. If any evidence exists, or can be inferred from the circumstances of the donation or legacy, that a donor or testator had a specific intention one way or the other, the charity must treat the gift or legacy accordingly. But if there is no such evidence the donation should be treated as income and the trustees should use it in any way they think will benefit the charity that is consistent with the terms of the charity's governing document.
40. Paragraph 55(a) of the SORP 2005 requires trustees to include a statement in their Annual Report about the level of reserves held and the reasons for this (see paragraph 56 below for more guidance on this). To justify their holding of reserves, trustees should have a reserves policy based on a realistic assessment of their reserves needs.
41. A charity which builds up reserves by retaining, as a matter of habit alone, any annual surpluses it makes will scarcely be able to justify holding those reserves.
42. In some (larger) charities the policy will be proposed by senior employees or by a sub-committee of the trustee body, but it should be formally agreed by the trustees acting as a board and recorded in writing.
43. The policy should cover as a minimum:
¬ the reasons why the charity needs reserves;
¬ what level (or range) of reserves the trustees believe the charity needs;
¬ what steps the charity is going to take to establish or maintain reserves at the agreed level (or range); and
¬ arrangements for monitoring and reviewing the policy.
44. We stress that the amount of time spent preparing the policy, and the detail with which it is set down, should be in proportion to the scale and complexity of the charity's affairs. A small charity with a simple, stable pattern of receipts and payments, few if any commitments, and little susceptibility to outside influences should be able to cover the matters above relatively quickly and to record briefly the trustees' conclusions.
45. Without a reserves policy trustees cannot be confident that their reserves level matches the charity's needs at the time. The charity could be holding reserves that are too high or too low for its needs. If a charity's reserves are too high, it is retaining income funds without justification. Those funds ought to be expended for charitable purposes. While the funds remain in the trustees' hands the charity's current users or beneficiaries - actual or potential - are not being as well-served as they could be.
46. If a charity's income is volatile or insecure, it has high commitments, and its state of affairs is highly susceptible to factors outside its own control, it may find that its reserves are too low to protect it from the risk of insolvency or serious disruption to its charitable work.
47. Some charities will be able to justify holding a certain level of reserves but will be unable to build up reserves to that level, or perhaps to any level at all. Many recently established charities, in particular, will be in that position. While we accept that some charities will simply not have had the resources to establish any reserves, we would still expect a charity in that position to have given thought to a reserves policy even if it currently has no reserves.
Realistic assessment of reserves needs
48. A charity's reserves policy should be informed by:
¬ its forecasts for levels of income in future years, taking into account the reliability of each source of income and the prospects for opening up new sources;
¬ its forecasts for expenditure in future years on the basis of planned activity;
¬ its analysis of any future needs, opportunities, contingencies or risks the effects of which are not likely to be able to be met out of income if and when they arise; and
¬ its assessment, on the best evidence reasonably available, of the likelihood of each of those needs etc arising and the potential consequences for the charity of not being able to meet them.
49. Trustees who hold reserves without making any attempt to relate their need for reserves to factors such as these will probably have great difficulty explaining in any convincing way why they hold those reserves.
50. Any charity could find its reserves subject to scrutiny and comment in the public arena. Charities which are likely to attract the most attention, especially if they hold sizeable sums as reserves, are those:
¬ which operate in areas where there is clear evidence of immediate human need; or
¬ which rely on a strong emotive appeal involving vulnerable groups or animals; or
¬ which are running public appeals emphasising the urgency of their own need for donated funds.
51. There is a risk that charities in that position could be seen as self-indulgent, because they are retaining funds which could be used with immediate effect to alleviate acute need. Compliance with the requirements in SORP 2005 and providing a clear and positive explanation of the reasons why reserves are held will greatly reduce this risk.
52. We believe that once a charity has taken the trouble to explain its reasons, the great majority of its donors, supporters and users/beneficiaries will be quite prepared to accept that it should hold appropriate reserves.
53. Charities applying to statutory or voluntary funders are also likely to have their reserve levels closely assessed.
54. Commentators, funders, charities and ourselves all have a part to play in promoting a better-informed treatment of the subject of reserves. The following paragraphs are concerned with charities' reporting of their reserves. We set out below what is required by SORP 2005 and how trustees should set about complying with those requirements.
55. A charity's purpose in reporting on its reserves is to disclose the level of them and to explain convincingly why it needs to retain them at that level.
56. Paragraph 55(a) of SORP 2005 requires trustees to include in their Annual Report information about their charity's reserves policy and the level of reserves held. In particular, trustees should:
¬ describe their charity's reserves policy;
¬ explain why they hold or do not hold reserves;
¬ quantify and explain the purpose of any material designated funds, and where set aside for future expenditure, the likely timing of that expenditure; and
¬ give the level of reserves at the last day of the financial year to which the report relates.
57. Paragraph 21 of SORP 2005 states that "a departure [from the recommendations of SORP 2005] is not justified simply for the purpose of presenting to the reader a more appealing picture of the financial position or results of the charity".
58. Every charity is responsible for ensuring that its appeals do not misrepresent the charity's financial position. This is the case whether the appeals are for voluntary public donations, corporate donations, legacies, grants, or any other form of income, and whether they are made by advertising, direct mail, in person, or by any other method.
59. If a charity is widely believed to have large reserves, appeals for further funds may provoke resentment against the charity for apparently seeking funds which it does not need. In wording its appeals, and in dealing with any reaction to the appeals, it should take care not to give anyone the wrong impression about the extent or urgency of its need for funds.
Significant changes from the previous version of this guidance
The principal changes in this version of this guidance compared to the previous (April 2002) version reflect the requirements introduced by SORP 2005 and the 2005 Regulations for including in the trustees' Annual Report information about a charity's reserves (see especially paragraphs 55 to 57).
Other minor and consequential amendments have also been made to keep the text as up to date as possible and to refer readers to the Operational Guidance on this issue available on our website.
We would be particularly interested in receiving feedback as to how useful this feature is to readers. As with any other feedback or suggestions for improvements to our publications, please write to the Head of Publications at our Taunton office. Readers should note that a completely new revision of this guidance is being undertaken in the autumn of 2008 to reflect our new publications style and developments in good practice and the reporting of reserves.