Gift Aid
Charity or business?
To be more effective, charities must begin to mimic businesses. By Barry Gower
In the opening editorial of the first issue of Funding for Independent Schools, editor Andrew Maiden encourages “headmasters and bursars to take a business-like approach to [fundraising for] their schools”. The recent report produced by the Institute of Fundraising (Promoting Tax-effective Giving), in referring to gift aid, says “charities need to get more business-like”.
Why is there such a strong call for charities to act like businesses? Surely, they are at opposite ends of the spectrum, where business is competitive and emotionless, and charity is exactly the opposite? There’s the rub. There is no such thing in law as a “charity”.
Charities only
“But,” you may react, “there are over 180,000 charities registered with the Charity Commission alone”. True, but let me explain. They are all bodies of one form or another that have been awarded charitable status by the Commission and so can call themselves “charities” (technically, only bodies with a turnover of more than £10,000 per annum have to register, but they are still bodies with charitable status. There are many types: groups, associations, institutions, societies and companies. The latter, either with limited liability or limited by guarantee, form a large proportion of the numbers and will have to observe the usual statutory obligations applicable in company law, as well as the additional requirements imposed by the Charity Commission. The true description of “a charity” is really “a body which has charitable status”.
So, instead of being “just a charity’’, a charity is actually a highly regulated body, subject to both the requirements of company and charity law.
High returns
One of the key purposes of a company is to secure a maximum return from shareholders’ investment. This is relatively easy to measure in the corporate world as the commodity is measurable – money. For a charity, it is not so easy as the “returns” are far more difficult to measure.
In every undertaking, there is always a consideration of return on investment (RoI). This answers the question “are we getting the most/best return for the effort/money put into this activity?” There are many aspects to be considered – is this a short-term or long-term activity, are there non-quantifiable elements such as growth strategy, buying market share, creating a brand image and so on. Yet these have to be considered in terms of the whole of the business.
Charities, on the other hand, tend to be driven more by habit and tradition. The question is more “what is the theme for this year’s school fete?”, rather than “should we consider a different form of fete, or should we use resources for a completely different fundraising activity which may be more cost-effective and bring in more money?”
The second commercial purpose is that once the business (or fundraising) activity has been agreed, ensure that it is being carried out in the most (cash) effective manner.
Getting your due
Schools registered as charities can improve their own returns by taking advantage of the change in the gift aid law from April 2000. Yet the evidence of the IoF report is that charities are still only claiming 30 per cent of the available gift aid, with over £850 million lost each year. Any board of a commercial business who reported such figures would be called to account by their shareholders. As an independent school, I suspect that many of your own trustees sit on such boards and would not accept this.
So, the challenge is this:
- do you know the efficiency of your individual fundraising, in particular your gift aid recovery?
- are you sure that everything is being done to ensure that all your gift aid is being recovered and your fundraising is operating as efficiently as possibly? and
- if not, do you and your trustees have an alternative action plan?
Whatever you do, make sure that you do something, soon and in a business-like manner – otherwise you may just find that you are no longer in business, charity or no charity.
Barry Gower is managing director of GAIN (Gift Aid Recovery Consultants). Barry can be contacted on bg@gain.me.uk or 020 8868 1307.
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