LBTH Local Community Fund (LCF) Finance Workshop

1. LBTH LOCAL COMMUNITY FUND (LCF) FINANCE WORKSHOP Thursday 09th May 2019 Steve Roberts SUPPORTED BY LB TOWER HAMLETS

2. Programme for today • Welcome • Introductions • Run through the Financial Guidance and Assessment Criteria (Including Financial policies) • Full Cost Recovery Budgeting principles • Cost of a post (pensions, ENIC) • BREAK • LCF Budget Template • One to One project specific questions SUPPORTED BY LB TOWER HAMLETS

3. Financial Business planning Medium or small organisation – a document which demonstrates the organisation has considered the seven key issues in detail. Level of detail will be proportionate to the size of the organisation SUPPORTED BY LB TOWER HAMLETS

4. Full three to five year plan which includes: • Organisational purpose, aims & objectives • Client need – evidence that is verifiable • Strategic context, i.e policy environment, issues affecting clients, how needs may change over time (could be PEST analysis -  political, economic, social and technological factors that may have an effect on a project and its planning process ) SUPPORTED BY LB TOWER HAMLETS

5. Assessment of organisational capacity (i. SWOT analysis - SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face.) • Plans for next 3-5 years (yr 1 in detail) • Resources required to fulfil plans • Risk assessment and contingency planning SUPPORTED BY LB TOWER HAMLETS

6. Financial management and viability • You must keep to all financial and accounting requirements of charity and company law, if appropriate. • You must follow good practice in relation to the business’ financial controls. • You must be able to provide accounts appropriate to the size of your organisation SUPPORTED BY LB TOWER HAMLETS

7. Financial management and viability • Accounts meet charity commission or other regulator’s standards • Yes to 50%+ questions on ‘Finances’ • Balanced income and expenditure budget for the organisation • Latest annual accounts show that the organisation does not have creditors/debts which appear unserviceable over the coming year(s) given their average income of unrestricted or designated funds. SUPPORTED BY LB TOWER HAMLETS

8. Financial management and viability • The organisation is able to demonstrate income from a diversity of funding sources • The organisation has a clear reserves policy which is appropriate for its size. • NB • New organisations will not have accounts. Assessment should therefore exclude reference to accounts but include all other points. SUPPORTED BY LB TOWER HAMLETS

9. Reserves Policy - A good reserves policy doesn’t have to be complicated or lengthy, as the following example shows:- “The trustees have reviewed the charity's needs for reserves in line with the guidance issued by the Charity Commissioners. These amount to £xx,xxx which approximates to three months running costs. The trustees believe that, taking into account the need to safeguard the charity's services in the event of delays in receipt of grants, reserves should be at least at this level to ensure the charity can run efficiently and meet the needs of the beneficiaries.” SUPPORTED BY LB TOWER HAMLETS

10. Now let us have a look at the sample Financial Policy SUPPORTED BY LB TOWER HAMLETS

11. Full Cost Recovery (FCR) FCR is a process. The aim is to - find out the whole cost of projects or services. • torecover “core costs” e.g. rent or heating/ lighting costs that relate to the project or service. • Funders have different definitions of “core” and “project” costs so always check the guidance SUPPORTED BY LB TOWER HAMLETS

12. Effective Budgeting • A common problem in fundraising is that the costs of delivering a project or service are not accurately calculated • Many times funding applications do not ask for enough money to deliver the work properly. Effective budgeting enables you to work out what it actually costs to deliver services – what is often referred to as Full Cost Recovery • It is important to make sure that all the costs are covered when planning the budget SUPPORTED BY LB TOWER HAMLETS

13. A budget is an estimate of the Income that you hope to generate, and the Expenditure you expect to incur in carrying out the plan. The budget will usually group expenditure as • Direct Costs, Indirect Costs, Governance & Strategic Development • Fixed Costs, Variable costs SUPPORTED BY LB TOWER HAMLETS

14. DIRECT COSTS Direct costs are the costs of those activities that constitute the activity [output] itself and are incurred in direct contact with the project’s beneficiaries. INDIRECT COSTS Indirect costs are costs of activities, which provide indirect support to the direct service/projects or outputs. These are central functions such as payroll, finance, information technology (IT) and others such as the Chief Executive, etc SUPPORTED BY LB TOWER HAMLETS

15. “Fixed costs" are those which you have to pay regardless of your level of activity • "Variable costs", are those items of expenditure that fluctuate depending on your activity level SUPPORTED BY LB TOWER HAMLETS

16. Useful contacts https://www.thcvs.org.uk/training https://www.gov.uk/government/organisations/charity-commission https://www.ncvo.org.uk/practical-support https://www.gov.uk/claim-gift-aid/gift-aid-declarations https://ico.org.uk/for-organisations/data-protection-reform/overview-of-the-gdpr/ THANK YOU! SUPPORTED BY LB TOWER HAMLETS