Earlier this year BDO welcomed chairs from charities with federated structures or affiliated local associations working under the umbrella of a national charity. Interesting discussions were had on the benefits of this model and the challenges faced, a summary of which is provided in this short briefing paper.
The roundtable lunch was attended by chairs from various large and medium size charities with either a federated model or network of affiliates. We were also joined by the Chair of Victim Support, a charity that in its recent history collapsed its federated model in favour of one central charity.
Learnings from Victim Support
Victim Support started as a single charity and grew quickly with 500 separate groups which led to a patchwork of services with different scale/capabilities and different standards. In 2002 the charity combined groups to reduce from 500 to 90 and in 2008 the remaining 90 were amalgamated into one central charity. The charity is mainly funded by a government commissioned contract to fulfil a statutory obligation and there was a driver through the funding to deliver one single consistent service. The Chair reported that the positive outcomes were an improved funding model, consistency of service and utilisation of local reserves for the benefit of the charity as a whole. The downside has been the loss of local networks, supporters and fundraisers and the stifling of local innovation.
Key points arising from group discussion
Is this the end of the federated model?
The resounding response was no, this isn’t the end of this form of structure for charities.
A major benefit of the federated model is the ability to work locally, harness a local taskforce and address local issues under the umbrella of a national brand charity. The Government’s recently published Civil Society Strategy seems to also see localism as positive stating “We also benefit from the sense of belonging that comes from feeling connected to our neighbours and from taking responsibility from the places we belong to.”
Other positives noted were the ability to attract volunteers and fundraising through a local presence.
There is mounting evidence that the general public’s perception of small, local charities is actually far more positive than that of their bigger counterparts.
A 2013 study by Borgloha et al found that, given the choice between donating to (otherwise equal) large or small charities the vast majority of people (73% -27%) chose to donate to small charities. Another recent study by Hall et al has shown that the public are often much more receptive to calls for donations from “local” charities than national or international charities.
Local trustees can be difficult to recruit and sometime do not understand their role, especially if local charity is unincorporated.
The key for any charity is to get a good board and regularly review the skills and performance of the board (both nationally and locally). It is important to collaborate with the chief executive and have clear and open lines of communication between the management and the board. And the board shouldn’t be afraid of asking questions.
New trustees now receive a welcome pack by email from the Charity Commission when registered as a trustee, covering matters such as; getting to know your charity; trustee duties; decision making and what to do if things go wrong. This is a useful first step in informing new trustees of their role but need to be followed up with regular communication and training.
Use of the charity governance code to benchmark your charity policies and practises is also a useful tool for all boards. https://www.charitygovernancecode.org
Charities need also to be aware of changes to automatic disqualification rules from 1st August expanding the reasons for individuals to be disqualified from acting as a trustee or in a senior management position in any charity.
There were however noted some challenges to overcome for charities with federated models:
Ensuring that local branches/affiliations are providing a consistent level and quality of service. This could be achieved by a system of peer review; KPI reporting; quality standards with 3rd party review.
It is important that trustees, management, staff and volunteers across the federation receive adequate training whether this is delivered centrally or locally.
Ensuring consistency of message both internal and externally. Charities need to ensure they avoid a Chinese whispers effect as messages are cascaded throughout the federation.
There can a fear/lack of trust locally for the “central” charity but collaboration across the federation is key to future success a government and the public are looking for greater collaboration in the sector.
It is important to establish sustainable funding models between branches and central charity. How will branches fund the resources/support they receive from the central charity? This may be through an affiliation fee.
Use of local reserves is an emotive subject for local branches but there is often great wealth in some branches that could be better utilised centrally. It may be that you ask branches to fund specific central projects/pilots
Is the federation and its local branches keeping up with technological advances? Local branches provide a local face to face presence but does that presence need to be physical or could it be digital?
Ensuring GDPR rules are adhered to is more difficult with devolved systems and processes but he reputation risk will be with the central charity. Cyber security is also a key risk
Risk to brand is greater for a federated model charity as there is devolved control. Charities will need to ensure they have appropriate incident report mechanisms as transparency is key for the sector currently
If you would like to discuss any of the matters raised in this briefing or to receive invites to future events and relevant publications please email firstname.lastname@example.org