Charity advisers: The Professionals - Part Four - The others

In the final instalment of his investigation into professionals who advise the third sector, John Plummer looks at financial experts, governance consultants, public relations specialists and other players in the consultancy gang.

PEAK PRACTICE

Financial advice paid off for one CVS

High Peak CVS in Derbyshire paid consultant Dr Gareth Morgan £480 for a day's work after it became VAT-registered. Like most small charities, the 17-strong organisation doesn't employ a tax expert. "I'm doing an accountancy course, but it covers only basic VAT," says finance manager Gina Spencer.

Morgan calculated the VAT position and trained Spencer to do it next time. "It was an intense day for me," she says. "I would have put standard rate next to some items that should have been partially exempt and vice versa, so it saved us money and a fine."

Morgan says: "High Peak CVS was aware that the charity had income that might possibly take it over the VAT threshold. Although the treasurer is a professional accountant, he is not a specialist on VAT for charities."

Morgan and his wife are sole partners of consultancy firm The Kubernesis Partnership. He also heads the Centre for Voluntary Sector Research at Sheffield Hallam University. He says he works with charities in Yorkshire, the north east and Scotland because the big London firms' rates are too high. Morgan, whose day rate is £640 for charities with incomes above £2m, says: "We're fairly unusual doing this kind of thing in the area." He's confident he gives a good deal. "In the public sector, many consultants charge much higher fees, particularly in the NHS," he adds.

THEY'RE IN THE MONEY

Investment advice is now obligatory for charities, but is it a drain or a gain?

Charities must seek professional advice on how to invest their assets.

The obligation, contained in the Trustee Act 2000 and supported by Charity Commission guidance, is good news for investment managers but not for charities, according to Luke FitzHerbert, senior researcher at the Directory of Social Change.

He believes it needlessly siphons thousands of pounds from the sector.

"The requirement to take investment advice whether or not the advice is appropriate for the charity concerned is absurd," says FitzHerbert. "My impression from reading thousands of sets of charity accounts over the years is that charities are being advised to invest the equity part of their investments in ways that underperform the relevant index rather than in an appropriate tracker fund. I suspect this is because the fees for the latter do not provide similar reward for those giving the advice."

The Charity Commission denies it is encouraging outside advisers to profit at the sector's expense and says it is possible to get guidance without paying, for example by asking umbrella bodies. But the fact remains that many charities pay thousands of pounds to investment advisers each year.

There are about 15 large investment houses serving the sector. Rensburg Sheppards, which has 811 charity clients with combined assets worth £1.9bn, is among the largest. It charges 0.8 per cent of the first £1m of assets under management, 0.6 per cent of the second £1m and 0.3 per cent thereafter. So it would earn £8,000 on a £1m portfolio, for example.

Charles Mesquita, the firm's charity specialist, says charities appreciate the value of investment advice. "The sector wants you to be professional and doesn't mind you charging what is fair," he says.

Investment managers operate in an unusually competitive environment compared with most consultants. "It's easier to measure the advice we give than the advice of other professionals, which makes it more challenging," says Mesquita.

"There is a measurable performance, so you can benchmark how well a fund manager has done."

Investment managers offer charities broader financial advice than simply where to put their money. United St Saviour's charity, which provides sheltered housing, says Rensburg Sheppards helped greatly when it sold a 64-bed site in south-east London and opened a 54-bed site in Surrey.

"It established how much cash we needed for our operational expenses and restructured our payments, which totalled £9m over the course of the year," says director Cristina O'Halloran. "We thought we might suffer a funding gap, but it came up with suggestions such as taking out a bridging loan. It has other sheltered housing clients and knows the issues." The charity pays the firm about £30,000 a year for advice on its £8m assets.

The complex - and many claim unfair - VAT laws for charities are another reason to pay for advice. Big firms usually charge either an hourly rate, of about £500, or a success fee, which is calculated as a percentage - usually 25 per cent - of any savings achieved.

Chartered accountancy firm Saffery Champness has six voluntary sector VAT experts and helps 35 of Britain's 100 biggest charities, including Cancer Research UK, pay as little tax as possible. "The key issue for all voluntary bodies is how much VAT they can recover," says Russell Moore, charity VAT partner at the firm. The sector's irrevocable VAT bill is estimated to be £1m each year,so it is easy to see why.

He reckons that his company's advice saves charities £30m. "Many of the large charities employ competent tax specialists within their finance departments, but on complex transactions they still require assistance," he explains. Until the tax legislation is simplified, specialist advice will always be in high demand.

CAPITAL LOSS

Living outside London is a bonus for consultants

Consultancy is one of the few professions where it can pay to live outside London. While the big city firms dominate the capital, those seeking to set up in business for themselves often find it more rewarding to make a name elsewhere.

"If you're looking to start, I would say head north," advises Kevin Curley, chief executive of Navca. "There are lots of big consultants in London and a lot fewer in the north east and north west." In Wales and Scotland, devolution has created a niche for consultants who understand the new political systems and can explain their relevance to nationwide charities. Martin Price, director of Martin Price Associates, based near Cardiff, charges charities such as Macmillan Cancer Support £400 a day for advice on effective fundraising or campaigning in Wales.

"Wales has acquired a different political climate from England since devolution," he says. "It is more dependent on the public sector, but it has a relatively weak corporate base. So politics and politicians have become much more important to charities in Wales."

PR consultant Boni Sones lives in technology-driven Cambridge, which she says brings her business. "It's certainly an advantage in terms of new media," she admits. "I'm doing a lot of work for charities on podcasts at the moment."

THE REST OF THE RANGE

There's an expert to cover every angle, from governance to PR

In the 1990s, governance was about the driest issue in the charity world. It may be stretching a point to call it sexy now, but it is at least a buzz word. The interest is creating a whole new niche for consultants such as Tesse Akpeki. Since leaving the NCVO a year ago to become a governance consultant charging £750 a day, Akpeki has been inundated with work. "It didn't harm me being at the NCVO for 13 years because people got to know me," she says. "But the market speaks for itself."

She says governance is now as important to chief executives as strategic planning. "The Good Trustee Guide was the first handbook for trustees," she says. "Now if you go to the Directory of Social Change or the NCVO you will see lots of material. More work is being done around governance reviews." This upturn in demand follows a long-term drive by sector leaders to promote proper governance.

Consultants have also sprung up in other professions that have felt a favourable wind in recent years, such as PR and political advising.

But how do you know they're doing a good job? "If someone helps a charity meet a fundraising target that's easier to measure," says Margaret Bolton, a policy and research consultant. A former director of policy and research at the NCVO, whose clients include the NCVO, Acevo and the Home Office, Bolton says the fact that the Treasury quoted an article she wrote for the NCVO on added value is one measure of its effectiveness. But she won't discuss her fees.

PR consultant Boni Sones, who charges £550 a day, says charities appreciate an outside view on how they pitch their policies, but warns organisations to be wary of big PR firms touting for business. She warns: "Senior people go in to get the business and then it's delegated to someone junior, and they don't have the confidence to pick up the phone and speak to a senior lobby correspondent."

The new-wave consultants certainly aren't profiting at the expense of the old: fundraising is flourishing, 30 years after it embraced consultants.

Megan Pacey, director of policy and campaigns at the Institute of Fundraising, believes the number of fundraising consultants has risen sharply over the past three to five years, so the institute is developing a code of practice for them.

"It reflects the fact that there has been a dramatic growth in numbers and they need a code of practice to abide by," says Pacey. "It should give people more confidence in consultants."

Some charities hire consultants to help them win grants. They either hire them to complete the application process or they bring them on board to impress funders. But using them can backfire.

"If a consultant helps the process, that's great," says David Emerson, chief executive of the Association of Charitable Foundations. "But if a consultant obscures the passion and transforms it into management speak, it could cause damage. There is a risk when management consultants come from the private sector thinking they can save the voluntary sector."

But as long as charities need scarce skills, they will need consultants.

As Cathy Pharoah, former director of research at the Charities Aid Foundation, says: "It's cheaper to pay for a researcher when you need specific help rather than to employ someone."

If charities feel the need but worry about the cost, they can contact the Cranfield Trust, which offers free consultancy services to voluntary organisations. It has a register of 600 volunteers, most of them MBA graduates of Cranfield School of Management. They take on 200 projects a year.

"We deliver £1m worth of consultancy a year to small and medium-sized charities that don't have budgets for consultants," says Amanda Tincknell, chief executive of the trust, which was established in 1988 when the Princess Royal urged the school of management to begin offering pro bono work.

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