HOT ISSUE: Do charities keep their costs under tight enough control?

In a keynote speech to the Directory of Social Change's Charity Accountants Conference, the co-founder of think-tank nfpSynergy, Joe Saxton, claimed that charities could trim costs by five per cent without affecting services. But is this ruthless approach to jobs, reserves, outsourcing and purchasing the way forward?

JOHN BURNELL, director, Personnel Solutions

No

There are, without doubt, economies to be achieved in areas such as joint purchasing and some degree of outsourcing. But it would be a mistake to assume that the interests of differing charities will be the same, even in common areas such as buying materials, so there is a risk of ending up with something second best.

This is even more the case with outsourcing, where contractors offering specialist services may do so on their terms, not those of the charity. So if it is financially prudent to provide sensitive services in-house, outsourcing can be a bad mistake.

It's more complicated with staffing. Employment isn't just about numbers and efficiency, it's about quality and appropriateness too. By all means shed jobs if they don't serve the purpose of the charity, but many charity jobs can be cost-inefficient and still be providing the quality specialist support that the sector is all about.

JOHN NEATE, chief executive, the Prostrate Cancer Charity

Yes

Of course there is more that charities can do to prune costs, but I disagree with the underlying sentiment of Joe Saxton's arguments. Charities face the harsh realities of competitive life every day. Many are run by highly committed staff and trustees with a keen eye for costs, where review is the norm.

General assumptions about the ability to cut costs are fraught with difficulties.

Lessons from the commercial sector are valuable, but our commercial cousins are not universally paragons of virtue. Let's hope we never become 'keen on redundancies'!

Reserves do play an important role if properly managed, plugging gaps, for example, in contract funding and smoothing erratic cash flow.

Outsourcing services can be beneficial, but can also come at a cost of time-consuming and complex negotiations between multiple partners, maybe for limited gain.

Joe Saxton is right to stir us up a little, but simplistic approaches just won't do. Let's get more effective in asking the right questions and developing better methods of assessment.

HELEN VERNEY, finance director, MS Society

Yes

Charities relying on voluntary income to fund their activities can't afford to carry slack, especially where core funding is tight. Additions to ongoing fixed costs have to be watched like a hawk. This tends to lead to under-resourcing rather than built-in slack.

In my experience this has meant that managers have had to plan staffing structures meticulously.

Outsourcing can be an extremely useful way of reducing costs, and in areas where significant efficiencies can be made, charities have made the change - consider the popularity of outsourcing direct marketing and website activities.

Unlike commercial organisations, we do not have the ability in most cases to increase our income through price yet our staff costs increase by inflation each year. So unless our donations are on a growth curve we have no choice but to make efficiencies each year just to continue our activities.

JOE SAXTON, Co-founder, nfpSynergy

No

Let's face it, many, even most, charities don't ruthlessly prune their costs. I hear you gasp in horror that I even suggest that charities don't watch every penny carefully. Well, here are five simple questions to answer to find out whether your charity is tightly controlling its costs.

Would you refill each post in the organisation were the current jobholder to leave tomorrow? And with the same skills requirement?

Do you routinely audit your support services to see if you could outsource them at lower cost for the same quality?

Do you use an intranet for purchasing travel, stationery, insurance, financial and other routine services?

Do you share costs and facilities with other organisations to leverage cost-saving on bulk purchasing, or to stop spending money on reinventing the wheel?

Have you abolished annual salary increments and the culture of more salary just for 'doing time'?

If you answered yes to four or more questions, excellent. Three or less: start to manage your costs and deliver more benefits to more clients - for the same income.

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