Sharing back office services

Shared Services and OutsourcingClick icon to insert client logo or illustration – delete this placeholder if not required. The green textbox below may be extended up to the top of this area instead.

www.connectassist.co.uk

Are charities efficient?

“With honourable exceptions, charities are generally terrible at explaining what they do and proving it works—and they need to improve

“As the cuts continue…. they are having to explain to the public that their money is being well spent”

Dan Corry, CEO, New Philanthropy Capital

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What donors think

53% believe that charities are inefficient in managing donations.

Efficiency, and the amount spent on administration are cited as the most important factors when selecting a charity to support (89% and 88% respectively)

Philanthropy: Barriers to Growth. Barclays Wealth

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This morning’s session

1. Background

2. Charitable purpose

3. Comfort factors

4. Shared services

5. Sharing versus outsourcing

6. Finance

7. IT and data

8. HR and legal

9. Supporter and customer care

10. Cost benefit

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About Connect Assist

Connect Assist is a social business created by a charity. Our purpose is to provide support, services and technology to the Third Sector and to create jobs and growth opportunities for people in the Welsh Valleys

Company background

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Organisations we work with

Some of the charity and public sector organisations we work with

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Charitable purpose

The starting point is charitable purpose.

Are you clear what is your charitable purpose, as opposed from your activities in support of the purpose?

Many charities are providing services to the public sector. Are you convinced that these are core to your charitable purpose or are they ways in which you (hopefully) fund part of your organisation?


Charitable purpose

What is your charitable (or social) purpose?

Participation

Activity% of annual expenditure Core purpose

Supports purpose

Finance and accounts 5% X


Shared services

What are shared services?

• Lots said about the value of shared back office services in the charity sector

• ‘Back office’ can include a whole range of activities, including:- Accounts and finance- IT and infrastructure- Human resources, training and development- Customer services, supporter care, helplines

• There are some successful examples of charities who have set up shared service operations (e.g. Charityshare)

• The reality is that the majority of charities are not sharing services


Charityshare

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Successful example


ELFS Shared Services

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NHS shared services


Comfort factor

Why charities don’t share services.

• Much of this is down to a fear of loss of control

• Decisions often taken on non-commercial grounds

• But how much time and energy is being spent on activities that are non-core to charitable purpose

Participation

• Write down 5 reasons why your charity would not consider shared services

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Why don’t charities adopt shared services

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Reasons why not!

We don’t want anyone else to

know our businessNo one can do

the work better than us

We are unique no one else

would understand us

We don’t have the money

Our trustees and staff wouldn’t

agree


Counter arguments

Now look at your 5 reasons and write how you would address this issue internally

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Participation

Reason why not How to prepare a counter argument

Our trustees wont agree Prepare cost and benefit analysis


What services are or could be shared?

Financial management

Book –keeping and accounting

PAYE and payroll

Investment management

Grant administration

Contract management

Human resources

Training, coaching and development

Quality assurance and standards

Recruitment services

Customer services

Supporter care

Helpline

Triage services

Appointment setting

Outbound fundraising

IT infrastructure

Procurement and leasing

IT support

Hosting

CRM and data


VAT and shared services

Charities can benefit from a relatively new HMRC exemption on VAT for shared services.

The effect of the new legislation is that the supply of services between organisations which have exempt or non-business activities will be exempt from VAT by setting up a cost sharing group (CSG).

A CSG is an independent group of persons who work together with a common purpose. The CSG is however legally separate from its members. It is established, owned and operated by the members for their cooperative benefit and is independent of any ownership, control or influence outside of the membership.

Ordinarily the supply of services between two independent organisations would be liable (in the main) to VAT at the standard rate (20%) and as such this can create a VAT efficiency.

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Can a CSG be a charity?

To be a charity an organisation must be, among other requirements, established for charitable purposes.

So, subject to meeting that test a CSG might be able to be a charity.

However, in a charity context a CSG could also be a non-charitable company limited by shares owned by a number of charities and, in practice, this model may be the more likely one.

If a CSG was able to acquire charity status there are particular direct tax rules attached to the trading activities of charities that a charity CSG would have to consider.

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What are 'qualifying supplies'?

Qualifying supplies are services which are ‘directly necessary’ to enable a member of the CSG to engage in the exempt and/or non-business activity for which the services are supplied.

The 5% test:

An organisation can be a member of a cost sharing group if it has a minimum of 5% exempt or non-business activities.

In addition, the supply of services to it can only be exempt if the services are directly necessary to those exempt or non-business activities.

Professional advise is recommended.

And as CSG’s must be independent, there will be costs associated with running a CSG, so these must be weighed against the potential savings.

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Sharing versus outsourcing

Increasing numbers of charities are outsourcing support services.

Although setting up a CSG has the advantage of saving VAT, there are potential benefits of outsourcing

• There are a number of specialist outsource organisations for the charity sector, including:- Finance and accounting- IT and technical infrastructure- Contact centre (helplines, supporter care, etc.)- HR, training and legal

• No requirement to set up a CSG

• Cost savings – should be in the region of 20% - 40%

• The charity has to manage the contract (using SLAs and KPIs) but does not need to manage or delivery the activity

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Key issues

There are key issues to consider which apply for sharing services or outsourcing

General ones to consider:

• How efficient is our current provision of office services?

• How much management time is engaged in office services rather than the core mission of the charity?

• What of our culture must we maintain and what needs to change?

• Staffing issues – will TUPE apply, redundancy, living wage, etc.

• Need to do a full-cost assessment of the costs and benefits of sharing or outsourcing

• What is our leadership’s appetite for change? What are the key drivers?

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Finance

Many charities already outsource much of their financial operations.

Typical elements that are shared or outsourced

• Book keeping and ledger preparation

• Payroll

• Debtors and debt management

• Financial director

Things to look for

• Qualifications

• Service level agreements

• Existing charity customers

Example: The Leadership Trust


IT and Data

IT is an obvious area for sharing or outsourcing. IT managers in the charity sector are typically out of date and this can present significant problems


• Hosting, maintenance and support

• Telephony

• CRM and database

Things to look for

• Cloud or on-premise

• Service level agreements/uptime

Examples:

• Charity Share (shared services)

• Certus (outsourcing)

• CTT (advice and services)


Contact centre

Surprising numbers of charities are sharing or more often outsourcing into contact centre operations

Despite the BBC’s depiction of the industry locally


• Supporter care

• Fundraising

• Helplines and service user contact

Things to look for

• Charity specialism

• Cultural fit

• Quality standards – ISO9001, ISO 27001, IoF, Helplines Partnership, etc

• Service level agreements


Examples

Examples of providers of charity contact centres

• Helplines and Supporter/Donor Care

• Outbound fundraising


Examples

Charities using outsourced contact centres - helplines

Charities using outsourced contact centres - fundraising


Cost benefit

Vital to assess costs and benefits of either sharing services or outsourcing

Good procurement will be important

Key things to look for in procurement

• Price

• Quality

• Partnership

• Sustainability

However, its best to find examples of what other organisations have achieved


Quality standards

Green Dragon – environmental standard

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Quality marks

ISO 9001 – quality of services and business processes

ISO 27001 – data security standards

Investors in people– Bronze


Growth in 11 months

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Old helpline Multi-channel service0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Enquiries per annumDigital serviceAdviser contacts

Num

ber o

f enq

uiri

es


Immediate cost savings

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Old helpline Multi-channel service£0

£100,000 £200,000 £300,000 £400,000 £500,000 £600,000 £700,000 £800,000 £900,000

£1,000,000

Cost per annum

And satisfaction levels have remained the same at 92%


NCVO member helpdesk

Service use year one

2010/11 2011/120

1000

2000

3000

4000

5000

6000

7000

Online channels Phone

50% increase on the previous year

Doubled opening hours

Over 50% cost reduction

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NCVO member helpdesk Service use year one

Before After£0

£20,000

£40,000

£60,000

£80,000

£100,000

£120,000

Annual cost

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Shared Services and OutsourcingClick icon to insert client logo or illustration – delete this placeholder if not required. The green textbox below may be extended up to the top of this area instead.

Unit 9, Cefn Coed Parc, Nantgarw, RCT, CF15 7QQ01443 827600

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@pnashconnect

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http://www.connectassist.co.uk/

Sharing back office services

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