Charities looking to recover from the current economic recession will be forced to seriously examine consolidating with others in the sector.
A tightening of funds allied to the ever-increasing “contract culture” within local authorities and other governmental organisations will see a further rash of mergers and partnerships within Scotland’s charities.
Alastair Keatinge, head of Lindsays' Charities Team maintains that financial need will ensure that Scottish charities will have to find new, innovative and commercial ways to collaborate in future as a combination of tighter criteria and tough competition bites.
Alastair is one of Scotland’s few accredited Charity Law specialists, and is speaking at the 2010 Charities Conference run by the Institute of Chartered Accountants of Scotland on 6th May 2010. Lindsays, which has one of Scotland’s leading charities practices, is the main sponsor of the event.
He said: “New legislation and regulation surrounding charities in Scotland has led to increased scrutiny, and tougher tests are now applied to ensure organisations meet the criteria for gaining charitable status.
“There is also a great deal of competition within the sector, both in terms of attracting funding and in seeking profile for the work done. In particular, it is now clear that there is an increasing ‘contract culture’ in local authorities seeking to place work which favours larger charities who are better equipped to deliver consistent quality of service. For example, a local authority seeking to outsource some work with children is maybe more likely to be attracted to dealing with a national charity than with a small local charity which can demonstrate far less experience in the field.
“In my view these pressures will lead to some significant consolidation within the sector, and we are likely to see charities take an increasingly commercial approach to this. I believe we will see charities enter into joint ventures, forge partnerships and set up other collaborative models which have their roots in the commercial world in order to continue to deliver
“On top of the tougher legal barriers charities now face, this activity means charities need to start thinking now about the future, and they need to consult with people who understand both their sector and the commercial world. This conference is a terrific opportunity to bring together charities, their advisors and others interested in the future of this vital sector.
“Charities need to put behind them their traditional reluctance to cooperate with each other. There are long held prejudices that each particular charity has a unique expertise. For example, there are over 800 charities operating in the UK in the field of autism. It is doubtful if this number is necessary and such charities should be honestly asking themselves if they could work more closely with others in the field. There is a role for both OSCR and the Charity Commission to be involved in encouraging more co-operation, joint working and mergers.”
Alastair is experienced at working with charities, numbering Citizens Advice Scotland, SAMH, Scottish Council for Voluntary Organisations and Project Scotland amongst the clients he advises. He is also an experienced corporate lawyer.
“When one organisation takes over another, or when two merge, it is essential that they fully understand the people they will have as a merged entity, and make fair and timely decisions. For example, would a new enlarged organisation need two marketing managers? Or might there be a need for a Marketing Director and a marketing manager?
“There can also be areas of uncertainty around, for example, volunteers which are much more likely to affect charities, and so appropriate advice is needed.
“Within Scotland, we have some major charities and many hundreds or even thousands of smaller ones. I think we will see increased consolidation, particularly amongst the smaller charities, as funding becomes more difficult to access from local authorities.
“I would urge charities considering changing the way in which they operate to ensure that they fully understand all of the legal implications for their employees and all of the potential consequences.”
