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Counting the cost

Finance | Gareth Jones | 1 May 2006

Recent government announcements about the Treasury undertaking a major review of the third sector's role, and establishing a dedicated office to provide a coordinated strategic approach across a range of sector issues, have been greeted positively. More evidence of the seriousness given to the role of voluntary organisations, it seems.

However, at the same time there has been a rash of unconnected stories revealing the problems faced by charities while perennial funding problems remain unaddressed and there is much to be done if the sector's engagement with government does not come crashing down around its ears. Leading charity Family Service Units has been taken over by Family Welfare Association after facing administration. It said part of the reason was the government's failure to reimburse full overhead costs arising from service contracts. Delays in Department of Health funding due to NHS budget problems has led to fears that many charities could suffer.

New CFDG research has revealed that despite the laudable aim of the Treasury's cross cutter in 2002 that by April 2006 the nirvana of full cost recovery would be achieved, the reality is very different. This is backed up by Sue Ryder Care, which has found that none of its statutory commissioners, which include primary care trusts and social services, pay the true cost for the basic care they commission from the charity. The recent Public Accounts Committee report Working with the Voluntary Sector, highlighted the same old issues around funding.

We continue to hear the usual rhetoric from central government, and are now on the second version of the Compact code of practice. While it proclaims the principles of fair and effective contracting as essential to encouraging the voluntary sector to play a greater role in providing services, this is simply not happening at a local level. The result is that charities continue to work under poorer contracting conditions than public and private providers. There are serious concerns that without firm commitment from government to place the onus on local commissioners to change the way they contract with charities, then increasing the voluntary sector's capacity to provide services will be extremely difficult. This has to be addressed with action and not just words, reviews and more consultation.

Security guards

This really shouldn't need spelling out, but the findings of our latest IT survey on charities' approach to security issues are quite worrying. While 90 per cent of respondents felt security was adequately dealt with in their organisation, less than a third actually had any procedure in place to test this. Having virus software and firewalls is not enough. How can you possibly know that the systems you have in place work if they are not tested?

There remains a perception in some organisations that there are more important projects to spend money on and until they have an incident or a near miss then they will continue to sideline security. Another problem is that there is a conspiracy of silence over the question of internet security, as only one in eight computer crimes are apparently reported. Until threats are perceived as being more likely attitudes will be difficult to change.

A graphic illustration of what the consequences can be came last year when hackers breached the security of the Aid to the Church in Need website and stole the credit card details, names and addresses of 2,800 charity donors held on the system. This particular charity had security measures in place, including encryption and secure server access, and felt it was safe. But technology moves quickly and hackers get ever more sophisticated in how they operate. Which makes it even more important that security is tested, and tested regularly. Finance directors would not dream of operating without rigorous financial controls, and they know they work because they are audited. Surely IT security should be a similar priority.

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Directory: Charity Finance Directors' Group (CFDG) | HM Revenue & Customs (HMRC) | Sue Ryder