Professor Paul Palmer argues that educational underinvestment is preventing finance directors from taking the lead in exploiting new forms of funding.
Many of the challenges charity leaders face today are highlighted in the report Social Landscape, The State of Charities and Social Enterprises 2015, published by Charities Aid Foundation (CAF) and Acevo in March.
The report stated that one in five smaller charities is struggling to survive. It also highlighted that generating income and achieving financial sustainability is the most pressing challenge for CEOs and that two-fifths of CEOs in large charities are concerned about a reduction in public or government funding.
What appears to be missing from this report and wider debate is how charity finance directors view the current climate, what concerns them most and what their role might be in terms of steering their organisation through these times of uncertainty. Too often, the charity finance director is still seen as the “accountant in the back room”, rather than someone who can step up and lead the strategic direction.
One potential reason for this could be that the sector often recruits finance professionals who are coming to the end of their career and are happy to stay within a traditional accounting framework, or younger accountants who are not yet exposed to wider management experiences.
For finance directors to feel confident adopting a more strategic role, many of them need professional development to give them more robust knowledge, education and qualifications that will not only enhance their own career progression but also improve the organisation’s development.
However, just a limited number of universities offer courses in voluntary sector financial management, which is reflective of the sector’s Cinderella nature. Even in the boom years of government funding, there was limited development in voluntary sector management training that would be sustainable in the university sector.
Just a handful of UK universities offer courses and qualifications in voluntary management and leadership development, compared to the USA where some 300-plus courses are offered. For finance professionals, there are even fewer options particularly since longstanding courses at London South Bank and Sheffield Hallam have recently closed their courses. Full UK university research centres focused on the sector are even fewer and again this compares unfavourably to the USA where the Nonprofit Academic Centres Council is based with some 50 members.
Considerable investment was made in non-university provision by the 1997-2010 Labour government but with the financial crisis much of this has now disappeared as most of it was unsustainable outside of government subsidy.
Another barrier to professional development is that the value of investing in leadership and management training within charities hasn’t been realised. Compared with the private and public sectors, the money spent on the management development of sector staff is less than a quarter.
The sector has contracted and expanded according to the wishes of government but, with new funding models like social finance becoming more widely available, things are starting to evolve. We are starting to see an increased demand for leadership and professional development in the sector, particularly in areas like social investment and social impact.
As the NCVO's recent UK Civil Society Almanac has identified, while donations still make up 48 per cent of the sector’s income, they have remained flat over the last five years whilst government funding has declined to 37 per cent from a peak of 43 per cent. In particular the grant income component has declined by 25 per cent in the last year. Currently, social finance and investment is less than 0.5 per cent of the sector’s income, yet for the foreseeable future social finance is the only component of income where growth is possible. owever, in his recent series of briefings on Social Investment: Demystifying the Hype, Mark Salway from Cass Business School noted that, when someone is asked what they understand by social finance, their reply most often includes the word “confusion”.
While the perception and understanding of social finance evidence suggests that the majority of charity executives are more open to understanding this source of funding, this figure drops to a third at trustee level. Where in the sector is the leadership and thinking in this area? At present I do not see it coming from charity finance directors educating and advising their trustees and encouraging them to think about taking on new sources of funding models. This is not a criticism of charity FDs but of the whole leadership of the sector and also by those proponents of social finance who have complained about the sector not taking up these opportunities. In my view, if social finance is to be truly successful and the game-changer the government wants, then a major investment in educational capacity at an advanced level is required and organisations and funders wishing to engage in this new form of finance will have to invest in capability at an executive level. It may be that after understanding social finance you may conclude that it is not for your organisation, but that is the whole point of executive education – the ability to evaluate and make an informed decision.
The sector is undergoing continuous transformation and the new government will no doubt bring further changes. As ever, leaders in the sector need to adapt and evolve and to do so they need the right professional development and support behind them.
Professor Paul Palmer is an associate dean and director of the Centre for Charity Effectiveness at Cass Business School. Cass offers five part-time MSc degrees for nonprofit sector professionals including an MSc degree for finance directors in association with the ICAEW where graduates automatically receive the ICAEW DCha award on completion.
Civil Society Media wishes to thank Cass Business School for their support with this article.
