I am in shock.

I don't think there has ever been agreement on this blog before. Something must be wrong. I'm rendered almost speechless. Apart from to say: thanks for all the comments!

Adam, Intelligent Giving

By posting an analysis of the Cats Protection annual report, I seem to have inadvertantly contributed to total agreement breaking out on the IG blog.

While it was never my intent to foster consensus, I must accept my responsibility in bringing about this totally unacceptable state of affairs. I realise in retrospect that I should have anticipated this completely undesirable outcome of harmony and concordance.

This situation has caused me great personal anguish and I shall take some time to consider my position. Rest assured that I have learnt from my error, and can promise in future only to post material likely to lead to the desired blog positions of dispute, disagreement and conflict.

It must be a record!

One thing which I think does come out of this is how useful it is to get an idea of how your annual report looks to someone with no pre-existing knowledge of your particular area of interest. Simply agreeing to "be transparent" doesn't get us very far because we've got preconceived ideas about what needs to be made clearer and what is so obvious we don't need to say anything about it.

So hats off to IG.

Absolutely RSPCA Cambridge. As you can see from my comment, I'm not saying their level of reserves is wrong...just that it requires better explanation. Which I think is what you're saying as well. The fact that none of us (charity professionals?) seem to be clear about exactly what they're for (even on close reading of their accounts) surely tells a story?

 And I don't think it's about people wanting to 'dig' deeper in their accounts as such, but merely that when charities start to get criticised (eg. on TV), having the reasons for reserves levels clearly outlined to deflect / puncture that criticism must surely be a good thing.

 I think we're all in agreement (uniquely for IG?) on this post: reserves are very necessary; each charity has unique / bespoke needs and requirements for reserves; it's key to explain these as clearly as possible.

Maybe there's an argument for  making some of the things that are usually confined to boring trustees meetings more available for people who want to dig more deeply into finances?

I may be wrong, but presumably SSE doesn't have to build special premises to hold its training courses? An organisation like CP would expect to invest about £5 million in setting up a major new animal shelter, but that would then have associated running costs (staff, veterinary fees etc.). They'd want to be very sure they could fund those running costs for a reasonable number of years before committing themselves to spending the initial £5 million - otherwise it would be wasted on buildings that couldn't easily be sold for a different purpose.

Thanks for picking through that SimonK, because I struggled on first look at their Annual Report. Incidentally, the £70m figure wasn't from me as such, but from various reports: I couldn't find that figure in their records, but did note, as you do, that there are different designated funds with significant amounts in. Nothing wrong with that, but may need a bit more explanation than is there at present: having the right amount of reserves is not only reasonable, but hugely important. Something which one could tell to the trust and foundation that turned us down for money (partly) because of the level of our reserves. I hasten to add that we are talking about significantly smaller sums of money than CPL!

It is about what is right for the organisation, but there's a need to be able to justify why it's there. For example, here at the School for Social Entrepreneurs (hence SSE), we ensure we have 12 months' worth in reserves because we run year-long support programmes and need to ensure that we can complete those programmes once they've started. But if we had another 12 or 24 or 36 months turnover stashed away without decent reasoning behind it, then I think questions could rightfully be asked. It may be, just as it may be for CPL, that we'd have a perfectly good reason for it, but we'd need to be clear about that and explain it properly. [which I guess takes us back to why IG's push for transparency and better reporting is so important]. Otherwise it will leave them open to the "Fat Cats" type comments you can find on various newspaper websites currently....

Thanks, SimonK, for that. That's basically what I was thinking. Even though I read CP's report a couple of days ago, from memory you're absolutely right.

Adam, Intelligent Giving

I had a look at their annual report and accounts (latest version available via their website and not yet on the Charity Commission site). Obviously I'm no expert at reading annual reports - if I was, I'd be working for Intelligent Giving - but this is my analysis (Adam, I'm sure, will correct me if I'm wrong). All figures rounded to nearest million.

Cats Protection have about £69m in total net assets, but £22m of this is fixed assets (buildings, etc), which presumably we shouldn't as part of their reserves. Of the remainder, £20m is held in a general fund as working reserves. The report explains that the general reserves are intended to "ensure the work of the charity can continue without disruption in adverse circumstances", and that they are aiming to have 12 months' expenditure in reserve. There's also £2m or so for repairs, maintenance and special projects, and another £2m in funds restricted to particular areas or branches.

All that seems thoroughly reasonable.

This leaves around £23 million which is held in the Site Acquisition and Development Fund, designated by the trustees "to meet the cost of new sites or major refurbishment projects for the properties of the charity". This is where things become less clear. This is not restricted income - it has been designated by the trustees for a particular purpose, and in the event of "adverse circumstances" (such as dropping £11m down the back of the Icelandic sofa) they are totally at liberty to move any or all of it back into the general fund. Now, as SSE says, there is no "one size fits all" reserves policy, and there may be very good reasons why Cats Protection feels that they need nearly a year's worth of expenditure in this fund. But if so, they don't do a great job of explaining it. There is some talk in the report of "ambitious strategic development plans", but these plans are not explained in any detail, and it's not clear why they would require £23m (as opposed to say £3m, or £53m).

So, all in all a mixed picture. The £11m they potentially lost is actually only a quarter, rather than a sixth, of their reserves, but they are still holding close to two years' expenditure as reserves, without really explaining why. Let's not tell Ian Hislop!

Agreed on all of the above, particularly the transparency issue; and impressed they have a statement on the front page and have written to their supporters.

But I was interested to note in a couple of reports that the £11.2 million was "16% of Cats' Protection League reserves" (see Independent, Third Sector etc). Which means, by my maths, that they have £70million stashed away; which is almost 3 years' worth of expenditure. Imagine what they would have said on TV if they'd realised that....

I think reserves policies should be decided by the charity on a bespoke basis, but I'd be interested to see the reasoning (presumably in the annual report) for the need for this level of reserves. Unexpected legacies? Predictions of a drop in income in the future? Competing with the Donkey Sanctuary and the RNLI? (just kidding)....

Hang on a second, mikemuses, we've never said charities ought not to have reserves! In fact, we've always explained why they're absolutely necessary on our charity-profile pages.

SimonK: Gosh. You're completely right -and I was wrong. Obviously, the effectiveness of the Cats letter came from the fact that it wasn't asking for cash. I can be very slow sometimes.

Adam, Intelligent Giving

"I was so impressed by their honesty that my first thought was to send some money. If only they'd included a donation form..."

But... would you actually have been so impressed if they had included a donation form? Surely the reason why this seemed so honest was precisely because they weren't asking you for more money. If they'd treated this as an opportunity to try to get more donations, you would (rightly) be suspicious of their motive in writing to you. Hats off to Cats, indeed, and especially for having the sense on this occasion not to ask.

People seem to have difficulties with visualising how amounts of money that are large in absolute terms can nevertheless be rather thinly spread.

I don't think it's simply a question of justifying reserves so much as a feeling that an organisation with x million pounds ought to be able to sort out ANY situation, and then being furious when it turns out they can't.

This may mean problems down the road if hospital charities start paying for drugs that the NHS can't afford and they're then pilloried because Mrs Y. ONLY needs a measly £50k for her treatment and the media can't understand why the charity can't pay for an infinite number of Mrs Ys.

And people wonder why charities are so risk-averse.I guess this is what charities need to be ready for, but then if it had been CRUK - would Hislop have made the joke?  NSPCC? - probably would have  (same joke, likely too).The thing for the Cats Protection though is that it's something that its supporters are deeply passionate about, while others, like Hislop wonder if there aren't worthier causes out there.  Personally, I'd be straight back out there explaining why we needed the reserves, and why our work is important, but then I'm not a communications chap (or a Cats Protection chap either)*Having said that, haven’t Cats Protection been immortalised in fiction already?  I’m pretty sure I remember that they get a name check in something science fiction-y, although I can’t find proof, so why shouldn’t they be the butt of someone’s jokes?But hang on now IG are advocating stashing cash, or *shock* keeping reserves?*Edit to add, it seems they’ve already done some good work keeping their supporters informed. 

They will be kicking themselves if they are reading this blog.
Ah well, there's always the next mailing.

Martin

How wonderful that Cats Protection did that! I think that's terrific - but such a shame they didn't include a donation form. I can only guess that their fundraisers are kicking themselves now...

Adam, Intelligent Giving

Cats protection actually wrote to me explaining what happened – the letter arrived yesterday. I was so impressed by their honesty that my first thought was to send some money.

If only they'd included a donation form...