Sharing back office services

Shared Services and Outsourcing

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
2

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
3

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
4

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
5

Organisations we work with
Some of the charity and public sector organisations we work with
6

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
10
Successful example

ELFS Shared Services
11
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
12

Why don’t charities adopt shared services
13
Reasons why not!
We don’t want
anyone else to
know our business
No 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
14
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.
16

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.
17

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.
18

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
19

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?
20

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
27
Quality marks
ISO 9001 – quality of services and business processes
ISO 27001 – data security standards
Investors in people– Bronze

Growth in 11 months
28
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Old helpline Multi-channel service
Numberofenquiries
Enquiries per annum
Digital service
Adviser contacts

Immediate cost savings
29
£0
£200,000
£400,000
£600,000
£800,000
£1,000,000
Old helpline Multi-channel service
And satisfaction levels have remained the same at 92%
Cost per annum

NCVO member helpdesk
Service use year one
0
1000
2000
3000
4000
5000
6000
7000
2010/11 2011/12
Online channels Phone
50% increase on
the previous year
Doubled opening
hours
Over 50% cost
reduction
30

NCVO member helpdesk
Service use year one
£0
£20,000
£40,000
£60,000
£80,000
£100,000
£120,000
Before After
Annual cost
31

Shared Services and Outsourcing
Unit 9, Cefn Coed Parc, Nantgarw, RCT, CF15 7QQ
01443 827600
patrick.nash@connectassist.co.uk
@pnashconnect

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