Jamie Davidson says charities can benefit from collaboration but trustees should proceed with caution
When Prince William called upon charities to collaborate more in order to achieve their charitable objectives, he sparked a debate that has given trustees across the country something to think about.
Many charities are finding increasing pressure on their traditional sources of income. And with local authorities searching for savings in their budgets thanks to cuts in central government funding and the current political uncertainty around Brexit, there is no sign of that changing.
In this challenging financial climate, charity trustees are increasingly having to be creative as they work to secure the future of their organisations, and turning to collaborative working to fulfil their charitable purposes could be a sensible move.
Whether it’s an informal collaboration such as information sharing or lending equipment, or formal arrangements over joint projects and sharing resources, or outsourced functions such as finance or IT, collaboration can lead to cost savings and can appear attractive to funders.
However, trustees should ensure that there are clear benefits to any joint working arrangement and that the risks are understood before going ahead. Above all, they must act in the best interests of their charity, and must ask some key questions.
Firstly, is the arrangement being considered legally viable? There are unlikely to be any legal barriers for working collaboratively, providing the charitable objectives are being furthered and the arrangement is permitted by the governing document. However, it is likely there will need to be formal legal agreements such as a Memorandum of Understanding, a Service Level Agreement or a contract over the collaboration and formal legal advice should be sought. The structure of the collaboration should be considered as it may be more appropriate to set up a separate legal entity such as a joint venture vehicle.
Secondly, trustees should question the reasons for collaborating and how will it impact the charity’s beneficiaries. It is important to fully understand the drivers for teaming up, and also the motives of prospective partners. The most common drivers include cost savings, expertise sharing, greater public awareness and access to new funders. However, any new alliance should not detract from the charity’s current projects which could have a negative impact for its core beneficiaries.
Finally, what might the charity gain and lose from collaborating with a third party? Weighing up the possibility of significant reputational or financial risks will assist in the decision making process. With any new arrangement, there is a real risk that the efficiencies and benefits envisaged will not be realised.
Poor communication, failure to embrace responsibility or difficulties integrating staff and systems can all become barriers to charities working effectively together. Trustees need to fully understand the culture and history of any new partner organisation as there is a potential reputational risk to the charity if it fails to deliver.
Trustees of charities need to be innovative in finding either new sources of income or finding different ways to operate more efficiently. There is definitely potential to find efficiencies by working together with other charities and sometimes a decision to collaborate can lead to a formal merger of two or more charities and a brighter, more sustainable future.
Jamie Davidson is partner and head of the charities sector group at Henderson Loggie and member of the ICAS Charities Committee
