Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 40-59)



Chris Ruane

  40. In the minutes, "Attendance of the Children's Society Trustee Board 19 October 2001, Trustees . . ." you are down as a trustee.
  (Lady Toulson) If I am, it was because I was co-opted for that meeting. I was there as a co-opted trustee for the day and, at the AGM on the day after, I was elected to the board and as chair of the board.

  41. Are the minutes incorrect?
  (Mr Sparks) The minutes are correct. The process the Society uses is, where there is a hand over of trustees—and at this particular point five trustees were retiring and five more were appointed—the board has the power to co-opt to fill vacancies. What they did was co-opt the five new trustees so that they would be at the meeting in October. The Articles then provide that those trustees retire at the AGM and offer themselves for election, which is what Lady Toulson and the other new trustees did. They were there technically as trustees within their role of having been co-opted from 19 October and, for a number of them, it was their first meeting. Those who had just been co-opted then retired and offered themselves for election at the AGM the following day.

Mrs Williams

  42. Were you allowed to take part in the discussions?
  (Lady Toulson) I did not because I did not have any of the background on which to take part in an informed debate.

  43. Mr Nall, can you explain how these cost savings were made? I do not feel you have answered that question adequately. Whilst all this was going on between March 1998 and September 2000, you cut costs significantly and I feel that Mr Nall has tended to skate over that slightly.
  (Mr Nall) We need to be very careful about terminology. We have reduced activity and associated costs. For instance, last October we cut £2 million-worth from our fund raising requirement by closing Some work and also making savings in both our fund raising and our support functions. More specifically, we have made further planned savings this year and that is the purpose for which we are here today, to answer questions about those decisions. There is also the other category, which you may be alluding to, which is saving money by being more efficient as an organisation. As an organisation, over the last three years, we have moved to benchmark what we do in all our functions against best practice, whether it is in the commercial sector or in the charity sector. We are now operating all our support services, for instance, at the top of the second quartile, which is an appropriate place for a charity to operate. I can expand on that if you would like. In terms of our support services, if they had grown at the rate of our aggregate activity in fund raising and our children and young people's work, we would have been spending another £1.6 million on that support activity. I am sure you will agree that that is a worthwhile saving.


  44. It became apparent there was a problem in September 2000, according to your evidence, but you then approved savings of two million altogether for that financial year. You claimed £50,000 of that was related to Wales. The fund raising income that you were then making grew in the second half of 2000-01 but slowed down again this year. What were the reasons for these large fluctuations at the time?
  (Mr Nall) In terms of fund raising income, it is a little unpredictable. Let me give the example of legacies. We might expect to have, say, £7 million-worth of legacies in the next financial year. However, if for some reason some very generous individuals were to die and leave us a £2 million legacy, we might find we had £9 million-worth of legacies. Alternatively—I apologise, this is rather a morbid topic—were fewer of our supporters who are giving us legacies to die in a year, we might come in substantially under. You will see volatility, particularly in long established charities in their fund raising income, where they have had time to build up a core of legacy support.

  45. To what extent were those trends outside your control?
  (Mr Nall) There is always some degree to which they are outside our control. However, we had a very sharp rise in the second half of the last financial year. From October 2000 through to March 2001 income grew well over 20 per cent. A lot of that was driven by activity that had started 18 months before. In that sense, the trustees knew they were facing a problem and we had expressed our needs within the Society and the kind of goals we were looking at because of the dependencies. The dependencies are the rise in fund raising income. Fund raising income has now started to arrive. In the second half of last year, it was growing very rapidly. If that growth had continued, we would not be sitting here today. The trustees gave that growth an opportunity precisely because they share your concern about the fate of children and young people in Wales and in our work in England and they wanted to allow that income growth to run. They formed a contingency planning group to look at savings in such areas as purchasing, our support services, in amendments to our contract terms to boost the overhead recovery on our contract work and similar types of savings. In the event, by the time we got to July this year, four months into the new financial year, it was clear that the first quarter's performance was not sustained by growth. It was above trend. It was above target but it was not going to be sufficient. That, I am afraid, led us to reappraise the basis of work. It is as much of a regret to the Children's Society and those who work for it as it is for yourselves. We are seeing valued colleagues having to go.

Roger Williams

  46. Your staff in Wales have been very successful in identifying sources of grants. For instance, in the mid-Wales area, applications are being made under the 5(b) scheme and yet I am told that that money remains unclaimed, £59,000 this year. They say there is a problem between your auditor and the organisation in Wales but is there no determination to sort that out so that that money is released?
  (Mr Nall) It is very helpful that you raise that. I have a slight difficulty in that I do not have a full list of our several hundred contracts with me. I do not mean to diminish your inquiry by that statement. We are at the moment doing a very careful audit to ensure we are claiming all income as part of our forecasting for the year end. Forecasting for the year end and procedures around it happen most years. They have happened every year I have been responsible for the Society's finances. We are obviously paying particular attention this year because of the financial situation. I have made a note of objective 5(b), 59,000, mid-Wales. I will follow that up and thank you very much for raising it[1].

  47. It does make staff disenchanted that their efforts are not being supported.
  (Mr Nall) Yes, but may I point out that staff who submit claims for managing work probably should be making those claims. I would need to look into the detail to find out what their accountabilities are but my first port of call will be the line management concerned.


  48. There is not a lot of point in claiming it if you do not carry on working with it.
  (Mr Nall) It is for work we are already doing.

  49. If what you are already doing is going to come to a dead stop, which it is likely to do unless—
  (Mr Nall) I was rather hoping that the conversation might turn to this because there is an issue about future viability and avoiding continuing runs on reserves in the Society is part of the financial strategy. Only in stopping those runs and looking ahead to the future can we see what is the best footing to put the transfer of work onto other partners or whether there is any scope for the Society retaining some role in it. I imagine the Society maintaining some role in it might be rather unpopular now and that is very understandable, but the trustees have always expressed their desire to see the work transfer. They have been up against a financial brick wall, not a moral one, in terms of the value to children and young people. That is agreed to be paramount.

Julie Morgan

  50. I want to ask you about the value of your buildings and whether you are disposing of any of your buildings—for example, your headquarters in London. Is that for sale?
  (Mr Nall) Firstly, we are looking at our administrative property to seek to realise value from it. Our surveyors are carrying out their own evaluations at the moment. We would be irresponsible to not do such a thing. £1 million is built into next year's growth in reserves to come from that very source. We would expect to make further contributions from that source in future years. However, leasing buildings is effectively a form of borrowing. It is not called that in polite society but what you are doing is swapping an asset for a liability. You get a lump of cash which is the principle of the loan and you are then borrowing funds against a property. I would not wish to borrow on significant core assets because all the money that you are paying in interest is going into someone else's pocket, not towards the needs of children and young people.

  51. Presumably you could move somewhere that was cheaper than central London?
  (Mr Nall) Yes. We could do that. One of the difficulties in that is that you incur very large costs because inevitably large numbers of staff may have children in school and you are effectively making a lot of staff redundant at very high cost.

  Julie Morgan: That is happening in Wales.

Chris Ruane

  52. What is the total value of your property portfolio?
  (Mr Nall) I have the annual accounts with me. I do not know if you have this document but it is in note eight. I would be very happy to supply it. Alternatively, it is a publicly available document and you will be able to obtain copies from the Charity Commission or through the House of Commons Library. The net book value of property at 31 March 2001 was 10.8 million. Bear in mind that that includes leasehold property and the amendments and refurbishments to it to make it suitable for the Society's use. I am afraid it is not all freehold property available for sale.

  53. £10.8 million is a considerable amount of money. I would urge the Society to take up the suggestions of Julie Morgan and consider raising funds through that. I can think of a nice place for you to relocate in the west of Rhyll. You would make a statement by doing that. You could get a six storey building for £50,000 and you would have plenty of change left over to carry on services in Wales and throughout the United Kingdom.
  (Mr Nall) Thank you for your suggestion. We are already looking at that, so perhaps we are one step ahead of you on that.

Julie Morgan

  54. I want to ask about how you reached this decision. When it became clear there was a problem and you were considering withdrawing from Wales, who did you consult?
  (Mr Sparks) We did not consult anybody. We reported to our trustees.

  55. As a result of deciding that this work in Wales may end, did you have any consultation at all with your staff in Wales, for example?
  (Mr Sparks) Not prior to the decision, no.

  56. You did not discuss it with any member of staff in Wales?
  (Mr Sparks) No.

  57. You had no discussion with the management team in Wales that you are in touch with and with the different organisations in Wales about what would be the consequences of such a decision?
  (Mr Sparks) No, because we have a director for children and young people responsible for all of our work who was able to take a view about what the impact and effect would be.

  58. That director is based where?
  (Mr Sparks) In London.

  59. A director based in London gave you your advice about what the consequences of making a decision like this in Wales would be?
  (Mr Sparks) She gave us advice on the consequences of all the decisions affecting both England and Wales, yes. That is her responsibility.

1   The claim has been prepared. It has been subject to audit in compliance with the relevant claim procedures and will be submitted shortly. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 15 February 2002