Examination of Witnesses (Questions 40-59)
LADY TOULSON,
MR IAN
SPARKS, REVEREND
JOHN GLOVER
AND MR
CHARLES NALL
TUESDAY 18 DECEMBER 2001
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.
Chairman
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.
Chairman
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
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