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Charity Management Terms

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100+ charity accounting, legal, management and governance terms explained in plain English, including fundraising, HR, data protection and communications. A summary version of the interactive, in-system help of the free Charity Excellence Framework online toolkit. It’s low workload and works for any charity.

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These are only an aid to general understanding. Some apply more widely than common charity usage, others have no agreed definition, whilst others have a precise technical meaning, which could only be condensed down by sacrificing accuracy. Seek professional advice, if necessary.

A

Accrual - records a transaction in the accounts, when it is completed, not when the cash is received. For example, income for an activity next year, being accrued into next year’s accounts.

Aged debtors report - is a list of all the invoices due that haven't yet been paid.

Analytics - gathering data from social media websites and analysing it using social media analytics tools to make decisions.

Avoidance – action to prevent a risk happening.

B

Back-up – duplicating the state, files and data of a computer system to use as a data substitute, if the primary system data is corrupted, deleted or lost.

Balance sheet - a financial statement that summarises an organisation’s assets, liabilities and capital (reserves) at a specific point in time.

Brand – a brand is the essence or promise that a product, service or organisation will deliver or be experienced by stakeholders.

Brand guidelines – guidance on colour, typeface, logos, design etc, to ensure these are used consistently across an organisation.

Business plan –– often a one-year plan to achieve the charity’s objectives, driven by the strategy. May be called an annual plan, or similar. Year 1 of your strategy

C

Campaigning - awareness-raising and efforts to educate or involve the public by mobilising their support on a particular issue, or to influence or change public attitudes

Capital expenditure – expenditures for fixed assets, expected to be productive for a long period of time. It is charged to expense gradually via depreciation.

Charity Governance Code - sets out the principles and recommended practice for good governance. It is deliberately aspirational and is not a legal or regulatory requirement.

Charities (Protection and Social Investment) Act – relating to fundraising, is intended to protect people from intrusive fundraising practices

COSHH – Control of Substance Hazardous to Health. H&SW regulations promoting safe working with potentially hazardous substances, such as chemicals.

Cost of living pay increase – a pay increase that offsets the impact of inflation on staff salaries. Sometimes referred to as a Cost of Living Adjustment (COLA).

Conflict of interest - a situation in which an individual has competing interests or loyalties. Trustees and company directors are required to act in the best interests of their organisation, at all times.

Contingency plan – is for when things may turn out differently to expected, often to respond to an exceptional risk that, though unlikely, would have catastrophic consequences. Your Plan B.

CRM –a customer relationship management system is a platform that enables charities to manage donors, volunteers and fundraising projects.

Crowd Funding – funding a project, or similar, by raising money from a large number of people who each contribute a relatively small amount, usually via a web platform.

Cyber security – the technologies, processes and practices designed to protect networks, computers, programmes and data from attack, damage or unauthorised access.

D

Data protection - all organisations that collect, process or store personal information must safeguard personal information and ensure it is managed properly.

DBS - The Disclosure and Barring Service helps organisations to make safer recruitment decisions and prevent unsuitable people from working with vulnerable groups.

DDA – Disability Discrimination Act - intended to protect people with disabilities from discrimination and includes serious penalties for those found in breach of the Act.

Delegation – giving responsibility or authority to another person (normally from a manager to a subordinate) to carry out specific activities

Deferred income – income received (or invoiced) in one financial period, which relates to a future financial period(s).

Depreciation – allocating the cost of a fixed asset over its useful life to account for its decline in value. For example, purchasing a computer for £300, and depreciating this at £100 over 3 years.

Designated funds – unrestricted funds set aside by trustees for a future purpose, which are expendable at their discretion. For example, setting aside funds each year for future capital repairs.

Digital – in common usage terms, essentially web/social media, but has various interpretations, including technology and new ways of engaging stakeholders.

Disaster recovery - A disaster recovery plan (DRP) is a documented process to recover and protect an organisation’s IT infrastructure in the event of a disaster.

Due diligence - a risk assessment of an organisation or person prior to signing a contract, or other agreement, or accepting a donation/support.

E

Emphasis of matter – a statement included in an auditors' report indicating a substantial uncertainty or other matter, which the auditor considers is significant or important.

Environmental scanning – monitoring the external world to identify emerging threats and opportunities.

Ex-Gratia payment – trustees believe they have a moral, but not legal obligation to make a payment.

Ex-officio trustee – is a member of the board, because he/she holds a particular appointment. For example, the CEO of another charity

Excepted charities - don’t have to register or submit annual returns to the Charity Commission, but are otherwise regulated by the Commission. Some churches, Scout/Guide groups and small student unions.

Exempt charities - are exempt from registration and regulation by the Charity Commission, but are required to have a principal regulator. Includes some educational organisations and museums/galleries.

Exit interview - is conducted with an employee who leaves the organisation to provide feedback on why staff are leaving, what they liked about their employment and what areas need improvement.

F

Fire risk assessment – an assessment of any non-domestic premises, including measures to reduce or eliminate the risk of fire, and identify persons at risk.

Free reserves – the total unrestricted funds on the balance sheet, excluding any designated reserves.

Full cost recovery – securing funding that covers all costs, including the direct costs of the project and all overheads, not just a contribution to overheads.

Fundraising Code of Practice – and its associated rule books outline the standards expected of charitable fundraising organisations.

G

GDPR – The EU General Data Protection Regulation came into force in May 2018 and strengthens the Data Protection Act.

Gift Aid - a scheme enabling registered charities to reclaim tax on a donation made by a UK taxpayer, effectively increasing the amount of the donation.

Gift in kind - donating goods and/or services, rather than money.

Google Adwords Grant – registered charities may apply for a substantial grant to pay for advertising on the web.

Governance - the Board’s responsibilities in setting the strategic direction and culture of the organisation and ensuring it is well lead and managed to achieve its charitable objectives.

Governing document - sets out an organisation’s purpose and, usually, how it is to be administered; a memorandum and articles of association or other formal document.

H

Health and Safety at Work Act 1974 - the primary legislation covering occupational safety, which places a duty on all organisations to ensure this, so far as is reasonably practicable.

High Net Worth – also known as major donor. Someone with the financial capacity to make a very large donation. How much that is defined as varies from charity to charity.

Hierarchy of messages – a prioritised list of your key messages that are used consistently in your communications. Your brand expressed succinctly in words.

House Style – guidance on how words and acronyms etc are used to ensure a consistent written style across an organisation

I

Impact – the long-term difference that charities make and the change they create for the people they help, in delivering their mission.

Independent examiner - an independent person who has the ability and experience to carry out a competent examination of accounts. A simpler form of scrutiny than an audit, for smaller charities.

Internal financial controls - essential checks and procedures that safeguard the charity's assets. For example, budgetary control, segregation of duties and bank account reconciliations.

Insolvency – can be balance sheet or cash insolvency, the most critical being when there is no reasonable expectation of being able to pay debts as they fall due.

Intellectual property - a category of property that includes intangible creations of the human intellect, and primarily encompasses copyrights, patents, and trademarks.

Investment appraisal – an assessment of the costs (financial and non-financial), benefits and risks of a proposal.

L

Liquidity - a measure of the extent to which a person or organisation has cash to meet immediate and short-term obligations, or assets that can be quickly converted to do this.

Lobbying – the act of trying to influence the votes of MPs or peers by pressure groups, constituents or colleagues.

M

Malware - software which is specifically designed to disrupt, damage, or gain unauthorised access to a computer system.

Marcom(m) – an abbreviation for marketing communications.

Marketing Automation – the use of software and Web-based services to automate marketing to increase efficiency and donations

Materiality – in finance, an item that if misrepresented or not included, might reasonably be expected to mislead those using the accounts. Am immaterial item would not.

Meta Data – words inserted into the coding for titles, headings etc that describe individual website pages to allow search engines to understand what each page portrays.

Mission –a short statement that communicates your purpose to your stakeholders in a compelling way. May include what you do, for whom, how and where.

Mission drift – the tendency over time for organisations to drift from their core mission, due to competing priorities, such as the need to secure funding.

Mitigation – action to minimise the impact a risk would have, if it happened.

Modified Audit Opinion - the financial statements do not show a ‘true and fair’ view in all material respects. There are 3 types; qualified, adverse or disclaimer.

N

Nominated trustee - is a member of the board, because another organisation has been given the power to appoint board members, in your governing document.

Non-disclosure Agreement (NDA)–a contract between 2 parties agreeing confidential information they will share, but not disclose to 3rd parties. Sometimes used to refer to a settlement agreement.

O

Outcome – the direct change created, because of what you do, for the people or issues you support. Shorter term than charitable impact.

Outsourcing services – engaging another organisation to performs tasks or provide services that might otherwise be carried out in-house.

Overheads - expenditure which cannot be specifically identified with a particular activity, such as rent and insurance. But, there are both direct and indirect overheads

P

PAT - portable appliance testing. A maintenance plan based on a straightforward, inexpensive system of user checks, formal visual inspection and testing.

Personal benefit - is a benefit that an individual or organisation receives from a charity.

Personal data - in data protection, information that relates to an identified or identifiable individual.

Personal development plan - an action plan based on awareness, values, reflection, goal-setting and planning, within the context of a career, education, or for self-improvement.

PEST – assessing key factors in the outside world Political, Economic, Sociological and Technological; also, PESTLE/STEEPL. The CEF Resource Base includes a template specifically designed for charities.

Petty cash - Relatively small amount of cash kept at hand for making immediate payments for miscellaneous small expenses.

Pipeline – the donors ‘in the pipeline’ - the numbers and amounts of donations that are realistically expected in the future.

Pre-payment - when a cost is incurred in one month/year, but spread over more than one period in the accounts. For example, annual insurance paid in one month, recorded in the accounts over 12 months.

Pro bono - work undertaken without charge, often by a professional, such as a lawyer.

Prospect – an individual or organisation who may potentially be open to being converted to a donor.

Prospect Research – a fundraising technique used to evaluate a prospect's ability to give (capacity) and warmth (affinity) toward an organisation.

Public Benefit – for an organisation to be a charity, each of its purposes must be for the public benefit. That is beneficial and available to a sufficient section of the public.

Public Interest Disclosure – the technical term for whistleblowing.

Public Services (Social Value) Act - requires public bodies to consider how the services they commission might improve economic, social and environmental well-being.

R

Reconciliation - is an accounting process that uses two sets of records to ensure figures are correct and in agreement. For example, regular reconciliation of the bank statement to accounting records.

Reserved powers - are matters which are dealt with only by the Board and are not delegated.

Reserves – funds kept in reserve to strengthen resilience against, for example, drops in income or to take advantage of new opportunities.

Restricted funds – funds which can only be used for a specific charitable purpose. Often where a donor has applied conditions .

RIDDOR – H&SW regulations on the Reporting of Injuries, Disease & Dangerous Occurrences.

Risk appetite – the type and degree of risk that an organisation is willing to accept.

Risk management – the process of identifying, assessing and managing risks.

S

Search Engine Optimisation (SEO) - increasing the number of visitors to a website by obtaining a high-ranking placement in the search results of Internet search engines

Security patch -a set of changes to a computer programme or its supporting data designed to update, fix, or improve it, including fixing security vulnerabilities

Serious incidents - must be reported to the Charity Commission. An adverse event, whether actual or alleged, which results in or risks significant loss, damage or harm.

Settlement agreement - a legally binding contract between employer and employee which settles claims that the employee may have against their employer. Colloquially a ‘gagging’ agreement.

Shared services -a number of charities collectively sharing services, instead of each having their own. Often back office, such as IT, HR or finance.

Social media management tool/platform -software that enables you to schedule and analyse your social media marketing campaigns.

Social media analytics – the collection of data from web and social media sites and evaluating this to make decisions. There are a range of free tools available.

Statement of financial activities (SoFA) – a single accounting statement in the annual statutory accounts that includes all income, gains, expenditure and losses recognised for the reporting period.

Statutory funding – usually contracts, from UK central, local and devolved administrations, international bodies, and overseas governments.

Strategic risk - risks that could impact on the organisation's ability to achieve its strategy and strategic objectives.

SWOT – evaluating strengths, weaknesses, opportunities and threats. The opportunities and threats, are the key issues from a PEST, or similar, analysis.

T

Tainted donations – arise when a donor or their representative obtain a financial advantage for themselves, in return for their donation; usually tax related.

Tangible fixed assets – appear on the balance sheet and include land, buildings, vehicles and equipment and investments held on a continuing basis.

Theory of Change –a non-profit tool for planning, participation, and evaluation. It defines long-term goals and then maps backward to identify necessary preconditions.

Tone of voice – not what your organisation says, but how – the impression you create about how you are in terms of your formality, respectfulness, humour and enthusiasm.

Trading -buying and selling goods/services. In primary purpose trading a charity will not pay tax on its profits, because trading helps to achieve its objectives. Secondary purpose trading does not.

U

Unrestricted funds – – funds that have no specific conditions imposed by donors, in terms of how or on what these may be spent.

Upside risk – the risk that an outcome has a positive benefit, It helps organisations take a more balanced approch to risk,rather than just focusing on the negative aspects.

V

Value for Money -  achieving the best possible value in using resources, based on economy, efficiency and effectiveness.

Vicarious Liability - in the context of running a charity, means the charity or its trustees being liable for the wrongdoing of others.

Vision -a short, emotionally engaging statement that describes what the future would be like, if we were to achieve your mission

W

Whistleblowing - the act of telling the authorities or the public that an organisation is doing something immoral or illegal.  The wrongdoing you disclose must be in the public interest.

Wrongful Trading -continuing to trade when there’s no reasonable prospect of avoiding insolvency and not having taken every reasonable step to minimise the loss to creditors.

Working Time Directive - the law governing workers’ rights to holidays, working hours and breaks.

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