Strategy for the future investment of Charitable Trust Funds for the benefit of the Trust population

Transcription

1 Charitable Trust Funds Advisory Committee Strategy for the future investment of Charitable Trust Funds for the benefit of the Trust population For approval. LA O Neill Director of Finance February 2011

2 Contents Section Paragraph Number 1 Introduction Current Funds Position Current Investment Strategy Sources of Income and Types of Funds Way Forward Conclusion Next Steps/Key Milestones

3 1. Introduction 1.1. This paper sets out a proposed strategy for the management and investment of the Northern HSC Trust Charitable Trust Funds (CTF) for the future. Its primary purpose is to promote investment of the current funds, both income and capital, as appropriate, to meet the objectives of the donors, and of the Trustees, and to enhance the experience of the patients, clients and staff of the Trust. 2. Current Funds Position 2.1. At 31 st March 2011, the last completed accounts for the Charitable Trust Funds showed that Northern HSC Trust CTF had the following values: Unrestricted Funds 3,286,000 Restricted Funds 1,593,000 Endowment Funds 74, In the year ended the 31 st March 2011, the CTF had received income of 837,000 and had expended 793,000 on approved purposes. This is not out of line with previous years The Trust had investments with the Northern Ireland Central Investment Fund for Charities (NICIFC), an independent investment fund managed via the Department for Social Development, totalling 1.63million. 3. Current Investment Strategy 1 1 The Investment referred to in this section is the use of CTF in the Trust Directorates as expenditure. It does not refer to the Investment policy, which covers the banking and investment of the totality of funds as described in the balance sheet.

4 3.1. Currently the Trustees have permitted the investment, i.e. spending, of the projected income for the funds in any given year. This is calculated, based on previous year s levels, and is designed to retain the capital intact. There is no direct strategy, or objective, to utilise the capital in any structured way over a period of time. Consequently, the capital assets have remained largely unused, and have varied in value due to external factors only, e.g., the collapse in stock values affected the dividends paid and underlying asset values At the beginning of each year the Finance Directorate advise the operational directors of the projected budgeted income and seek proposals for spending that amount. Practice varies among Directorates as to how they respond, however generally they do not provide a 12 month plan for expenditure. Spending tends to be relatively ad hoc and influenced by circumstances This approach is not wrong and it does have the merit of providing a balanced position each year. However it does not maximise the potential of the funds nor does it necessarily meet the donors wishes. Hence an alternative strategy should be considered. 4. Sources of Income and Types of Funds 4.1. In developing an alternative strategy it is essential to understand and acknowledge the type of funds and their sources and how this affects their use There are three types of funds: Restricted: funds which are donated or granted with a specific purpose imposed by the donor Unrestricted: funds which are able to be spent at the discretion of the Trustees. These are also referred to as general funds.

5 Endowment: capital funds which are made available to the Trustees who are legally required to invest or retain them It is also possible to have designated funds which are set aside (earmarked) by the Trustees for a specific purpose, e.g., within an unrestricted fund The four main sources of new funds in the Trust are: Donations: this is primarily gifts of money made by individuals to the Trust, e.g., by a patient at the end of a stay in a Trust facility. Donations can be restricted where the donor specifies the exact purpose, e.g., for the benefit of patients in Ward A. An unrestricted donation would be one which is given without an exact purpose being specified, e.g., for the hospital charity or for the ward funds, without specifying how it should be used Fundraising: this income normally arises from events and often is for a specific purpose, e.g., to purchase an MRI Scanner for hospital A. This places a clear restriction on how it can be used Legacies: these can be either restricted or unrestricted dependent on the terms on which the bequests are made Investment Income and Interest: this arises as a result of the asset investment policy of the Trustees. Income in respect of restricted funds cannot be credited to the unrestricted funds The underlying principle is that restricted funds capital and income can only be applied for the objectives of that fund. Unrestricted funds can be applied for wider charitable objectives In the NHSCT CTF there is 1.593million of restricted funds in the balance sheet at 31 March 2011 and 3.286million of unrestricted funds and 74,000 of Endowment Funds In considering an alternative investment of funds approach this principle will need to be recognised.

6 5. Way Forward 5.1. The CTF Advisory Committee has expressed the view that the Trustees should maximise the benefit that the funds could provide to the Trust s population. This could be achieved through the gradual release of the capital into a variety of acceptable initiatives linked to the Trust and Directorate strategies and plans In order to achieve this the following approach is suggested: The constraints on each of the types of fund outlined above set a framework within which the Trustees must operate. It is therefore proposed that the Unrestricted funds, which were valued at 3.28million at the 31 st March 2011, should be released for investment by Directorates over a five year period. This would make available some 600,000 per annum in addition to the normal level of income Directorates would be asked to bid for these additional sums, linked to meeting the objectives of the funds and also to maximising public benefit. There may be merit in establishing a series of key themes against which the investment could be made, e.g., research and education, patient comforts, developing community and voluntary services, etc. This approach would require the involvement of the various Directorates to get agreement Given the nature of Restricted funds, i.e., they are relatively specific, it will be necessary to consider these in direct relationship to their original objectives. In some cases these will be clear and written down or implied in the fund title. This does not preclude the use of these funds for the purpose that they are established. It is proposed therefore to ask Directorates to consider each fund and bring forward proposals which might be funded. These funds had just under 1.6million assets at the 31 st March In relation to the Restricted funds the position is relatively straightforward. If a fund is not capital in perpetuity or bound by some other legal restriction, then any proposal which meets the objects of the fund, is in line with

7 Directorate strategy and is considered a beneficial (and value for money) use of the funds, could proceed relatively quickly. Normal HSC procurement and contracting rules would apply in all instances The Unrestricted funds are made up of almost 260 individual funds which reflect both the three legacy HSC Trusts and the Northern HSC Trust. In order to progress the proposal to release the capital over a period of years, a more detailed period of preparatory work will be required. There are a number of issues to be considered: Some funds have been in existence for a long period of time and there may not be clear documentation of the objects of the fund. This makes it difficult to be exact on their purpose even if they are regarded as Unrestricted; As some funds are quite old they may well be for purposes and /or locations which no longer exist or have been transferred/amalgamated with other services; There is an historical attachment between individuals and the funds which they manage/support, which will need to be reviewed and redesignated in any future arrangement Given the large number of individual funds it would be difficult to create a superfund/s to support any significant or cross-directorate initiative In order to move to the CTFAC objective of utilising the capital more effectively there are a number of steps which require to be taken The wide range of funds needs to be consolidated into a more manageable amount. This will require a legal review and a submission to the court or the Charity Commission if appropriate for a Cy-pres application, for transfer; The historical nature of CTF arrangements, whereby a large number of funds have been opened, and each has a fund manager will need to be changed. This will require consultation, engagement and education of

8 stakeholders. A Trust-wide engagement and communication strategy will be required Procedures and a governance framework, which reflects the new management arrangements, will need to be drawn up. 6. Conclusion 6.1. Individuals who donate or bequeath gifts to be Charitable Trust Funds expect that their gift will be put to use for the purpose they intend. It would also not be expected that their gift would be held for an uncertain period (except for capital in perpetuity type gifts) purely to generate small amounts of income. The historical position in this Trust, and in many other charities, is that the underlying assets have not been disbursed. There have been reasons for this, however there is a growing expectation that those intended to benefit should do so in a reasonable time period The CTFAC has taken the view that it wishes to see a more proactive approach to the use of Trust Funds so as to meet the objectives of these, and to contribute to the overall experience of patients, clients and staff of the Trust. The Trustees need to become similar to a grant-awarding body. To do this will require legal and administrative change This paper sets out the key steps which would be required and a potential timetable for these changes.

9 6.4. Next Steps/Key Milestones 1. Provide Draft Strategy for CTFAC Dec Tender for legal advisory service Jan Appoint legal advisor and brief Feb Review all funds for status and any legal impediments, and advise Charity Commission of approach Feb/Mar Prepare fund mapping and consult with relevant stakeholders Apr Agree governance arrangements for the review of CTF Apr Prepare legal transfer documents May Final paper to CTFAC and Trust Board (public) Jun Submission to Attorney General Summer Prepare new systems/procedures Autumn Training and education sessions for staff Winter Move to new structures 1 st April 2013

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