Trustees Report

Financial Review

For the year ended 30 September 2022

Our Financial Position

The Foundation remains well-placed financially to deliver its long-term objectives, thanks to the funding agreed by CareTech as set out in the Donation Agreement between the company and the Foundation settled in July 2019.

This year saw a welcome growth in income from the company’s annual donation and an additional restricted donation to support the growth of the Foundation’s Staff Hardship Fund. As highlighted above, the sale of CareTech plc provided the Foundation with a significant cash boost and the opportunity for the Foundation to implement its long-term investment and income diversification strategy.

Providing the Foundation with sufficient clarity as to the likely funds at its disposal over at least the medium-term ensures the best possible opportunity for it to deliver impact. The Board of CareTech plc, in establishing the Foundation, fully accepted the importance of settling clearly the funding basis for the Foundation moving forward, enabling it to focus on delivering impact and reinforcing its independence. The Donation Agreement provides for an annual donation of 2.5% of the company’s pre-tax profits.

CareTech complements its financial donations by supplying significant in-kind support, such as office accommodation, back office systems and staff expertise. We have established systems to capture and attribute the full value of CareTech’s support to the Foundation, which includes:

the value of all in-kind support provided (accommodation, back-office support, staff salaries for seconded staff, etc.);
the value of employee volunteering hours; and,
any other value added/leveraged support provided by the Foundation

In this current year, the overall value of this in-kind support has been valued at just over £8,000.

As noted elsewhere in this Report, trustees have established an Income Diversification Strategy. The benefits of diversification of income go far beyond simply achieving an income surplus; diversification also gives organisations the security needed to focus more on long-term strategies and ultimately have more impact for their beneficiaries. The aims of the Foundation’s income diversification strategy, therefore, are:

to increase the capacity of the Foundation’s grant-making capacity;
to reduce its reliance on a single income stream (however reliable); and,
to provide greater certainty on future income levels to encourage longer-term investment.

As noted above, CareTech plc has over the last three years made a restricted donation to the Foundation – over and above its main annual donation – to support the Foundation’s Staff Hardship Fund. This year’s restricted donation in this regard remained at £50,000, all of which was committed during the year. Those funds provided for Championing Social Care programmes, as detailed above, are also treated as restricted income.

A formal budgeting process, scrutinised by the Trustees’ Audit & Risk Committee and approved by the full board of trustees, in in place. Trustees’ budgeting is based on conservative estimates and a small amount of in-year unallocated funds, in addition to the Reserves target noted above, to allow for any significant unforeseen expenditure. The Foundation uses the xero.com accountancy system, with additional accountancy and payroll support provided by Cater Chartered Accountants Ltd, to manage the Foundation’s finances and monitor performance against budget. The trustees have also approved a Financial Handling Manual that sets out all necessary financial systems for the Foundation, which is reviewed at least annually.

Trustees are provided with a monthly financial report as part of the CEO’s regular report and further scrutiny is undertaken by the Audit & Risk Committee as well as the full Board of trustees.

Our Reserves Policy

As a medium-sized charity, trustees recognise that we need to invest our funds wisely and safely but have also agreed that we wish to back innovative programmes. With innovation comes higher potential impact but also, of course, higher risk. As trustees, we have agreed that we have:

a reasonably high risk appetite in respect of the projects we support, although will always seek a balanced portfolio of projects of varying risk levels;
a low risk appetite in respect of the reputation of the organisations with which we partner, preferring to work with credible and respected partners; and,
a low risk appetite in terms of process, having put in place rigorous due diligence procedures to safeguard the Foundation’s funds and reputation.

In line with the above risk statement, the Foundation maintains free unrestricted reserves:

to provide a level of working capital that protects the continuity of its core work;
to provide a level of funding for unexpected opportunities; and,
to provide cover for risks such as unforeseen expenditure or unanticipated loss of income.

Last year, trustees updated the Foundation’s Reserves Policy to establish a target of maintaining free reserves equal to six months of staff and associated costs. This amounted to approximately £150,000 based on the

Foundation costs approved by trustees in the Business plan. At the end of this Financial Year, the Foundation held £489,350 of free reserves. This reflects the full reserves held by the Foundation, less its fixed assets and the proceeds of its investments.
The Trustees will review their investment strategy and reserves in 2023.

Going Concern Review

Trustees have considered carefully the position of the Foundation as a going concern throughout the year and is confident that the charity remains well-placed in this respect. Trustees base this assessment on the following factors:

The Foundation has a formal agreement with CareTech in respect of the charitable donation it can expect each year, with that donation expressed as a percentage of the company’s Pre Tax Profit. The agreement provides for a lengthy notice period should the company wish to withdraw from these arrangements. This agreement has been re-confirmed with the company following its return to private ownership.
The trustees note the long-term profitability and growth of CareTech over its long history.
The sale of the shares in CareTech plc has provided the Foundation with significant extra cash revenues, and the opportunity to provide a diversified income additional confidence. Trustees have agreed an investment strategy for these revenues, providing a mix of short-term liquidity and longer-term, but less liquid, options. Trustees are confident that the sale of the shares provides the Foundation with greater income diversity and financial independence than in previous years, as well as ensuring the long-term financial health of the charity.
The Foundation has agreed an Income Diversification Strategy, with good progress being made on its implementation.
Strong business planning and financial management systems are in place to contain costs.
Strong contingency and mitigation plans and measures are in place in the event of significant downward pressures on income, as well as the use of conservative budgeting assumptions.

Other financial matters

The Foundation has no material pension liability.