Report of the Trustees 2004/2005: Page Five
Investment policy
During the year, continued slow recovery took place in the world’s stock markets, recouping some of the losses incurred in earlier years. This resulted in an overall gain of £112,000 in the Charity’s investments.
In light of the Charity’s increasing size and financial complexity, it was signalled in last year’s Annual Report that the potential benefit of appointing a specialist investment manager would be investigated. This review was duly undertaken by the Finance Committee which concluded that the slow recovery in the market and the limited current size of investments meant that the fees of an investment manager were unlikely to be substantially outweighed by improved investment performance. It was also decided that the preference, for the moment, would be for investment in cash rather than shares. An investment manager will not therefore be appointed for the foreseeable future.
Reserves policy
Taking into account the nature and volume of income streams and the pattern of expenditure in meeting the Charity’s objects, the Trustees have maintained their view that to ensure efficient management, and the provision of a financial buffer allowing uninterrupted services, a free reserve equivalent to three months’ unrestricted fund expenditure is required. This amounts to £552,000 on the basis of 2004/05 expenditure. The free reserve amounted to £636,000 at the balance sheet date.
Risk assessment
The Trustees and senior managers continue to review the risks facing the Charity and have taken a number of steps to mitigate these. Risks are best managed by having a framework within which effective monitoring and review takes place. The Charity’s Memorandum and Articles of Association and five-year strategy, ‘A Cause for Action,’ provide such an overall context for the management of the Charity.
The Memorandum and Articles of Association have been comprehensively reviewed, with legal input, to ensure that the Charity will continue to be governed efficiently and to high standards of transparency and public accountability. The five year strategy establishes clear priorities and provides a framework for planning and review. During the course of the year, progress against the range of strategic objectives was reviewed and an assessment carried out of the Charity’s key audiences and the programmes of work delivered to those audiences.
Following earlier fundamental review of the Charity’s research strategy, new arrangements for the rigorous annual review of grant awards has been put in place, enabling any difficulties to be identified at an early stage. The Charity has continued to adopt a fundraising approach based on a prudent mix of high return donations (e.g. from major donors) and sustainable sources (e.g. direct marketing) – maximising income potential and spreading risk.
An annual budget is debated and approved by Trustees and forms the basis for financial monitoring. Financial review is undertaken by the Finance Committee on behalf of the Board, but the Board itself also receives reports on financial performance. The Senior Management Team regularly monitors financial performance, provides regular reporting narrative to Trustees and invites ongoing questioning.
Explicit delegated authority arrangements have been agreed by the Trustees for the commitment of resources. These have been developed following the identification of risk to the Charity in relation to different types of commitment. They will be reviewed again in 2005/06 to ensure their continued appropriateness.
A staff performance and development system continues to provide a framework for ensuring that the work of all employees is tied clearly to the overall strategy, and that regular monitoring of performance is carried out.
The need for enhanced financial policy and greater strategic management of resources has been recognised through the strengthening of leadership of the Charity’s finance function, reported last year. A more senior Head of Finance, to lead this work, took up post in 2004/05.
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