Building bridges with other charities?

There's a discussion on Petstreet about one member's experiences after winning a day shadowing an RSPCA Inspector. Also, see her fuller diary of the day. It's very interesting to see how we appear from "outside", in particular how difficult it is for other people to understand how the RSPCA's somewhat chaotic structure grew as the result of the decisions of local branches over a timespan of more than a century.

In our case we have a clinic, but no animal home purely because the branch committee of 50 years ago identified a welfare need for low cost pet care and negotiated a deal with Cambridge University to get cut-price treatments in return of use of the clinic for training new vets.

In the case of Stubbington Ark in Hampshire, the branch committee presumably decided they wanted a shelter and raised funds for one. HQ animal homes tend to be more strategically placed in that HQ will realise that there´s a problem with finding placements for animals in a particular region and build a home to fill that need.

Cambridge branch uses a combination of care at private boarding kennels, fostering by individuals and transfers to Block Fen which is our closest HQ funded shelter. The advantage of using private kennels is that (if we have the money!) we can increase the number of available spaces "overnight" rather than having a building with fixed limits. The disadvantage is that private kennels are not usually geared towards rehabilitating animals with behaviour problems etc.

Where there's a long-established HQ run home there is a tendency for the local branch to wither away because all the public interest — donations, volunteers etc. — tends to come to the home rather than the branch. In the long run that tends to mean that the branch can't afford to supplement the places provided by the home with fostering or spaces in boarding kennels. I suspect that having an active branch also improves relationships with other charities because they're more likely to meet us day to day. I certainly don´t get the degree of antagonism the Maidstone inspector seemed to find and we regularly come to arrangements with the local ferret rescue, Cats Protection, Blue Cross etc. if we have facilities & they don't or vice versa.

I´m afraid at the end it does come down to money. We've never yet been in a position where we were telling our inspectors to put down healthy animals, but a year ago we were very close to the point where we'd have had to. This is why it's so vital that we make a success of our new shop.

Worse than I expected

We were warned at the last meeting of the Regional Board that the drop in income from donations would mean the National Society would have to make cuts in annual spending, so this doesn't come as a complete shock. However a planned saving of £54 million is fairly steep, even spread over a three year period. Normal annual turnover of the National Society varies around the £100 million mark, so we're looking at a cut of about 18%, rather than the 9% that was originally suggested as a probable figure.

Comparison

Some figures from the Home Office performance report on Cambridgeshire police make an interesting comparison:

* Police Officers: 1,379
* Police Staff: 892
* Community Support Officers: 197
* Other Staff: 25
* Special Constables: 210

Budget 2007/08: £116.0 million

Cambridgeshire alone has an annual income that roughly matches the resources the RSPCA has to fund all its national services (Inspectorate, animal homes, campaigns, scientific etc.). Next time you hear that someone phoned the RSPCA and "no-one was available to come out that day," please remember those figures. It isn't that "no-one cares".

Cash flow figures for 2008

Just finished the spreadsheet of the accounts for 2008. The final figures in the branch Annual Report will be a bit different because these are adjusted for money owed by us (e.g. invoices for work done during the year not sent until the following month) or to us (e.g. VAT rebates not yet received). However the "raw" cash flow figures give an impression of the financial situation:

Total income: £378,880

Total expenditure: £242,877

Of this, £66,549 was spent on running the animal clinic, £40,515 on veterinary treatments at private vets and £33,237 on boarding animals until they could be rehomed. £61,860 was the overheads of running our three shops (including rent, rates and staff wages). 

Shop profits suffered a drastic fall to just a tenth of the amount we made in 2007. Considering the terrible general state of retail sales, we may have been lucky not to have actually made a loss.

Cash flow for September

Our income for September was £18,868, and expenditure £15,680, so there was a net surplus of £3,998 for the month. However, this was skewed by receipt of the £9,289 payment for reclaimed input VAT relating to the annual payment to the University Vet School for clinical services during 2007 which we made in April. 

Another poor month for the shops — overall profits are almost halved compared with 2007.

When combined with the figures for the number of animals handled by us in the same month, you'll see how the cash flow figures demonstrate that the amount of money available per animal is quite low. We would have no more than £50 available for each animal even if we had no overheads (shop rents etc.) at all.

A brief explanation of how VAT works in relation to charity activities is probably in order. We have to pay output VAT to the Inland Revenue on services (such as our animal clinic) for which we make a charge and which are not VAT exempt. We can reclaim the VAT which is included in charges we pay to our suppliers (such as the University Vet School) to enable us to provide those services. 

A normal business would charge its customers more than it pays its suppliers (or go bust) so, because VAT is calculated as a percentage of VATable charges, its reclaimed VAT would always be less than the VAT owed (so it would have to make a net payment to Inland Revenue every quarter).

We subsidise our clinic services, so we charge clinic users less than it costs us to run the clinic, and this means that the VAT we owe is less than the VAT which is included in the charge made by our suppliers. This means the Inland Revenue owe us money at the end of a quarter (effectively we have overpaid them) and we get a refund four times a year.

At present this is very welcome.

Not so cool for cats

Cats Protection have put out a statement about their investments in Iceland:

"In August 2005, the charity identified that Kaupthing Singer and Friedlander, a UK bank, was a bank where it could invest with confidence as it had a high credit rating. Kaupthing Singer and Friedlander is owned by an Icelandic bank, Kaupthing. Consequently, some of Cats Protection’s cash reserves were placed with them on a 90 day arrangement. Our deposits amounted to £11.2 million.

The credit ratings of the various banks the charity uses are checked periodically and quite recently, Kaupthing Singer and Friedlander’s rating remained sound.

“In the light of the demise of some major banking institutions, Cats Protection decided that it should diversify even further and on 17 September 2008, the charity gave 90 days notice to KSF of its intention to withdraw these deposits.

“On Wednesday afternoon, 8 October, Cats Protection received news that the bank had been put into administration. Some of the deposits held within the Kaupthing bank group have been rescued under a deal set up by the UK treasury. However, at present the future of other deposits, CP’s included, is uncertain. Many local authorities and councils find themselves in similar positions and we and they are exerting pressure on the Treasury to act."

Very worrying.

Some people seem to be taking the view that CP shouldn't have had reserves of that size in any case, and it's worth pointing out that (like us) they handle thousands of cats every year — and also help low income cat owners with vouchers for pet neutering and grants towards emergency vet bills. It's a lot of money, but spread over that number of cases, it doesn't represent a huge amount per individual cat. Setting up a new shelter doesn't leave much change out of several million pounds when you consider that a suitable site could cost at least half a million and would require at least as much again to kit it out with suitable buildings. Even paying just the minimum wage staff costs would be at least £80,000 p.a. to have a rotation to cover holidays and time off and still have someone on the premises 24/7.

Reserve funds again

Trepidation about the general state of the economy. I think it's unlikely that there's any risk that the funds in our bank account could be lost however bad things get, but it's not looking good for our charity shop income if customers aren't spending because they're worried about the safety of their jobs. The CEO of the national RSPCA (as opposed to the local branches) must be feeling pretty glum about invested funds as those do go up and down in value along with the Stock Market (and in this case, down). 

We are extremely fortunate to have received legacy income this year and without it things would be looking very bleak indeed.

Things are already looking very serious for the Rabbit Residence Rescue where most of our branch rescue rabbits are fostered. Please consider sponsoring a rescue rabbit, or adopting a pair of rabbits who are suitable for rehoming (not all of the rabbits featured on the web page came to Rabbit Residence from the RSPCA).

August Figures

A very slow month for rehoming: only three cats and one bird. We provided veterinary treatment for 227 dogs, 122 cats, 8 rabbits and 12 miscellaneous animals and neutered 15 dogs and 8 cats.

Total outgoings were £12,409 and we raised £8,411 with shop takings still rather depressed although total sales at the Cambridge shops were up £800 compared with July.

July statistics

Just got the records for July collated. During the month, our branch:

Provided low-cost veterinary treatment for 205 dogs, 115 cats, 11 rabbits and 14 miscellaneous small animals.

Rehomed 4 dogs, 3 cats and 2 birds.

Microchipped 11 dogs and 10 cats

Neutered 13 dogs, 12 cats and a rabbit

Our total outgoings were £16,904 (this amount also covers wages for our three shop staff, rent for the charity shop in Newmarket and our annual audit fee). We raised £7,811, mostly from sales at the charity shops and clinic fees.

Investments

The RSPCA has an ethical investment policy - basically that society funds shouldn't be invested in anything which causes harm to animals (as that would negate the point of having them, anyway). Putting this into practice isn't exactly as straightforward as it might seem, as I've been finding out.

If you have large amounts of money that you can tie up for several years, there's no problem getting a tailor-made investment package where your funds are invested in companies which fit whatever criteria you specify. For smaller amounts (where "small" means less than about £500,000) it's only really feasible to put your money into existing schemes, and in our case it appears that the only really viable choice is between building societies (you know the funds are invested in property) and the Co-operative Bank (they have a pre-existing list of sectors where they won't invest depositors' money). It's looking as though the Co-op is going to be the right "home" for the money we know we won't need to touch for at least a year.

Unfortunately this doen't completely solve our problems as the Co-op doesn't have many branches where our shops and volunteers can bank cash takings, so it wouldn't be practical to transfer our current account there. We probably also need to maintain some cash on short-term deposit at our current bank because we need to be able to transfer money quickly into the current account when necessary.

I sometimes get asked rather aggressively "what companies do you invest your funds in?" - with the implication that we're probably funding smoking beagles and cosmetics testing. It always sounds rather evasive to say "that's not how banking works", but I'm afraid that's the actual truth. We're not big enough or rich enough to be investing in individual share holdings.

Branch Reserves Policy

Now that we actually have some reserves (the result of a generous legacy, which pulled us back from a very dicey hand-to-mouth situation) we need to have a policy about the way we manage them, and at our committee meeting this week we agreed the formula below.

“Owing to the nature of our activities and supporter base, branch income is composed of a fairly regular component from fundraising activities and clinic fees and an unpredictable legacy component. This means that we receive occasional very large amounts which need to be used gradually to support the regular income rather than being spent during the year in which we receive them. We aim to keep our free reserves between an upper limit set at twice our annual operating costs and a lower limit fixed at the amount which would permit 12 months continued activity at current levels of regular earned income. 

At any point when free reserves dip below this 12 month safety limit we will have to begin cutting back the level of service which we provide.

At current income and expenditure rates the lower reserve limit is £41,000 and the upper limit is £260,000.”

In other words, if our steady income from the shops, clinic fees, collection tins etc. is £3,000 a month short of what we currently spend, we can calculate how long it would take before our saved funds ran dry. If the remaining time drops to 12 months we need to make emergency cuts until spending is in balance with the steady income. 

Our free reserves at the moment (after allowing for outgoings which we know will take place at the year end) amount to £120,000. This would sustain our current expenditure for three years provided our regular income stays at its existing levels. It means our work is reasonably secure, but there isn't much scope for "capital" projects (such as building an extension to our clinic for a "sluice room", which is one of the things we'd like to do).