This is the first opportunity I’ve had to speak to a large group of charities since joining the Commission as Chief Executive last month.

While I’ve had many useful and engaging conversations with individual charity leaders, especially during the party conferences, you are witnessing, as it were, my maiden charity speech.

And I’m delighted that my first address is to an audience of FDs and Heads of Finance.

Because we can expect matters financial and economic to dominate debates in the sector for the months and years ahead.

And the roles you play in your organisations are likely to become ever more crucial as charities face new and evolving funding pressures.

As Daniel outlined in his introduction, my background means that I understand many of the pressures, rewards, challenges and opportunities that are associated with the sector.

I know that one of charities’ great strengths is the enthusiasm of the people who give their time, either professionally or on a voluntary basis or both, to further the causes they believe in.

But I won’t pretend the coming months will be plain sailing.

It’s going to be tough.

In fact, it doesn’t take a great deal of imagination to paint a gloomy picture of the year ahead for charities and indeed for the Commission itself.

There is plenty of inspiration to choose from, plenty of available evidence pointing to challenges ahead.

One of more recent examples comes in the form of NCVO’s latest Charity Forecast Survey, published last month.

The self-selecting survey, which is conducted quarterly, provides a sort of measure of the mood of the sector’s leaders.

The latest one isn’t a cheerful read.

Some figures:

• Almost all respondents (91%) say economic conditions for the voluntary sector will be negative over the next 12 months.
• Two thirds (63%) feel that the financial situation of their organisation will worsen over the coming year.

These figures don’t amount to a selective quote.

I’m not deliberately skipping the positive bits.

The writers of the report summarise charities as ‘having the lowest level of confidence in the general situation of their organisation since the survey began’ – which was in early 2008.

The survey as a whole suggests that charities are apprehensive, uncertain, and nervous about the future.

And NCVO members aren’t alone.

The Charity Commission’s own Economic Survey of Charities, published in March of this year, showed nearly sixty per cent (59%) said they had already been negatively affected by the downturn.

Charities reliant on income from investments have been especially vulnerable so far.

And many charities that are seeing their income decline are simultaneously – and not surprisingly – finding that demand for their services is increasing.

And in purely financial terms, we know the immediate future does indeed harbour serious challenges for charities.

In two days time, on Wednesday, the government will make the outcome of the Comprehensive Spending Review, the CSR, public.

I’ll come on to the implications the cuts will have on the Commission in a moment.

But I’d like to focus first on the impact of the cuts on charities.

Many rely heavily on public sector support to carry out their objects.

Over a quarter of large charities (27%), those with incomes of over £100,000 a year, rely on public sector contracts or grants as their main source of income.

That’s a quarter of the most well known charities, the household names.

And across the charities on our register, 16% rely on public sector support for part of their income.

We can’t say definitively that all of these charities will suffer a financial black hole from next year.

And it will take time to establish any discernable pattern in the impact of the cuts on charities – no doubt certain types of charities will be more vulnerable to cuts than others.

It will depend on how departments respond to their cuts, which funding streams, which projects, which initiatives are sacrificed.

But we can reasonably expect the spending cuts to have significant impact on the charity landscape, including, indirectly, through the cuts the Commission itself faces.

We know the likelihood is that they will require a radical response from us.

We certainly won’t be able to shave percentages off our spending here and there, in an attempt to maintain the shape of the services we currently provide.

I’m determined to lead the Commission through a thorough strategic review, during which I will encourage colleagues to ask simple but sometimes uncomfortable questions:

Those questions include:

• If we were starting a charity regulator from scratch, what would we be doing?
• What are the key risks a good regulator should be addressing?
• What should our regulatory approach be: for example, where should we sit on the spectrum that ranges between relying on charities’ transparency at the one end to conducting intrusive compliance work at the other?

This is not a process the Commission can pursue in isolation, behind closed doors.

We want to hear your thoughts on how we should go about restructuring our work.

We’ll be launching a formal consultation process later this week.

But we won’t be able to keep everyone happy.

We may have to lose services that you consider valuable to your charity.

Already, comments I made during my first days at the Commission have prompted a reaction among some charities.

In an interview, I suggested that if the Commission does have to scale back on the provision of advice and guidance, some charities will have to seek professional advice where previously they came to the Commission.

I used the conditional throughout – and I’d like to repeat that this was just an example of the kind of questions the Commission needs to address.

But it hit a nerve with many trustees who consider the Commission’s ability to respond to individual emails and calls with tailored advice an extraordinarily useful public service.

So I’m aware that many charities feel strongly about the Commission’s work, or aspects of our work.

That’s why I’d like to warn you that the process we face will be tough, and not just for us at the Commission.

So far, I’ve painted a fairly grim picture.

But I’d like to use today’s conference to add a note of optimism to the debate.

Because one of the things I’ve been most struck by since starting at the Commission a little more than a month ago is the commitment in the sector not to be deflected from providing the best possible service to beneficiaries.

And this isn’t just anecdotal, it’s not just based on chance encounters I have had.

The Commission’s own Economic survey, which I mentioned earlier, makes clear that charities are not obsessed with doom and gloom.

When we asked in March, 84% of charities were optimistic for the next 12 months.

Only 12% said they were quite or very worried about the coming year.

That’s extraordinary, given what the very same group of charities were saying about the hit they’d taken so far as a result of the downturn.

Of course, that survey was conducted six months ago, and it’s quite possible that, were we to ask the question today, the response we’d receive would be different.

More cautious, more subdued, more anxious.

But there is more recent research available that suggests continued buoyancy in the sector.

The Charity Finance Directors Group – of which no doubt many of you are members – has also made similar findings.

It’s just published the 2010 Risk Survey – which looks at the challenges charities face in putting their strategic vision into practice.

It’s useful, because it looks both at what charities have done over the course of the year and at what they are planning for the financial year ahead.

The survey demonstrates that charities have, for the most part, focused on making the most of the situations they face.

Three-quarters of charities responding to the survey had managed to meet their targets for the past year, regardless of any financial pressures on them.

In planning for the year ahead, only 44% had based their strategy on an expectation that their income would fall.

And nearly nine in ten (89%) said they firmly intended to emerge from the recession stronger than they went it to it.

These findings are extremely heartening; they’re a testament to the resilience of charities and the voluntary sector.

And while some of the optimism charities display may be misplaced, energy and confidence are surely valuable qualities in a crisis.

And charities’ attitudes are not the only source of optimism.

It won’t have escaped your attention that charities are among the great white hopes of our political leaders.

Not only are all the main parties agreed on the vital role charities provide in binding citizens, in creating a stable society.

There are indications that new opportunities are becoming available to charities – that the government envisages a future in which charities provide more public services, and not one in which the state cuts ties with the sector.

At the Conservative Party Conference a few weeks ago, Nick Hurd, the Minister for Civil Society, made clear that the government wants to support the sector financially.

He said the government’s ‘bureaucracy-busting agenda’ will benefit the voluntary sector and that “it should be easier for charities to apply for public money and report on how they spend it."

I was encouraged by those words.

And there are plenty of other small but significant indications that the affairs of charities are climbing the political agenda.

I counted 30 fringe events at the Conservative party conference that were organised by voluntary organisations or were focused on issues directly relevant to charities.

And most were attended by ministers or senior members of the party.

Very similar numbers applied to the two other main party conferences.

Charities, voluntary organisations, were big news. Many of their events were packed.

Also, the Opening Debate of the new House of Lords session last week saw peers discussing “The role of the charitable sector in strengthening civil society”.

That was the first issue peers wanted to grapple with upon their return from recess.

And what, to me, is the most important source of comfort is people’s continued support for and faith in charities.

The Commission’s recent survey into Public Trust and Confidence, published in July, shows that charities remain among the most trusted groups in society.

They come third only after doctors and police.

And the number of people saying their trust in charities is ‘very high’ has increased by five percentage points since 2008, the last time the survey was conducted.

That’s a real reason to be cheerful.

But such levels of support should not be taken for granted, especially as we have seen faith in many other once respected institutions – such as the banks – declining over recent years.

So while I’m positive about charities’ resilience in the face of the economic storms, and about public support for them, charities will not be able to survive simply on optimism.

There are likely to be casualties over coming weeks and months.

Especially among charities relying on a single source for too large a proportion of their income – be that public funding, grants income or investments.

So we’re urging charities to adapt their organisations to the new environment and to plan systematically for the future.

A good place to start is the Commission’s Big Board Talk, which is based on research we have conducted with charities.

It includes the 15 important questions we think all trustees of every charity should be asking.

We’ve described it as ‘the discussion every board should be having’.

It covers areas such as whether your charity can diversify its income, whether you can fulfil your contractual commitments, whether you’re making full use of investments.

Your charity, whether it’s large or small, must focus on what it can do.

Whether or not you are facing financial difficulties, you must use the opportunity presented by the current climate to establish what you can do better.

How can you adapt the way you do things to the new challenges and the emerging opportunities?

One of the strengths of the sector is its relative flexibility, its agility. Given the right leadership, your charity can innovate and adapt - more easily, more quickly, and more creatively than large public and corporate bodies.

Sometimes, asking difficult questions about the way it works, about its strategy and priorities, can help a charity refocus on its objects, its reason for existing.

A simple example: has your charity thought seriously about the use you can make of new social marketing and networking opportunities in securing new supporters and donors?

Not all charities agree that social networking tools such as Twitter and Facebook are appropriate fora for fundraising.

Many feel strongly that they shouldn’t be monetised.

It’s not for the Commission to take sides in this debate, but I do think this is an example of areas in which charities are ahead of the game.

I read recently about an animal welfare charity that raised significant amounts of money by encouraging their twitter followers to add an animal icon to their profiles.

Once people had done so, they were asked whether they’d like to make a small donation to the charity.

They weren’t forced to, but were given a chance to think about whether they’d like to ‘put their money where their mouse is’.

That’s just a small example of the ideas that emerge from charities, of their ability to think of fresh new ways to resource the work they do. And to bring people along with them when they do.

I am also convinced that charities must forge a new and stronger relationship with the private sector.

You are going to need friends in business.

Both as partners in consortia with whom you can bid for contacts and as philanthropic donors to your charities.

We know many charities are already moving in this direction.

A recent example:

The Charity Careers Development Group has announced that it’s joined with a private company to bid for the government’s Work Programme contract across the whole of England.

It already provides services in parts of the country. But it’s decided that it now has the expertise, the capacity and the partner to provide them across England.

There are other examples, notably in the area of criminal justice and I expect to see such partnerships become more frequent as charities recognise the benefits of working with profit making organisations.

Charities must also collaborate more with one another.

The Commission’s Economic Survey in March revealed only 9% of charities are currently considering collaborating or merging with another.

That is something I do not understand.

There is such a broad range of ways in which charities can work together to become more effective – and some save costs.

It doesn’t have to involve formal contractual arrangements, let alone full organisational mergers.

Some charities simply exchange information, share expertise and advice with each other.

Often charities with different objects can come together for specific projects or to complement one another’s work.

Of course, some charities do go further to form full mergers.

These are rarely easy and require leadership, commitment, planning and, in the short-term, resources.

But they can result in significantly improved services for beneficiaries – as well as in cost savings and efficiencies.

Recent examples of large charities that have decided to take the plunge are Age Concern and Help the Aged, who’ve joined to form Age UK – now the largest and most important charity working with older people.

So I urge you to consider how you might work with other charities to improve services to your beneficiaries.

The Commission is also urging charities to focus more closely on demonstrating the impact they’re having and how they are spending their money.

One reason for that, is that charities are clearly going to have to rely more heavily on private, individual donations in future.

And that requires them to demonstrate sound financial management and a beneficiary focused approach.

The Public Trust and Confidence research I mentioned earlier shows that money is on peoples’ minds.

It revealed that while trust remains high, the factors influencing it are changing noticeably.

The factor now cited as the most important driver of trust in the sector is ‘ensuring a reasonable proportion of charity income goes on the end cause’.

Now sometimes people have unrealistic expectations of charities, expecting them to operate on thin air and the good will of volunteers.

We know professional charities providing professional services have overhead costs.

That’s fine.

But charities must ensure they are able to explain to donors why they take certain spending decisions.

And how those decisions further their objects, help their beneficiaries.

The sector must also move from a grants mentality – the expectation that they will be supported because their heart is in the right place – to a contract mentality.

To an understanding that you are going to need to bid for support for certain projects, services, or activities in return for demonstrable public benefit.

That’s what is going to win charities support: the ability to demonstrate impact – and, of course, cost effectiveness.

A squeezed public sector will be watching every penny it spends more carefully than ever, it won’t want to gamble on an unproven good idea.

It will prefer to place relatively safe bets.

That doesn’t mean: don’t try out new things, don’t innovate. It doesn’t mean avoiding risk at all costs.

But it is about showing off about the difference your approach, be it well established or new and innovative, is making – or can make.

Before starting at the Commission, I spent some time looking at charities’ annual reports.

Many were glossy, accessible, inviting.

And many were clear and expressive about the difference the charity had made over the past year.

But I was struck by how many charities reported on their successes only in terms of scale.

“We’ve launched this many new projects this year”

Or

“Our services now reach x percentage of children living in inner-city areas”

That’s interesting and it’s good.

But it leaves me with the question: so what?

What problem are you solving?

What difference did your involvement make to those children?

What changes do you witness in the children you work with?

What’s the evidence that they’ve gone on to do better in school, or get on better at home because of your work?

I do not doubt that most charities make an enormous contribution to the lives of the people they work with, or to the causes they further.

And I recognise that the difference they make is not always quantifiable, measureable or visible.

But I do think that charities engrossed, day-to-day, in the work they do can forget that, for politicians, for local councils, for individual supporters, you have to state the obvious.

Such as:

“By providing meals-on-wheels services to x number of people in the borough, we saved the taxpayer y amount in the cost of hospital admissions or care home places”.

Spell them out, the costs you offset, the damage you limit, the lives you change.

I recommend a study published by New Philanthropy Capital last month, which provides a fascinating insight into the ways charities report outcomes.

Their paper ‘talking about results’ also includes some useful examples of good practice.

But of course while charities will need to adapt to the changing economic and social climate, there are some things that we should protect and maintain.

First of all - independence.

It is crucial that charities remain politically non-partisan, self-determined and free from undue external pressures.

A charity’s primary responsibility is to its beneficiaries and its governing document – not to government, a private partner, or indeed to donors.

Of course, charities in contractual arrangements with public bodies or grant-makers must honour those agreements – that goes without saying.

But charities should decide whether to enter such contracts on the basis of the benefit that their beneficiaries will draw from them.

You shouldn’t bend your charity’s purposes to the money available.

Remaining independent requires courage and resilience. But these are not qualities lacking in charities.

Many charities on our register look back on proud histories of withstanding political persecution and surviving in spite of severe economic hardship.

And charities must continue to provide a voice for the most vulnerable people in society – and for some of the less popular causes.

The relationship between private, public and voluntary sector will no doubt shift and change over coming months and years.

But charities must never become subject to the rule of the majority as political parties are or the rule of the market as private businesses are.

Charities must continue to exist to help people, causes and groups that would otherwise be sidelined, deprived or worse.

And those who are responsible for ensuring charities remain focused on their objects are trustees.

I don’t need to tell this audience that being a trustee of a charity is not a light responsibility.

It’s associated with commitment, tough decision making and a fair amount of paper work.

I’m sure many people in this room have presented their board members with some tough choices recently – and probably with more documentation than they really want.

There are around 800,000 trustees in England and Wales, at least.

Most trustees give their time for free, many bring professional expertise and experience they could charge royally for in the public or private sectors.

Later today, I will be speaking at another event about Trustees’ Week, a joint initiative between the Commission, the Charity Trustees Network, NCVO, Reach Volunteering, Getting on Board and the Institute of Chartered Accountants.

The aim of Trustees’ Week – which starts next Monday – is to raise the profile of trustees and to make more people aware of the opportunities, the rewards associated with joining a charity board.

So I hope you’ll find the time to visit the Trustees’ Week website and to take part in some of the events taking place under its banner.

And perhaps you can recommend it to one or two of your financially savvy friends – a lot of charities would welcome experienced FDs on their boards with open arms.

So to conclude:

These are tough times for many charities – we can expect, over coming months, some wailing and gnashing of teeth.

But I’ve been impressed with the energy and commitment I’ve already witnessed among charities. And it’s that can-do attitude that will make the difference.

I’ll say it again: focus on what your charity can do, not on what it can’t. Focus on how you can adapt

That’s exactly what I will try to do at the Commission as I lead it through the Strategic Review.

And I look forward to working with you.

Thank-you.

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