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RS4 Collaborative Working and Mergers - Annex A, B, C & D

(Version April 2003)

Annex A: Research techniques
Annex B: Glossary of terms
Annex C: Resources for trustees
Annex D: Bibliography
Acknowledgements
Main Report

Annex A: Research techniques

The data used in this report was derived from the Charity Commission's casework archive, meetings with individual and groups of charities, as well as with Charity Commission staff. In addition Martin Hamblin GfK, an independent research company, undertook a postal survey of 3,600 charities in England and Wales.

Survey techniques

The survey sample was stratified by income:

Charity size classification

Small	Income less than £10,000 per annum
Medium	Income £10,000 - £249,999
Large	Income £250,000 - £999,999
Very large	Income £1,000,000 +

The total sample structure was as follows;

Income	No. consulted	No. responded
Under £10k	1,800	623
£10-£ 250k	1,080	434
£250k - £1m	360	171
Over £1m	360	154
	3,600	1,382

Of the 3,600 questionnaires sent out, 1,382 were returned with a response rate of 38%.

Survey findings

Table 1 Profiles of respondents

		%	Number
Size of income	Under £10k	45	623
	£10-£250k	31	434
	£250k-£1m	12	171
	Over £1m	11	154

Organisational activities	Service/Support	57	786
(Main activity)	Financial assistance	30	413
	Resource body	4	53
	Research	1	20
	Other	6	77
	Did not answer	2	33

Income source	Investments	22	299
(Main income)	Donors	19	259
	Members	16	217
	Grants	15	200
	Contract	7	100
	Trading subsidiary	2	25
	Other	18	244
	Did not answer	1	38

	0-5 years	8	103
Length of time in operation	6-20 years	35	480
	21-100 years	44	608
	101 years or more	12	171
	Did not answer	1	20

Whether work collaboratively	Yes	22	310
	No	78	1072
	*Base, all respondents*	*1382*

Table 2 Main source of income

		%	Number
MAIN Source of income	Investments	22	299
	Donors	19	259
	Grants	15	200
	Members	16	217
	Fees / sales	14	191
	Contract	7	100
	Rent	4	51
	Trading subsidiary	2	25
	Others	- *	2
	Did not answer	3	38
		Base: 1382

*- Between 0 and 1

Collaboration

Table 3 Whether charities work collaboratively

Does your charity currently work collaboratively with another charity or charities?

	%	Number
Yes	22	310
No	78	1072
Base, all respondents	1382

Table 4 Whether charities work collaboratively, by size of income

	Size of income
	Under £10k	£10 -£ 250k	£250k - £1m	Over £1m
Whether work collaboratively	%	%	%	%
Yes	15	23	36	39
No	85	77	64	61
Base, all	623	434	171	154

Table 5 Whether charities work collaboratively, by main income source

	Main income source
	Contract	Donors	Grants	Investments	Members	Trading subsidiaries	Other
Whether work collaboratively	%	%	%	%	%	%	%
Yes	38	22	33	16	21	24	17
No	62	78	67	84	79	76	83
Base, all	100	259	200	299	217	25*	244

* Note small base

Table 6 Number of separate collaborative arrangements charities are engaged in

	%	Number
Just one	37	116
2-5	45	140
6-10	8	26
11 or more	5	14
Don't know	5	14
Base: all who work collaboratively	310

Table 7 Number of separate collaborative arrangements that are FORMAL

	%	Number
1	51	69
2-5	41	56
6-10	5	7
11 or more	3	4
Base: all who have formal arrangements	136

Table 8 Formal arrangements by size of income

	Size of income
	Under £10k	£10-250k	£250k-£1m	Over £1m
Number of formal arrangements	%	%	%	%
1	68	62	56	27
2-5	26	33	35	61
6-10	5	2	9	5
11 or more	0	2	0	7
Base: all who have formal arrangements	19	42	34	41

Table 9 Number of separate collaborative arrangements that are INFORMAL

	%	Number
1	50	101
2-5	40	80
6-10	8	16
11 or more	2	4
Base: all who have informal arrangements	201

Table 10 Number of formal arrangement that have a clause by which the collaborative working arrangement may be terminated

	%	Number
Yes	60	82
No	20	27
Some do, some do not	12	16
Don't know	8	11
Base: all who have formal arrangements	136

Table 11 Descriptions given of organisations working structure

	%	Number
Not part of any group	56	173
Function as part of a national/ membership structure	25	76
Function as part of a group structure	18	57
Did not answer	1	4
Base: all who work collaboratively	310

Table 12 Aspects of charities' activities or operations that are included in the most recently initiated collaborative working arrangement*

	%	Number
Sharing knowledge	59	182
Joint service delivery with another charity	49	151
Sharing resources in order to increase efficiency or save costs	40	124
Creating support networks	33	102
Joint fundraising activities	23	70
Joint research projects or feasibility studies	13	40
Joint advertising campaigns	13	40
Sharing accounting functions	13	41
Sharing activity investment	7	21
Others	1	2
Did not state	2	6
Base: all who work collaboratively	310

* Respondents could give more than one answer so table may add up to more than 100%

Table 13 Aspects included in working arrangements, by size of income*

	Size of income
	Under £10k	£10-250k	£250k-£1m	Over £1m
What aspects included	%	%	%	%
Joint service delivery with another charity	39	42	53	72
Sharing knowledge	54	59	59	65
Creating support networks	23	31	43	42
Joint research projects/feas.studies	9	10	13	23
Joint advertising campaigns	12	12	13	15
Sharing resources in order to increase efficiency/save costs	40	41	38	42
Sharing accounting functions	19	8	10	17
Sharing investment activity	12	5	2	7
Joint fundraising activities	29	16	28	18
Others	0	1	2	0
Did not answer	1	5	0	0
Base: all who work collaboratively	91	98	61	60

*Respondents could give more than one answer so table may add up to more than 100%

Table 14 Whether key aspects of a charity have improved, worsened or stayed the same as a result of the most recent collaborative working arrangement

	Improved	Stayed the same	Worsened	Don't know/ not applicable
	%	%	%	%
Admin. costs of the charity	20	53	7	19
The public profile of the charity	32	46	1	20
Ability to attract funding	26	40	5	29
Service delivery	45	34	1	20
Base: all who work collaboratively	310

Table 15 Whether ability to attract funding for charity changed, by size of income

	Size of income
	Under £10k	£10-250k	£250k-£1m	Over £1m
	%	%	%	%
Improved	11	27	38	36
Stayed the same	41	41	40	36
Worsened	6	8	2	2
DK/NA	41	24	21	27
Base*	82	92	58	59

*All who work collaboratively and answered the question

Table 16 Why the recent collaborative arrangement was of benefit *

Reason	%	Number
Sharing of information/knowledge	29	63
Improved services	20	44
Building working relationships between charities	19	42
Good communication between charities	17	36
Similar objectives/philosophy	15	33
Definition of aims/objectives/visions	15	32
Raised charity profile	11	23
Working together we secured additional funding	10	21
Cost reduction	9	19
Shared administration	9	19
Joint mission	8	17
Wider base to provide help	7	15
Support systems between officers	7	15
Definition of existing strategies	5	11
Improved staff relationships	4	9
Trustees serving on both boards	4	9
Shared accommodation	4	9
Combined fundraising	4	8
Shared banking/insurance/postal charges	3	7
Appointment of someone to head project	2	5
Proper legal contracts	2	5
Base: all who provided reasons	217

*Respondents could give more than one answer so table may add up to more than 100%

Table 17 Why the recent collaborative arrangement was not of benefit

Reason	%	Number
Breakdown in communications	29	5
Lack of clarity in relationship	18	3
Lack of initiative of partners	18	3
Improving facilities for local community was detrimental to our income	6	1
Offer of increased collaboration was turned down	6	1
Base: all who provided reasons	17

Charities that do not have collaborative arrangements

Table 18 Reasons why charities do not work collaboratively with other charities*

Reason	%	Number
Collaborative working has never been considered as an option	55	592
The profile, objects or the services of the charity are too specialised to make collaborative working an option	43	463
We have never been approached by other charities to work collaboratively	41	439
The links with other charities that would make collaborative working an option have not been established	13	143
We have considered working collaboratively but it has not materialised	9	96
Previous collaborative arrangement did not work out and we are cautious about working in this way again	1	14
Other **	4	37
Base: all who do not work collaboratively	1072

*Respondents could give more than one answer so table may add up to more than 100%

** Of those who ticked 'other': 9 charities had already merged or were in the process of merging, and 20 worked co-operatively but not in a formalised way

Table 19 Whether charities work collaboratively, by whether they merged

	Whether merged
Whether work collaboratively	Have merged within last 10 years %	Considered proposal to merge %	Have not merged %
Yes	44	60	18
No	56	41	81
Base, all respondents	71	79	1232

Mergers

Table 20 Charities that have merged, or considered merging with another charity in the last 10 years

Reason	%	Number
Yes, we have merged within the last 10 years / we are in the process of merging at the moment	5	71
We have considered a proposal to merge in the last 10 years but it did not proceed	6	79
We have not merged within the last 10 years and we have not considered it	89	1232
Base: all respondents	1382

Table 21 Whether charities have merged, by size of income

	Size of income
Reason	Under £10k %	£10k-250k %	£250k-£1m %	Over £1m %
Yes, we have merged within the last 10 years / we are in the process of merging at the moment	4	4	6	14
We have considered a proposal to merge in the last 10 years but it did not proceed	5	5	7	10
We have not merged within the last 10 years and we have not considered it	92	92	87	76
Base: all respondents	623	434	171	154

Charities that had merged in the last 10 years

Table 22 The types of merger that occurred

Reason	%	Number
One or more charities dissolved and transferred their assets to an existing receiving charity	59	42
Two or more charities combined their assets and resources with the result that the original charities dissolved (or remained registered as 'shell' charities) and a new, restructured charity was created	21	15
Two or more charities were grouped under a single governing document that provides for all the assets, with a single body of trustees	15	11
Other	3	2
Did not answer	1	1
Base: all who merged within the last 10 years	71

Table 23 Number of charities involved in the merger

Reason	%	Number
Just us and one other	72	51
3-5	24	17
6-10	1	1
11 or more	1	1
Don't know	1	1
Base: all who merged within the last 10 years	71

Table 24 Motivations to merge *

Reason	%	Number
To increase efficiency	54	38
One or more of the charities was in difficulties and could not continue alone	44	31
To prevent duplication of services / to provide better services	42	30
To enhance the charity's profile	24	17
To boost income	16	11
To prevent duplication of fundraising / to boost fundraising	14	10
Other	7	5
Don't know	3	2
Base: all who merged within the last 10 years	71

*Respondents could give more than one answer so table may add up to more than 100%

Table 25 Motivation to merge by size of income *

	Size of income
Reason	Under £10k %	£10-£250k %	£250k-£1m %	Over £1m %
To increase efficiency	54	60	46	52
One or more of the charities was in difficulties and could not continue alone	25	47	64	52
To prevent duplication of services / to provide better services	50	40	27	43
To enhance the charity's profile	8	20	18	14
To boost income	21	27	9	5
To prevent duplication of fundraising / to boost fundraising	13	33	27	29
Other	8	0	0	14
Don't know	8	0	0	0
Base: all who merged within the last 10 years	24	15	11	21

*Respondents could give more than one answer so table may add up to more than 100%

Table 26 Whether key aspects of a charity have improved, worsened or stayed the same as a result of the merger

	Improved	Stayed the same	Worsened	Don't know/ not applicable
	%	%	%	%
Admin. costs of the charity	35	39	6	20
The public profile of the charity	28	45	3	23
Ability to attract funding	19	39	2	40
Service delivery	44	30	0	25
Competition for funding streams	9	32	2	58
Base: all who have merged	71

Table 27 Reasons given why the merger has been successful *

Reason	%	Number
Increased efficiency	25	18
Full co-operative working/openness between parties	20	14
Reduction in administration costs	18	13
Good communication with members	13	9
Financial support	11	8
Limited initial change/continued with charities' aims	10	7
Similar objectives/aims/philosophy	9	6
Desire/determination by both parties	9	6
Enhanced services	9	6
Thorough/detailed preparation before merger	7	5
Strong leadership	6	4
Insight/understanding of each others' organisations	3	2
Base: all who thought their merger was successful	50

*Respondents could give more than one answer so table may add up to more than 100%

Charities who considered that their merger was not a success were asked to list up to three things that they thought might have contributed to its lack of effectiveness.

Four charities provided reasons as to why their merger had not been a success, these were as follows:

Decision process slower
Loss of focus / no clear statement of intent
Charities have separate aims
Current users didn't like change

Charities that did not proceed with a proposed merger:

Table 28 Motivations to merge *

Reason	%	Number
To increase efficiency	71	56
To prevent duplication of services / to provide better services	54	43
To enhance the charity's profile	30	24
To boost income	29	23
One or more of the charities was in difficulties and could not continue alone	23	18
To prevent duplication of fundraising / to boost fundraising	22	17
Other	6	5
Don't know	1	1
Base: all who merged within the last 10 years	79

*Respondents could give more than one answer so table may add up to more than 100%

Table 29 Reasons given why the merger did not proceed *

Reason	%	Number
No benefit/different outlook	20	16
Merger too bureaucratic/complex	15	12
Vision did not match both parties	14	11
Lack of interest	14	11
Complicated paperwork/financial problems	14	11
Lose identity/charity value autonomy	9	7
Charity Commission raised objections/no support	9	7
Clash of functions	5	4
Logistics caused problems	4	3
Not relevant or appropriate	4	3
Overbearing for small charities/unable to find workable match	3	2
Base: all who gave a reason	75

*Respondents could give more than one answer so table may add up to more than 100%

Charities who had not considered merging:

Table 30 Reasons given why charities had not considered merging *

Reason	%	Number
We do not see any benefit in merging	51	630
We have never been approached by other charities to merge	51	625
The profile, objects, or services of the charity are too specialised to make merging a viable option	45	550
The links with other charities that would make merging an option have not been established	17	212
Other **	12	152
Base: all that had not considered merging	1232

*Respondents could give more than one answer so table may add up to more than 100%

** The key 'other' reasons provided by charities were as follows:

Wished to remain independent (47 charities)
No suitable other organisations to merge with (16 charities)
Limited service provided/serve local community (10 charities)
Funds given to other bodies (6 charities)
Little in common with other organisations (4 charities)

Interview techniques

In addition the Charity Commission commissioned Martin Hamblin GfK to conduct 20-minute teledepth interviews with large and very large charities to further investigate charities' motivations for merging.

In order to qualify for interview, the charities had to:

Currently provide services/support direct to beneficiaries as a main activity.
Have merged within the last 10 years.
Have not given their motivation for merging as 'that one or more of the charities was in difficulty and could not continue alone'.
Have indicated on the questionnaire that they were happy to be contacted to participate in further research.

The interviews were carried out with three large and seven very large charities in December 2002. The ten charities consulted all merged at different times

Interview findings

Reasons charities gave for merging

Providing a more effective and beneficial service to the community.
Wanting to become one large organisations working for a particular client group.
Made logistical and financial sense.
Helping a charity in financial difficulties, thus enabling them to continue providing services.
Enabling charities that provide complementary services to expand and develop.
All three large, and four of the seven very large charities stated that some of the original charities involved in the merger were dissolved.
Most if not all of the services provided by dissolved charities were continued after the merger.
For most very large charities the smaller charity drove the mergers. In one case the larger charity drove it, and in another, both charities drove it.

Reasons given for driving the mergers through

Could see the benefits of expansion (larger charity drove merger).
Made sense for charities doing same job to merge together (larger charity drove merger).
Would improve ability to raise funds (smaller charity drove merger).
Financial stringency (smaller charity drove merger).
Improve efficiency and bring services in line with each other (smaller charity drove merger).
Help raise awareness of work of charity through expansion (smaller charity drove merger).

Staff issues

In the majority of cases, trustees initiated the mergers. In only one case did the chief executive initiate the merger.
Most chief executives were recruited internally. Two were recruited externally. The majority of chief executives had previously worked for one of the pre-merger charities.
A wide range of staff was employed by charities prior to the mergers.
For three charities staff levels had increased since the merger, in three cases, the levels had decreased.
Respondents had different numbers of trustees dependent upon the size of their charity.
In general, some or all of the existing trustees of pre-merged charities were brought on board after mergers. The exceptions were one charity that had no trustees, and two charities that only brought on board their trustees, not those of the dissolved charities.
The majority of charities did not bring on board new trustees after the merger.

Reasons given for the increase/decrease in staff levels

(Where decrease): some staff left due to the merger (were not needed or resigned).
(Where decrease): mainly due to change in location (staff left as did not want to travel).
(Where increase): Could provide more services, do more fundraising etc, so could afford to take on more staff.

Timing issues

Most mergers took 1-2 years.
Most charities did not think proceedings were held up as mergers continued at the correct pace (i.e. they were not too rushed and people had time to get used to the idea).
Where charities had experienced a delay, they gave the following reasons:

length of time needed for members to vote on merger;
held up by individuals or organisations; and
discussions relating to where the charity was to be based.

Funding

Where mergers needed funding, most charities funded the merger themselves.
The cost to charities of the mergers was generally small, with the vast majority reporting that their merger cost £20,000 or less.

Conditions

Where trustees of pre-merged charities placed conditions on the merger, these included:
Insisting on full consultation so people are informed as to the process and outcome of the merger.
Requiring confirmation that the work of smaller charities will continue.
Ensuring the aims and objectives of merged charities are consistent.
Complying with the trust document.
Not selling an existing building for five years.

Naming the merged charity

In three cases, the new charity took its name from both of the merged charities
In six cases, the large charity dissolved the smaller charity and the larger charity's name continued
Four charities put their suggested name to the trustees' vote
Three charities kept their name and thus a new name did not need to be decided upon.
The remaining charities either followed existing protocol of previous mergers or members decided on the new name or the old charity name was kept for the purpose of legacies.

Annex B: Glossary of terms

Collaborative working

In this report, collaborative working is defined as when two or more separately registered charities initiate an arrangement to work jointly on a project or venture in order to fulfil their objects whilst remaining as separate organisations. The project or venture may relate to any aspect of the charities' operational activity, including administration, resource sharing and streamlining of costs, service delivery and fundraising activity, or advertising and profile enhancement.

Merger

The transfer or combination of the assets (and liabilities) of two or more separately registered charities, and some or all of the parties restructure or dissolve into an existing charity. In such cases, either a new charity is formed, or one charity assumes control of another.

National structure with members

Exists where a large number of separately registered charities (each with its own trustee body) share a name and objects. (This excludes the common situation where a national charity has regional or local branches that are not separately registered, but are part of the administrative machinery of the main charity).

Group structure

A formal association of separate organisations. This could involve, for example, one or more charities becoming a parent to or subsidiary of another, or several charities becoming subsidiaries of a new parent body.

Uniting direction

A direction made under either s.96 (5) or s.96 (6) of the 1993 Act allowing two or more charities to be linked for all or any of the purposes of that Act. The basis for a uniting direction is different in each case:

for a direction under s.96 (5), the criteria rests on the purpose of the charities concerned: one of the charities must be established for any special purpose of or in connection with another. Under s.96 (5) we can treat one or more charities as forming part of another whenever both or all of them are identified with the same charitably provided service and are administratively interdependent (see OG 46, Special Trusts, when available) for explanation of 'administratively interdependent');

for a direction under s.96 (6) the criteria is common trusteeship; discretionary emphasis will also be placed on charities having broadly similar purposes.

The purpose of giving a direction is to achieve the administrative linking of charities where it is practical to do so. Where there is a close connection between the purposes and/ or administration of two or more charities, we normally wish to encourage the preparation of a single annual report and statement of accounts.

Pooling Scheme

A Scheme to establish a particular type of common investment fund whose main characteristic is common trusteeship. (For further details please see the Charity Commission's Operational Guidance 49).

Albemarle Scheme

A Scheme normally dealing with church halls being used for other charitable purposes.

Specie property

Specie property is settled on specific charitable trusts. It is land or buildings held by the charity and required to be used for a particular purpose of the charity. This is different from functional property that is used by the charity to further its charitable objects but is not required to be used in this way by the trusts of the charity.

Cy-près doctrine

Through the cy-près doctrine, the trusts of a charity may be formally modified to allow a possible application which is as near as possible to the provisions of the original trusts. A cy-près occasion arises where the trusts of a charity can no longer function under the terms of the present governing document, or can be more effectively used.

Permanent endowment

Property of the charity (including land, buildings, cash or investments) which the trustees may not spend as if it were income. It must be held permanently, sometimes to be used in furthering the charity's purposes, sometimes to produce an income for the charity. The trustees cannot normally spend permanent endowment without our authority.

The terms of the endowment may permit assets within the fund to be sold and reinvested, or may provide that some or all of the assets are retained indefinitely (for example, a particular building).

Annex C: Resources for trustees

Organisations

The Charity Commission for England and Wales

Responsibility for charities is split between our three offices. Further information can be obtained from the Commission at:

London	Liverpool	Taunton

Harmsworth House	12 Princes Dock	Woodfield House
13-15 Bouverie Street	Princes Parade	Tangier
London	Liverpool	Taunton
EC4Y 8DP	Liverpool	Somerset
	L3 1DE	TA1 4BL

Tel: 0870 3330123

Minicom: 0870 3330125

e-mail enquiries

Association of Chief Executives of Voluntary Organisations (ACEVO)

ACEVO provides good practice resources and information on sector issues.

83 Victoria Street
London
SW1H OHW

Tel: 0845 345 8481

Charity Commission

In this section

What's New

RS4 Collaborative Working and Mergers - Annex A, B, C & D

Contents

Annex A: Research techniques

Survey techniques

Charity size classification

Survey findings

Collaboration

Charities that do not have collaborative arrangements

Mergers

Charities that had merged in the last 10 years

Charities that did not proceed with a proposed merger:

Charities who had not considered merging:

Interview techniques

Interview findings

Reasons charities gave for merging

Reasons given for driving the mergers through

Staff issues

Reasons given for the increase/decrease in staff levels

Timing issues

Funding

Conditions

Naming the merged charity

Annex B: Glossary of terms

Collaborative working

Merger

National structure with members

Group structure

Uniting direction

Pooling Scheme

Albemarle Scheme

Specie property

Cy-près doctrine

Permanent endowment

Annex C: Resources for trustees

Organisations

The Charity Commission for England and Wales

Association of Chief Executives of Voluntary Organisations (ACEVO)

Association of Charitable Foundations (ACF)

Advertising Standards Authority (ASA)

Business in the Community (BiTC)

Business Community Connections (BCC)

Charities Aid Foundation (CAF)

Charity Finance Directors' Group (CFDG)

Charity Trustee Networks

Directory of Social Change (DSC)

Ethnic Minority Foundation (EMF) and the Council of Ethnic Minority Voluntary Organisations (CEMVO)

The Housing Corporation

HM Customs and Excise

Inland Revenue (IR)

Institute of Chartered Secretaries and Administrators (ICSA)

Institute of Fundraising

Management Accounting for Non Governmental Organisations (MANGO)

National Association for Councils for Voluntary Service (NACVS)

National Council for Voluntary Organisations (NCVO)

VolResource

Wales Council for Voluntary Action (WCVA)

Journals, magazines and newspapers

Charity Finance

Charities Management

Charity Times

Community Affairs Briefing

The Guardian / Society

Third Sector

Voluntary Sector

Annex D: Bibliography

Acknowledgements