The decision to develop or refurbish property is never one taken lightly. This is true with your own house and money, but even more challenging when acting as a trustee for an organisation with a substantial history of supporting those in housing need. You have to be certain that what you plan to do secures a legacy for future generations. 

CAF Bank has worked with a number of organisations on a range of successful projects.  The Association asked them to share some of their knowledge with members which has been detailed below: –

11 things to think about as you prepare your finances for development

Charities Aid Foundation Bank

1. Be clear about your aims. Is the idea of the project to generate increased impact, increased income or both? Is it about maintenance or development? Clarity at Board and Executive level helps prevent the project scope moving away from the original ambition and subsequent  problems.
2. Choose your professionals. Very few of our clients have all the skills in-house to drive a development. Take time in choosing your professional team, making sure that they are the right fit for you. As with many areas of charitable life, neither the cheapest or most expensive is a guarantee of the right fit.
3. Check everything you know. Many organisations have extensive “corporate memories” which can be incredibly useful; especially if you are developing on your own land. But it is equally important to check everything. My own experience includes finding out in the middle of a planning permission exercise that the charity I was a trustee of didn’t actually own the land we thought we did.
4. Check your governance. During the development you will need to make sure that you can enter into significant contracts. Making sure that the board meets the requirement of the Governing Documents, that you are quorate and that conflicts of interest are dealt with are just three of the areas of governance you should consider.
5. Think about your finance mix. Will you be funding this just from reserves, from grant or from borrowing? Think about certainty, flexibility and conditions. Think about what happens in the future and about what happens if things don’t work out. Short term supporters’ loans can really help projects but they need to be repaid and you should also understand what happens if things don’t go as well as planned.
6. How much do you need? There is normally a multiphased approach to any major project and it is important to consider not only contingencies but also changes in costs  since original estimates were sought; and the level of certainty in those first figures. At times we have seen a “per square foot guesstimate” later reported as a formal project number; which then contrasted significantly with the tenders. As this is written in late 2021, build cost inflation is a significant factor.
7. Plan your future finances. You will need to think about the future. Make sure that you think through and document your assumptions on income and costs. Whether or not you are looking for repayable funding, you should think about what may change and the impact it will have.
8. If you need funding, engage early. Having early conversations with potential funders helps you  understand the parameters and conditions which might impact your project.  For example, will your architect need to provide a Funder Collateral Warranty?  If so, have they been appointed on this basis?
9. If you need funding, think about your history. Many grant and loan funders will review your published history. This will include information from the Charity Commission and other regulators. Common areas to think about are whether there are any regulatory comments or questions; such as whether accounts are marked as “Qualified”. And, as an aside, accounts marked as qualified are not a good thing – they mean the auditor or examiner has expressed a concern. If your financial history shows losses or challenges, think about providing explanations. For example, if you have made discretionary grants or had unusual expenditure.
10. If you need funding, think clearly. We never get a second chance to make a first impression, so make sure that when you engage with funders that you are clear on your project, what support you need, as well as certainties and uncertainties in the project.
11. With construction, it’s (partly) all about the paperwork.  We are all focussed on the actual building development, but making sure the paperwork is comprehensive is incredibly important. The construction contracts will underpin what must be built and how the relationship with all parts of the development team works for both yourselves and your funders. Agreeing these at the start helps massively in any challenges that may occur.
12. (A final bonus point) Finally, it is all about the beneficiaries. There will be challenges during any project, but it is worth making sure that you focus on the original aims and the impact on the beneficiaries. They will provide you with the motivation to overcome the obstacles.

The Charities Aid Foundation enables charities to do more life-changing work with lasting benefits for all by providing them with funding and finance solutions including banking, investments, fundraising tools and social investment.

We are a charity and champion for better giving and for over 90 years have helped donors, companies, charities, and social organisations make a bigger impact. Through CAF Bank we offer simple and straightforward day-to-day banking designed exclusively for charities.

We believe in the power of people and the almshouse movement; which is why we have been delighted to earmark £20m to support Almshouse finance needs including refinancing existing loans, refurbishments and new developments. To help celebrate the Almshouse Association’s 75^th Anniversary, we are offering a discounted arrangement fee to 0.75% for the next 12 months and you will always have the chance to talk directly to experienced Relationship Directors.

The CAF Bank

To find out more about their work, you may want to take a look at their work with The Finchley Charities.

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