Update from Michael Robarts, Finance Director - Spring 2017

Our Spring 2017 newsletter provided the opportunity to announce a significant change in our funding policy, prompted by the steady increase in the sums of money we are sending to CDTFN, our local partners. The increase is in many ways to be celebrated, since it primarily reflects the growing success of our orphan support efforts. However, it does mean that we are currently spending beyond our income and consequently eating into our reserves. The position is entirely manageable in the short term, but does clearly need to be addressed, in order to head off the potential for a funding crisis to develop at some future point.

The decision reached by the Trustees, after careful analysis, is to start the process of transferring to CDTFN the responsibility for financing the local administrative costs (over 70% of which are accounted for by salaries and staff welfare generally). Over time, we expect this to free up a growing proportion of our UK revenue in order to fund the actual development programmes, namely Orphan Support, the Zawadi School and the smaller (but locally vital) BibiBabu and Peer Educator schemes.

Starting in July this year, we have agreed to fix the amount we send each year to cover administration costs at its current level of £25,000. We have committed to continuing this level for the next three years, to give CDTFN plenty of time to organize and make a start on their own local fund raising. Thereafter it will be reduced gradually until such time as CDTFN are entirely self-sufficient for this element. We do not underestimate the challenge this represents for the local team but they accept the need for the change and, whilst apprehensive about it, they are excited by the opportunity.

We see two major advantages flowing from it, apart from the obvious benefit of matching spending to our means. First, it enables us to maximize the extent of our funding of the development projects and to continue to support them on a sustainable basis as they grow; secondly, it makes a start in addressing a concern we have always had at the back of our minds that completely open ended support for all aspects of Changarawe’s local activities risks encouraging a culture of dependency within the local community. Moving to a joint funding model will create a truly shared partnership and, in the long run enable CDTFN to take the lead role.

It is absolutely clear to us that this vision will not be achieved overnight and that considerable flexibility will be needed, as CDTFN will be embarking on this from scratch. We are however confident that increasing our funding focus on actual development schemes will be welcomed by our donors, as it will build on our tradition of avoiding the use of donor money to fund UK administrative costs. We know that this has been key to the donor support we continue to receive. Local administration is in a rather different category in the sense that it makes a very important contribution to the local community, but we are in no doubt at all that donors like to feel a direct connection to project work.

Thanks to our sponsorship initiative, we are managing to keep abreast of the immediate financial demands. The revised approach outlined here makes us confident of being able to keep it that way over the longer term, but please do keep your donations coming!

We have previously mentioned one last way donors might consider supporting us, namely via legacies.

Very briefly stated, a legacy to charitable causes of 10% of an estate (net of the £650,000 nil rate band for a married couple) reduces the rate of inheritance tax from 40% to 36%. As a simple example, an estate of £1 million for a married couple would currently incur IHT of £140,000. A legacy of 10% to charity would amount to £35,000. The IHT bill would then fall to just over £113,000 and the amount available to beneficiaries would only reduce from £860,000 to £852,000 – just 1%. There is a mathematical curiosity about the legacy mechanism which I think is quite compelling. It is that, whatever the size of the estate, the 10% legacy to charity is ALWAYS 4.2 times the monetary cost to the beneficiaries.

The trustees are aware that at least one donor has amended their will to take advantage of this, naming Changarawe as one of the charities to benefit. If any readers of this newsletter have an interest in exploring this further, please contact Michael Robarts who can provide further details.

Easy Fundraising

A reminder that if you use the website when you shop online, you can authorise small donations from most of the major retailers for The Changarawe Project. It costs nothing to the purchaser, but tiny amounts from 50p upwards from the retailers all add up.