The good fight

As a business journalist, interviewing FDs while quaffing gently carbonated
designer water in their award-wining offices at a sexy London address is an
occupational hazard. But those frivolities are absent at the decidedly less
glamorous headquarters of Voluntary Services Overseas in south-east London
(VSO), where Financial Director met its new finance director, Jo
Knowles.

Of course, it’s the warm fuzzies, rather than the quarterly enrichment of
shareholders or a hefty corporate pension that Knowles counts as her motivation.
But the FD says many accountants find it hard to match their occupation with
making a positive change to underlying causes as lofty as Ethiopian education
advocacy, or Kenyan attitudes to AIDS.

As a careerist charity accountant, since this January FD of VSO ­ an
international development charity working across 34 countries and which
celebrates its fiftieth birthday this year ­ Knowles believes her work quietly,
but critically, lays the foundation for its 1,500 volunteers to effect its
mandate.

“If you don’t keep finance working well ­ produce accounts, pay bills and
staff, keep IT systems working, keep stakeholders and regulators happy ­ people
would stop giving us money and the Charities Commission would close us down,”
she says.

Not a charity case
There is a prevailing belief that running a charity is easier than running a
corporate ­ no greedy shareholders, quarterly reporting, or market pressures.
Knowles refutes this: in the two decades she has spent running the finances of
big brand outfits like Greenpeace, Cancer Research UK and Save The Children, she
has seen accounting governance revolutionised to become as mission-critical as
it is for any other publicly visible company.

“VSO is reasonably privileged because 60% to 70% of its funding comes through
the government’s block grant schemes, so we are not competing for all our
income. But governments change and priorities change ­ you could be flavour of
the month today and out of favour tomorrow, yet your beneficiaries remain and so
does your desire to serve them. Those pressures are enormous.

“I’ve worked in charities that were entirely reliant on public donations and
that’s a very competitive market. Because VSO gets a lot of government funding,
there’s a perception that we don’t need their cash. But we are competing for
money the same way everyone else does and all charities talk about brand,
segmenting markets, lifetime values… all those commercial considerations,
because even though we are a charity, in a sense we’re a profit-making company.
We just don’t expect to make 10% ­ we expect more like 30%, 40%, 50% on the
money we’re spending.”

Double your money
Knowles is mandated to double VSO’s donor income over the next three years from
2007 figures of £40.6m ­ an ambitious target even with the increase in tax
relief from gift aid announced in this year’s Budget, which should make VSO
around £45,000 better off in 2009.

There are threats to income from global economic downturn, made all the more
worrying in the face of consecutive, devastating natural disasters in areas
where VSO works, such as China and Burma. “Our plan to double our income may not
be so deliverable,” she concedes.

Knowles, who left Shell’s graduate trainee scheme in 1992 for Save The
Children, was among the first of a throng of qualified accountants moving into
the third sector for the first time amid its period of reporting
professionalisation.

Responding to accusations of charities squandering donations in various ways,
failing to deliver on their mandates and scrutiny around their lack of
transparency and financial governance practices, the Charities Commission and
the Accounting Standards Board formed the industry accounting standard, the
Statement of Recommended Practice (Sorp), in the 1990s, and later the Statement
of Financial Activities (Sofa).

This was updated in 2005 to expand the narrative in charities’ annual
reporting, in a similar way to quoted company requirements. These requirements
keep regulators happy and answer oft-bemoaned habits of charities wasting
donations by the public and the press. The increased transparency is also
crucial in attracting and retaining funding, gifts and volunteers on which VSO
depends to achieve its mission.

Amid this sea change, Knowles rose from project accountant to acting finance
director for Save the Children in 1997 before moving to Imperial Cancer Research
Fund and becoming a key architect of the merger with Cancer Research Campaign to
create Cancer Research UK. There, she became head of finance for one of the UK’s
biggest charities, by income, before spending two years as FD at Greenpeace in
Amsterdam. Moving to the UK-based Alzheimer’s Society proved a temporary
distraction from international development as the VSO role tempted her back.

Short-term thinking is another curious paradox in some larger charities,
Knowles says, what with their long-term mandates. In 2008-09 her priority is to
change this. VSO’s finance and IT systems, coming under her remit, could
potentially do with an overhaul, for example.

“Things within VSO are quite based on annual budgets and plans, and there’s
an opportunity for us to think a little further ahead than that, which includes
looking at some of the financial systems we’ve inherited,” says Knowles.
“They’ve not had much money spent on them; we need to re-write our IT strategy.
But it’s a massive project because it is core to what everyone does ­ and no one
wants to be blamed for breaking it. It will be a bit of a battle, as it always
is in charities, to get money spent on what people see as admin and overheads,”
she adds. “In a sense, the ‘good spend’ is what you do internationally and the
‘bad spend’ is what you spend on support. If we have £100,000, we can choose to
have a look at the accounting system, or we can send more volunteers overseas.
Those are hard conversations in charities.”

Knowles headed up an IT overhaul at Alzheimer’s, ploughing £1m into its
25-year-old systems. “It was just never deemed necessary to have an IT network,
but we had to do it because it’s what people expect of an organisation with £45m
turnover,” she says.

Moving apace
Doing the dirty jobs has been a double challenge in a sector that demands
consensus to move forward ­ consensus from a number of stakeholder groups, who
tend to shy away from change and spending on anything but the cause. Investor
relations have played a critical role in Knowles’s repertoire.

“You’ve got to herd people to a degree, particularly when you’re working with
volunteers who are investing in the organisation and its ideas and for whom
change can be a threat, so decision making is slower that those in the corporate
world would be used to.”

That has not always equated to a slower working environment. “The out-there,
challenging, assertive way Greenpeace worked on its external campaigns was the
way it also operated internally, so the people there weren’t backwards in coming
forwards and it made it a very interesting place to work,” she says. “But my job
there was to stay back and keep things tidy so they could do that. It’s
important for me that there is some relation between what I do and the cause of
social justice.”