24th March 2011, 04:45 PM
GPStone Wrote:I'm not sure why you think it would require 25+% of turnover, RedEarth. I can't help you with that, but if its used in that way I suggested it amounts to a credit arrangement negotiated between a company and their bank, so could be anything depending on what both sides are prepared to do. The 10% mark sounds about right and works for most companies.
The point I'm trying to make is that, because someone doesn't understand the financial arrangement of a company of any type, it doesn't make it right or acceptable to cast aspertions on that company's finances. Its an unregulated marketplace with eveything that goes with that. If a company is a charity, it will normally have to fulfill a charitable aim and will be held to that by the charities commission and have to demonstrate its financial solvency through independently auditted accounts. It doesn't mean it stops functioning as a company if its a charity. It does, however, mean that it doesn't have shareholders creaming off any profit and if things get tight it doesn't have shareholders who can be used to inject cash into the company so operates in a stricter financial environment than non-charities.
As far as competition is concerned, charitable status is used by many companies to give them an edge. The important point to remember is that they will have to fufill charitable objectives if they are to be considered a charity with all the VAT allowances etc that come with it and will be monitored by the charities commission as to whether they do or not. If any other company feels that it can justify applying for charitable status to increase its commercial potential, and is willing to take on board the charitable aims and jump through the relevant hoops to get there, there's nothing stopping them. It is often the case that limited companies don't consider this to be worth it though, which is why they don't. Remember, when it comes to accounting, if there are issues with a company's finances they are more likely to be exposed or caught out if they are a charity than if they aren't. Is it possible that this puts some companies off applying for that status?
Here's some approximate and simplified figures from an imaginary archaeological charity's accounts - turns over ?400,000 spends ?500,000 = overspend of ?100,000. ?100,000 is, I believe, 25% of ?400,000 hence in order to remain solvent it needs to have credit/overdraft/whatever amounting 25% of its turnover. A bank is unlikely to give you that - certainly if you went to them with that as a business plan they would throw you out the door.
I may not understand in detail the accounts of a given company (how could I without access to them all) but I can do basic maths. Of course charities have to provide audited accounts, but so do private companies, and insolvency can affect them both the same. Charities just seem to be able to perform amazing feats of accounting. I was involved in a very small charity some time back, until I realised how badly organised it was, and it was in a state of virtual insolvency from beginning to end with the hilariously titled 'commercial' arm constantly bailed out by the (tax free) donations given to the charity. Were it's accounts audited every year? Yes. Did the Charity Commission close it down? No. I'm not saying this goes on in any any archaeological organisation, but the differences between a company that is part of a charity and a company that is just a company are, I would suggest, far greater than you would like to believe. It sounds a bit like you're justifying the 'competative edge' being a charity might give - I don't care about that, what concerns me is when it potentially leads to unfair advantages that force non-charities to cut costs further to win work and thus struggle to make an decent income, can't increase wages, can't improve conditions etc etc. If all archaeological work carried out by competative tender was carried out by organisations that were essentially run in the same way then it wouldn't really matter. It's the competation part that's a bit tricky. And don't be fooled by the notion that profits (profits! Hilarious) are creamed off by greedy director's in the case of private companies - since director's salaries are not necessarily fixed that is likely how they get paid. If there is a bad year it might be directors putting their money in to keep it going.
I'm not sure about companies becoming charities - is that even possible? If it were set up by a bunch of directors it would then need a board of trustees who were willing to support its mems and arts and didn't think there was anything dodgy about the directors continuing to get paid. That would be the major stumbling block, not the fact that you would get audited. Most of these things were presumably set up the other way round.