RNLI 2013 accounts : highlights

[Bru]

In the current climate the incomes of the rich continue to increase out of proportion to all economic indicators. Add in the reduction in family sizes & I would actually expect legacies to increase rather than decline. What evidence do you have to the contrary?

To be fair to Sybarite, on this point he does have a point even if he has made it, badly, as a stick to beat other aspects of the RNLI accounts with

As much as fifteen or twenty years ago major charities were looking sideways at their legacy income in regard of future proofing as there is an expectation that it will decline as the current generation or two who benefited from the property boom and decent pensions fade away

It may turn out to be a unneccessary concern but the anticipation is that my and subsequent generations will, due to increased longevity, decreasing pension values and so on, generate far fewer little old ladies who leave their estate to Battersea Dogs home etc.

It's not the rich who generate the bulk of legacy income, it's bequests from (for want of a better way of putting it) the comfortable middling sort (as the middle classes used to be called!) and these are predicted to decline drastically over the next few decades

I'm quite sure the RNLI will be looking forward, long term. Ideally, they'd move to an endowment funded model (at least as far as core activities are concerned) as quickly as possible but they'll doubtless be hampered in that by the Charity Commission who are a bit blinkered in that respect. And it would give the likes of Sybarite apoplexy to see their reserves and investment funds rising at a much faster rate than they already are!

The legacy funding flow isn't going to be cut off overnight, the RNLI is not vulnerable to sudden fluctuations in cashflow in the way that "charities" dependent on grant income are (for example) but it is a long term potential problem

 

[Daydream believer]

I have run my own business, I have been a partner in an insurance business (which used insurance products in financial engineering montages) and have been a director of several trading organisations. I have also participated in the running of a family business. I therefore don't think I need lessons on business awareness. (In fact a pyschological assessment for a post indicated that I was good at seeing the big picture.).
.

Sound like a bit of a drifter to me
What happened to the family firm --- skint i suppose
& your own business??
Do not come to me for a job , your cv is one of a continuing failure

 

[Sybarite]

.

...Perhaps part of your difficulty is framing the problem in your own experience, rather than objectively looking at the organisation in its context (Beginning to sound like a broken record here). One of the key lessons to be learned from the study and practice of management is that there is no universal "right way" - if there was you would not need human brains, only robots.

A bit like teaching your Granny how to suck eggs. What do you think I did coming into a new organisation? Remember I said that I had given professional development courses on the Business Approach to Auditing. That meant undrstanding the nature of the business before writing your audit plan.

The RNLI does NOT operate in a crisis driven, got to beat last month's results, shareholders baying for blood environment.

In other words, there is no pressure to perform. Great if you can get it.

The art of management is identifying the things you can do something about and using them to your advantage.

Like dealing with inefficiencies? Why did the RNLI hire 71 new people last year, while, at the same time they had identified 150000 excess man hours (say 80 people)? Can you give me a rational explanation for this?

In our context there is clearly a willingness of charity funders to support the RNLI strategy as evidenced by the significant increase in both legacy and donation income. Just because you have had an experience of a charity losing 50% of its income has little bearing on what we are discussing here - so why make the possibility a key plank for your argument?

We didn't think we would lose this 50% either. However we recognized in advance that we were vulnerable and acted accordingly.

Your way of nitpicking on individual figures to try and prove your hypothesis is the very worst form of "science"

I wouldn't call it nit-picking when I dealt principally with the largest numbers in the accounts.

as it leads you to ignoring other figures that tell exactly the opposite story.

Please tell me which figures I have ignored which would contradict the principal points I am making.

 

[Rigger Mortice]

Please tell me which figures I have ignored which would contradict the principal points I am making.

The numbers of people who re happy to continue to support this failed organisation.
The numbers of volunteers who continue to be happy and proud to work for it
The numbers of people who have been saved by it
The numbers of sailors who have benefited from things like the Sail Safe scheme.
The numbers of..........

 

[Border Terrier]

Here's a drift...

While reading the comment about grannies sucking eggs.

My Grandma appears to have been an early WAG, my Grandpa playing
for GPR and Sheffield United after the first War.

The height of success? The ownership of a Morris Bullnose Cowley.

 

[JumbleDuck]

Like dealing with inefficiencies? Why did the RNLI hire 71 new people last year, while, at the same time they had identified 150000 excess man hours (say 80 people)? Can you give me a rational explanation for this?

Because they are not French, obviously.

 

[Border Terrier]

You rate the Institution, or you don't.

If you do, you may donate. If you don't why get involved in a Charity in
which you have no interest?

 

[Sybarite]

Do not come to me for a job ,

You couldn't afford me.

 

[Rigger Mortice]

You couldn't afford me.

The RNLI can, but they don't seem to have coming knocking at your door. They have all the FCA's they need.

 

[Tranona]

.

A bit like teaching your Granny how to suck eggs. What do you think I did coming into a new organisation? Remember I said that I had given professional development courses on the Business Approach to Auditing. That meant undrstanding the nature of the business before writing your audit plan.



In other words, there is no pressure to perform. Great if you can get it.




Like dealing with inefficiencies? Why did the RNLI hire 71 new people last year, while, at the same time they had identified 150000 excess man hours (say 80 people)? Can you give me a rational explanation for this?



We didn't think we would lose this 50% either. However we recognized in advance that we were vulnerable and acted accordingly.



I wouldn't call it nit-picking when I dealt principally with the largest numbers in the accounts.



Please tell me which figures I have ignored which would contradict the principal points I am making.

Not sure what your Business Approach to Auditing course contained, but everything you write suggests you inhabit what we used to call the "Wen-We" school of management. Common among those who as I suggested set everything in their own frame of experience and are unable or unwilling to recognise any other context. Typically it would be exhibited by redundant middle managers undergoing re-orientation who when asked how they might go about solving a problem would start their response with "When we were at XXX...."

So you preface all your comments by such things as "When I was working for..." or "XXX does it this way". Mostly irrelevant. The RNLI does not inhabit a world of constant pressure to meet shareholder's demands, it does not operate in a severely cash constrained environment. If it did operate in either of these its managers would behave in a different way. It is not in a position where there is likely to be a significant drop in funding, and if there was a fall suspect its first action would be to seek more funding to maintain its long term strategy. "Pressure to perform" does not only mean meeting shareholders requirements in a market place. This organisation does not operate in a market place. The pressure to perform is different. You perhaps need to consider that different environments have different pressures, and judge the organisation in its own environment, not one of your choosing.

You are a nitpicker. You just pick a figure like the minor change in the number and composition of the workforce and turn this into "evidence" of failure - ignoring as I pointed out the fall in salary and support costs - you can't have it both ways. Numbers are almost always interlinked so you need to look for an explanation of a change in numbers so that you can understand WHY. You might then be in a position to determine whether the change is good or bad. These are very basic principles of analysis that you seem to have either forgotten or maybe never really learned.

Numbers in historic accounts are only representations of past decisions. To understand them you need to understand the context of those decisions. You seem to ignore the clear strategy and mission of the organisation. It is undertaking a programme of expansion and reorganisation. Increasing the range of Lifeguard activities, major capital expenditure in new launching facilities and upgrading existing facilities, building a factory to become self sufficient in its boat building programme for the next 20 years, expanding its all weather capability etc etc. Very different from your previous employers, other charities you have worked with or even the French rescue services as you have described them.

Audit is only a small (but important) part of managing an organisation. Maybe you are very good at it - I don't know, but despite what you say about having to understand the business, this understanding does not seem to extend to businesses or organisations outside your own direct experience.

 

[Hydrozoan]

... As much as fifteen or twenty years ago major charities were looking sideways at their legacy income in regard of future proofing as there is an expectation that it will decline as the current generation or two who benefited from the property boom and decent pensions fade away ...

Yes, I seem to remember reading somewhere that the RNLI expected legacy income to fall, and I recollected that earlier when reading this thread and wondered if that was behind a building-up of 'reserves' - however they may defined by the accountancy experts here, of whom I am certainly not one!

 

[Sybarite]

Not sure what your Business Approach to Auditing course contained, but everything you write suggests you inhabit what we used to call the "Wen-We" school of management. Common among those who as I suggested set everything in their own frame of experience and are unable or unwilling to recognise any other context. Typically it would be exhibited by redundant middle managers undergoing re-orientation who when asked how they might go about solving a problem would start their response with "When we were at XXX...."

So you preface all your comments by such things as "When I was working for..." or "XXX does it this way". Mostly irrelevant. The RNLI does not inhabit a world of constant pressure to meet shareholder's demands, it does not operate in a severely cash constrained environment. If it did operate in either of these its managers would behave in a different way. It is not in a position where there is likely to be a significant drop in funding, and if there was a fall suspect its first action would be to seek more funding to maintain its long term strategy. "Pressure to perform" does not only mean meeting shareholders requirements in a market place. This organisation does not operate in a market place. The pressure to perform is different. You perhaps need to consider that different environments have different pressures, and judge the organisation in its own environment, not one of your choosing.

You are a nitpicker. You just pick a figure like the minor change in the number and composition of the workforce and turn this into "evidence" of failure - ignoring as I pointed out the fall in salary and support costs - you can't have it both ways. Numbers are almost always interlinked so you need to look for an explanation of a change in numbers so that you can understand WHY. You might then be in a position to determine whether the change is good or bad. These are very basic principles of analysis that you seem to have either forgotten or maybe never really learned.

Numbers in historic accounts are only representations of past decisions. To understand them you need to understand the context of those decisions. You seem to ignore the clear strategy and mission of the organisation. It is undertaking a programme of expansion and reorganisation. Increasing the range of Lifeguard activities, major capital expenditure in new launching facilities and upgrading existing facilities, building a factory to become self sufficient in its boat building programme for the next 20 years, expanding its all weather capability etc etc. Very different from your previous employers, other charities you have worked with or even the French rescue services as you have described them.

Audit is only a small (but important) part of managing an organisation. Maybe you are very good at it - I don't know, but despite what you say about having to understand the business, this understanding does not seem to extend to businesses or organisations outside your own direct experience.

As this discussion is becoming circular there's not much point in continuing it.

Just one point though. You say that the personnel number changes are minor: we are talking about an issue which covers about 150 people: ie additional personnel in the year (71) and excess capacity - redundant work force of say around 80 (150000 hours at approx 1800 pp/yr). That's an enormous cost to bear. What are they doing additionally in 2013 that they could do with fewer people the previous year? (I accept that the increase in lifeguards explains a small part of the increase). Remember that personnel support for lifesaving fell.

 

[Tranona]

Yes, I seem to remember reading somewhere that the RNLI expected legacy income to fall, and I recollected that earlier when reading this thread and wondered if that was behind a building-up of 'reserves' - however they may defined by the accountancy experts here, of whom I am certainly not one!

No. If you look at the accounts, legacy income is pretty steady at 60%+ of overall annual income, but in 2013 it jumped significantly to 64% or income. Suspect due to extra fundraising activity in the light of the major capital expenditure programme. However not sufficient information in the annual report to clarify.

Building up of "reserves" happens automatically when income exceeds annual operating expenses. The difference either stays in cash, investments or converted into capital assets such as premises or boats. These all appear on the asset side of the balance sheet and the equivalent value is shown as a reserve on the liability side so the balance sheet balances.

Where there is an annual surplus of income over expenditure in a profit making organisation it could be paid out as a dividend to shareholders. This is obviously not possible with a charity so in general all income has to be used to meet its charitable objectives, although there is leeway that allows charities to retain surpluses as investments and use the income to fund activities in the future. RNLI could choose to build up its investments to reduce its dependency on donations or legacies rather than use it to improve its services and expand its activities, but that is not its strategy at the moment.

 

[Hydrozoan]

Building up of "reserves" happens automatically when income exceeds annual operating expenses ... there is leeway that allows charities to retain surpluses as investments and use the income to fund activities in the future. RNLI could choose to build up its investments to reduce its dependency on donations or legacies rather than use it to improve its services and expand its activities, but that is not its strategy at the moment.

Thank you. Yes, I do appreciate that reserves inevitably increase when income exceeds expenses, and had presumed that charities were given the leeway you describe (within limits, at least). I did not know what the RNLI's strategy is, but reading Erbas' contribution reminded me that I believed legacy income was expected to fall - though not perhaps immediately or monotonically. It seemed to me one potential reason why a prudent organisation might plan to build up reserves, that's all.

 

[Bru]

Thank you. Yes, I do appreciate that reserves inevitably increase when income exceeds expenses, and had presumed that charities were given the leeway you describe (within limits, at least). I did not know what the RNLI's strategy is, but reading Erbas' contribution reminded me that I believed legacy income was expected to fall - though not perhaps immediately or monotonically. It seemed to me one potential reason why a prudent organisation might plan to build up reserves, that's all.

The issue, or more accurately potential issue, with legacy income is a long term strategic one. Actually, legacy income across the third sector is holding up better than expected but the long term expectation is still that it will fall over time. By long term I am talking decades, it's a generational thing (nominally thirty years between generations)

A problem for operating charities such as the RNLI (as opposed to what I think of as "collect and forget" charities who raise funds, distribute them and move on) is that the Charity Commission and indeed the whole structure of charitable status is predicated upon the assumption that a charity rattles the tins, distributes the proceeds in the furtherace of the stated cause and that's it. Indeed, the CC has more than once suggested that the majority of charities should not, in fact, be charities at all

(The key advantage for an organisation such as the RNLI is tax exemptions (particularly VAT), otherwise they'd probably be better off as a CIC)

I doubt the RNLI will make a big shift in it's financing in a hurry nor is there any need for them to do so. I would think that they'll be looking at steadily building up endowment income over the next couple of decades as an insurance against a possible reduction in legacies so I'd expect to see a gentle but undramatic rise in invested reserves year on year

 

[Hydrozoan]

The issue, or more accurately potential issue, with legacy income is a long term strategic one ... I would think that they'll be looking at steadily building up endowment income over the next couple of decades as an insurance against a possible reduction in legacies so I'd expect to see a gentle but undramatic rise in invested reserves year on year

Yes, that's what I understood from your earlier comment - and why I said legacy income might be expected to fall '... though not perhaps immediately or monotonically'. I certainly see the difference between the RNLI and what you so pithily describe as "collect and forget" charities, though I guess that many lie between the extremes - e.g. committing outgoings beyond a few accounting cycles, but not for as long as the RNLI does.

 

[Hydrozoan]

Deleted - for some reason, last post repeated!

 

[Tranona]

As this discussion is becoming circular there's not much point in continuing it.

Just one point though. You say that the personnel number changes are minor: we are talking about an issue which covers about 150 people: ie additional personnel in the year (71) and excess capacity - redundant work force of say around 80 (150000 hours at approx 1800 pp/yr). That's an enormous cost to bear. What are they doing additionally in 2013 that they could do with fewer people the previous year? (I accept that the increase in lifeguards explains a small part of the increase). Remember that personnel support for lifesaving fell.

Staff FTEs increased by 4.4%, salary costs by 5% - so allowing for inflation average wages fell. Number of people paid over £60k fell from 37 to 32. Incidentally it was 44 in 2010 - giving the lie to your accusation that the organisation is too top heavy! Chief Execs emoluments virtually unchanged. Capital expenditure increased by 35%, legacy income by 17% (£18m extra!).

So with that change in both the scope and level of activity, it is hardly surprising that staff numbers increased. They will almost certainly increase again in 2014 as the AWB facility comes on stream as this is additional activity, not displacement.

Only goes to show that unlike your experiences in other organisations this is not a shrinking organisation or one where the prime objective is cost cutting. It is expanding, and expansion uses resources. I am sure that they face a lot of challenges managing the transition and keeping control over costs on new and unfamiliar activities, but I don't see any credible evidence to support your claims.

I can't answer your question about surplus labour and what can be done with it as I do not have access to any sensible information. You certainly can't get answers to such questions from historic accounts, although you might get some idea of the results of any action in future accounts. I can't see where you get your excess capacity data from, but it would be surprising if the organisation was paying people to do nothing and at the same time recruiting additional staff in just about every area of the business. Not sure how you come to the conclusion that personnel support for lifesaving fell as whichever way you calculate it given the changes in classification of personnel over the years, FTEs in activities related directly to saving lives has increased both in absolute terms and as a proportion. If you are specifically referring to the reduction of 8 FTEs (1%) in those classed as "lifeboat services" in 2013 then you really are into nitpicking.

Hope that answers your questions.

 

[Bru]

It's interesting how you can cherry pick headlines and numbers to make the point you want to make.

Here's my take on the RNLI's 2013 Annual Report ...

8.384 people rescued, 21,938 people helped by lifeguards, 425 lives saved (lets save the argument over how they work those stats out for another old favourite thread!)

Over £175m raised in these tough economic times

£22.3m a year cut from the operating costs at the culmination of a three year efficienty programme

5 new lifeboat stations, the new Shannon class into service, 6 new lifeboats a year to be built at the new Allweather Lifeboat Centre in Poole

and I could go on

I will mention that the RNLI has a ten year plan and a twenty year vision (which has long been a bugbear of mine when it comes to so much of British business and organisational planning where 5 years is considered a long time ahead) - this is an organisation with a long history and a clear eye on the future