1. 18 Charity Finance October 2014 civilsociety.co.uk
restructuring at CSV
COMMUNITY SERVICE Volunteers
(CSV) has over 50 years’ experience
of providing volunteering and social
action opportunities for some of the
most disadvantaged people across
the UK.
With innovation, challenge and
passion, millions of people have been
inspired to make a difference in their
communities through CSV. However,
as the first decade of the 21st century
came to an end – with the onset of
the recession, a new government
dedicated to deficit reduction,
and a changing political and social
climate – CSV was no longer able
to survive without major change.
With the appointment of Sir Jon
Shortridge as chair in 2010, the
retirement of Dame Elisabeth
Hoodless after 48 years and my
appointment as the new chief
executive in early 2011, fundamental
change was on the agenda to ensure
the survival of the charity.
A major financial crisis
By April 2011 the charity faced
a ‘perfect storm’. Historically CSV
has had no endowment, no regular
income or charitable donations,
and had all its assets locked into
operational properties. Income
was generated from a large number
of individual grants, donations and
contracts, with the majority being
restricted funds.
So the loss of the £1.1m core
operating grant from the Cabinet
Office (ending a 40-year strategic
relationship with government) caused
a major crisis in the charity’s finances.
The situation was very challenging.
With a series of inherited deficits
from prior years, the loss of the
Cabinet Office grant put everything
in stark relief and action had to
be taken.
As the new chief executive, and
only the second CEO in the half-
century of the charity’s history,
you would have expected me to
undertake a fundamental strategic
review. In practice, we had to
undertake that review very fast,
mobilising people within the charity
to new ways of working – and in a
timeframe that was counter-cultural.
A number of key colleagues from
across the organisation responded,
and rose to the challenge.
The trustees were very clear that
things needed to change. By the
September 2011 board meeting,
trustees were able to consider the
recommendations of my strategic
review. They took the decision to
rationalise the charity into two clear
operational areas – social action
and volunteering and learning.
The new structure reduced the
senior management group, took
out costs and – equally importantly
– created clear lines of management
and accountability. It identified a
number of consistently loss-making
operations on the volunteering and
social action side and proposed
closure, or urgent review pending
potential closure.
We also undertook an independent
qualitative perceptions audit of CSV
and an independent staff survey,
and we started a senior managers’
leadership programme to underpin
the need to develop CSV-wide
leadership skills among the top
25 managers.
The core message was, and
remains, that the charity has got
to operate as ‘one CSV’.
We have to harness the undoubted
passion and commitment to the
‘cause’ in a much more coordinated,
directed and businesslike way.
Crucially, we identified the chronic
Lucy de Groot tells how, after skirting with insolvency,
CSV has been fundamentally restructured to create
a more certain future.
Transformation or bust
Losing the Cabinet Office
grant caused a major
crisis in our finances
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2. civilsociety.co.uk Charity Finance October 2014 19
restructuring at CSV
a professional and efficient way.
There was also a strong assumption
that the autonomy of business units
was sacrosanct, and an anarchic
approach to compliance with the
basic systems and processes.
This was not credible in a multi-
million-pound charity.
underinvestment in basic systems
and infrastructure as a problem.
Infrastructure ignored
In September 2011 there was
a major IT blackout which added
to the sense that we could not
go on in the same way, patching
and putting sticking plaster on
things. Fundamentally, both the
infrastructure and the skills and
capacity of key corporate functions –
such as finance – had been reduced
to the point where the organisation
lacked the necessary capacity to
undertake what was required in
How we confronted the finance challenge
Finance had to provide the foundation
for the CSV transformation; we needed
to transform both our function and our
fortunes. There were six key steps:
• The finance function needed
investment in people, processes and
systems. The finance system had been
unsupported for seven years, so the first priority was to
invest in a new accounting package.
The change of system enabled us to update the
processes being followed, and this in turn informed a
restructuring of the charity’s resources. We were then able
to harness the commitment and knowledge of the finance
team and give them a voice across the organisation.
In the past 18 months, we have consolidated our
complex contract information (regarding more than 140
separate contracts) and introduced a purchase order
system with workflow, both of which have significantly
improved our cash management.
• Cashflow had to be a priority. CSV had been running
on its reserves and, by mid-2013, the situation became
critical. The devolved nature of the organisation made
cashflow forecasting extremely difficult.
We therefore began a relentless focus on cash, looking
at the forecast from every angle. We stopped being
complacent about chasing cash and we changed our
payment terms to maximise daily cash balances.
• We needed a credible business plan to convince
trustees and our creditors about the future viability
of the organisation. The finance team were spending
a large portion of every month forecasting, but the
outputs weren’t joined up.
We spent time building a forecasting model which
gave an integrated profit and loss account, balance
sheet and cashflow.
This was critical to being able to formulate the overall
business case in February 2014, set the strategy and
build the narrative for the future organisation.
• We had to gain the support of our major creditors.
CSV’s membership of a defined benefit local government
pension scheme was a key issue. The deficit in the
2012/13 accounts was shown as £9.7m and in October
2013 we were expecting the next triennial valuation. We
were struggling to make our quarterly deficit payments
and we were running dangerously close to our £1m
overdraft limit.
We engaged very openly with both the bank and the
pension scheme in order to gain support for our plans.
A difficult, but very necessary step, when they hold your
future in their hands.
• CSV had to realise its property assets. It was clear
that we were going to need cash to deliver our plans,
and that cash would have to come from the sale of some
of the property portfolio.
The first step was to build the business case to
justify disposal; obviously it would not have been viable
to sell properties and then spend more on leases.
We concluded that the HQ building in London was no
longer fit for purpose as it needed significant investment
to bring it back up to standard and, more importantly,
it was now far too big for CSV’s needs.
The right course of action was to begin by selling the
King’s Cross HQ to provide enough capital to satisfy our
creditors and deliver the transformation.
• We needed the right external support. While it was
challenging to find the cash to pay for external support,
it was critical to the success of the project. CSV was
potentially facing insolvency and had a complicated
pension situation to deal with.
Trustees were clear that commissioning the right
professional advisers was essential to underpin the solid
governance framework. It gave them, and the executive
team, confidence that at all times we were ‘acting in the
best interests of our creditors’ – a phrase which became
our mantra through the difficult days.
Jo Day, director of finance and resources
cover story

3. 20 Charity Finance October 2014 civilsociety.co.uk
restructuring at CSV
particularly on the learning side.
The poor functionality of the finance
system and weak management
accountability, alongside a deeply
embedded devolved culture of
autonomy, meant that there was
no quick fix.
With five separate subsidiary
learning charities, one of which was
responsible for 30 per cent of the
turnover of the whole CSV group,
the governance and management
needed urgent attention.
The last chance saloon
Getting a handle on the performance
forecasts and losses in learning was
critical. Trustees agreed to bring
in some external expertise to make
recommendations. The degree
of scrutiny and external challenge
involved was entirely new to the
managers and was therefore perceived
as a threat. However, with a loss
of £2.2m reported in the accounts,
there was no more time in ‘the last
chance saloon’.
During 2012/13 the learning
consultants produced a detailed
report with a strong recommendation
to combine all CSV’s learning
operations under single management
to drive performance, quality and
viability. This would have combined
Alongside the organisational and
cultural reforms, it was also clear
that the governance of the charity
needed to be modernised and made
relevant to the contemporary
context. A recruitment campaign
for new trustees was led by the chair
and one of the longstanding trustees.
This produced four new trustees
with experience across the private
and public sectors. For the first time
it also brought in a trustee with
extensive experience of the skills and
learning part of CSV’s work.
Underlying issues masked
While the 2010/11 accounts showed
an operational surplus, this masked
the underlying issues. The surplus
was largely as a result of the Labour
government’s short-term, post-2008
recession ‘Future Jobs Fund’
programme, which CSV had been
delivering successfully. This came
to an end in 2011.
The underlying financial
position was serious and systemic.
The perfect storm was at its
height with the challenge of the
loss of the Cabinet Office strategic
grant, weak performance by
the charity’s learning operations
(in the face of the funders’ tight
performance-by-results regime) and
our substantial local government
pension scheme deficit.
By the start of 2012, we had
begun to turn things around, with
a strategic plan which included
targets and impact measures, new
people and new roles.
The new ‘one CSV’ culture was
the driving force underpinning
everything – focusing on impact,
efficiency and a rigorous review
of every aspect of the finances.
But as we started to set the
2012/13 budget it was clear that
we still needed to undertake root-
and-branch work on controlling
and forecasting operational budgets,
the five separate subsidiary charities
with the other nine CSV learning sites.
By the summer of 2013 the
overall finances were clearly
in a very serious position as
we dipped ever deeper into the
overdraft. Our new finance director,
Jo Day, brought with her extensive
private sector finance and business
transformation experience.
Within months of her starting
we had to introduce emergency
measures to control our cashflow.
As the cash position became even
more difficult it was clear that
we had to engage with external
advisers to ensure that we continued
to trade legally.
While the majority of the
reorganisation of the learning
operations was completed with
a lot of hard work, the leadership
changes to move to a single
operation were not able to be
agreed. This left the learning
operation still underperforming
and losing money.
In late 2013, with the appointment
of a new managing director, Jacqui
Oughton, with wide experience
from the private and public sector,
there was an intensive effort to
see if the learning operation could
be turned around and start returning
a consistent surplus. Time was
against us.
The key remained a single, strong
line of consistent management and
governance accountability, together
with a clear process for timely
reporting on finance, performance
and learner outcomes. This proved
impossible to deliver.
So early in 2014 the trustees took
the difficult decision to close all of
the CSV learning operations apart
from Ipswich, and for Springboard
Sunderland to become a separate
charity as of 1 August 2014.
The agreed strategy involved
selling the charity’s King’s Cross HQ
The autonomy of
business units was assumed
to be sacrosanct
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4. civilsociety.co.uk Charity Finance October 2014 21
restructuring at CSV
Lucy de Groot
stepped down
as chief executive
of CSV at the end
of September
finance advisers to ensure that it
was robust.
Potential for another 50 years
We are now at the start of a new era
– focused on our core mission – with
a clear business plan incorporating
measurable targets, renewed systems
and processes, and the opportunity
provided by a new HQ in the heart
of the community in Hackney, north
London.
Trustees are now able to start
thinking about the future; about our
brand; and about our impact, and
how to better support and extend it
building, and other properties no
longer required following the closure
of learning, so that there would
be money to pay our immediate
creditors, and to eventually start a
small investment fund for the future.
At the same time we produced
a business case for the social action
and volunteering part of the charity,
based on a prudent view of known
income, and a detailed analysis
of all expenditure and staffing.
This was the core building block
for the future.
The plan was agreed by trustees
and it was also critical to get the
support and agreement of our key
creditors – namely the bank and
the pension fund. The business
case was prepared entirely by CSV
management, albeit advised and
interrogated by our professional
with thousands of volunteers across
the UK. The next stage will continue
to require robust oversight and will
be overseen by the new management
team, which continues to reflect
wide-ranging experience.
There will be new opportunities
and new challenges emerging, but
CSV’s mission and determination
to enable everyone to contribute to
society – and to make a difference –
now has the potential to be fulfilled
for another 50 years. ■
We engaged external
advisers to ensure that we
continued to trade legally
In the eye of a storm – the chair’s perspective
Perfect storms are demanding and
exhilarating. From a trustee perspective,
how did we meet the challenge and,
more particularly, what did we learn?
First I was blessed with a totally
committed group of trustees. None
of us had joined up expecting that
we would have to devote so much energy to turning
the charity around in the face of extraordinary financial
challenges. Remarkably, none of us flinched from the
burdens that this imposed on us. Most importantly, we
remained united.
A united board
So my first learning point is that in a crisis you need
a strong, diverse, resilient and united board who are
prepared to provide the leadership and support required.
Second, a board cannot deal with crises on their own.
The heavy lifting has to be done by the executive team. We
were fortunate that two of the directors had recent private
sector experience. They understood the imperatives of
the commercial world. And, in Lucy, we had someone with
the leadership experience to direct this team when others
would have been overwhelmed by the problems.
There had to be complete openness and trust
between the executive and the board. Critical here
is the link between the chief executive and the chair.
This is the buckle that holds the whole charity together.
I tried to be always ‘there’ for Lucy, even though I live
nearly 200 miles from her office.
Third, to survive we had to acknowledge that we did
not, even collectively, have the skills and experience to
confront this crisis unaided. Although in some ways it
was counterintuitive, we had to spend substantial sums
on securing legal and insolvency advice – this repaid
itself many times over.
Central to our strategy was a determination to
be absolutely open with our major creditors. They,
in turn, took substantial assurance from the fact that
the numbers in our business plan had been accredited
by one of the big four accountancy firms.
And finally, the exhilaration? We now know that we have
brought CSV safely through the storm. We are smaller, but
very much stronger – both financially and in our governance.
We are all very confident that CSV now has more than
another 50 years’ life in it. What could be more satisfying
than that?
Sir Jon Shortridge, chair of CSV
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