Murieston Community Development Trust

There are two sets of inter-twined issues in creating a Development Trust:

How to create an organisation which will achieve the social, economic and environmental regeneration of an area – that is, provide some real benefits to local people.
How to create an organisation which is financially sustainable – that is, one which operates as an efficient business.

Development trusts are different from most small businesses: they are not owned by any set of individuals, and do not distribute any profits. They do, however, have to find ways of constantly raising funds and earning money, because unlike public bodies they have no direct access to taxes. And while grants may be available, few funding regimes stretch for more than a few years.

This means that while ‘community benefit’ may be the vision which engages people’s commitment, those creating and running a trust have to set up all the administrative systems of a business, follow all the legal requirements of as company, and be just as enterprising as any entrepreneur.

This means that before creating a trusts, those involved should consider:

What are we really trying to achieve – the purpose?
Do we need a trust to do that – what are the advantages and disadvantages?
How will the wider community be involved?
What are the critical success factors?
What skills and funds will we need to get started?
Sustainability – will we be able to keep the trust going?

Defining the purpose

There may be a number of reasons local interests start to think about a development trust:

A local group may see it as a way of doing more than they can at present
Those working in Challenge projects may see it as an ‘exit vehicle’ to continue work when short term funding ends.
Council officers may see it as a way of raising funds from charities or private sponsors.

Each may be right. What is important is that each understands the ‘agenda’ of the other – and that these agendas can be fulfilled.

However, before starting the process of creating a trust it is important to ask whether an existing organisation does the job, or some other arrangement would work.

Advantages and disadvantages of development trusts

The advantages and disadvantages in creating a trust depend on where you stand and who you are – for example, within a council or quango considering sponsoring a trust, as a funder, or in a local group or voluntary organisation.

The advantages for a sponsor include:

A ‘do-it’ organisation able to develop economic, social and environmental projects and attract a range of extra resources.
A means of fulfilling Government or European funding requirements for partnership and community participation.
An organisation which may not require revenue support in the long term.
A structure which can be tailored to meet local needs for control and accountability of different interests.

The disadvantages could be:

The time and resources needed to establish the trust.
Subsequent time commitments in Board membership and liaison.
Loss of direct control over projects.
A possible perceived threat to local politicians.

From the community-level perspective, the advantages could be some or all of those perceived by the sponsor, plus:

The advantages might include

An ability to develop larger projects and attract new sources of funds.
An opportunity to develop new skills and confidence.
A chance to directly influence the future of the neighbourhood.

The disadvantages might include:

Time commitment required from individuals, with the associated personal risk and responsibility in running a company.
The trust could compete for resources with other existing organisations.
Unless there is some form of local accountability, the trust may lose touch with local people and develop projects solely to suit those most closely involved.

Community involvement

Community developments, described in this guide, are organisations which have some degree of community management and involvement. They are not simply devices for developing projects without regard to the interests and needs of local people.

Community involvement means more than one or two token representatives on the Board. While this may be desirable, it is easy for those individuals to become isolated from local interests.

During the start up process, and later, a Development Trust will have to develop a range of methods for informing and involving people. These may range from publicity materials through formal and informal events to the use of techniques like Planning for Real.

Involvement leads to ownership and commitment – which is essential if a trust is to draw on the enthusiasm and support of its community, whether residents or businesses.

See Community involvement, Events, Participation, Planning for Real, Workshops in the A-Z.

Critical success factors

The success factors for trusts are similar to those for partnerships in general. The Development Trusts Association lists as key factors:

Clear objectives
Involving the community
Commitment and clarity of partners
Investment in people
Ability to attract funding
A commitment to the long term
Planning to be flexible and responsive
Effective communication
Taking calculated risks
Developing an asset base

The later section on the stages in the start up process sets out how to build these factors into your development strategy.

Again, the failures of trusts usually reflect those of partnerships described earlier. In trusts, failures will stem partly from unclear objectives and poor relationships, and partly from the difficulties of running a non-profit business. For example:

Poor management.
Lack of clarity of Board and staff responsibilities.
Lack of a basis for long-term financial sustainability.

Skills and funds for start up

Since the start up process can be a long haul, with many different tasks to perform, adequate resources are necessary – people to do the work and budgets.

The start up process can easily require the equivalent of two or three days a week from someone at peak time, and cost £15-20,000. Budgets will be needed for:

A development officer
Communication materials and events
Specialist advice on projects
Legal advice and incorporation

Sustainability

Trusts are not magical devices for solving the problems which afflict all organisations with a social purpose – how to find the funds to develop projects, provide services, and also keep essential staff employed.

In their early years trusts will certainly need some core funding to cover staffing and overhead costs which may well by over £100,000. Difficulties arise when funders withdraw or taper off these funds, as is almost inevitable.

Trusts do have advantages in facing this problem. They are good vehicles for packaging funds and help in kind from different sources: grants, charitable donations, sponsorship, secondments, volunteer commitment. This enables them to continue to develop innovative projects.

They can also earn income from their activities, and use this to cover some staff costs.

The difficulty for trusts is that because they are fulfilling a social purpose many of their activities are unprofitable, and however successful they are in their day to day trading this is unlikely to yield sufficient surpluses to cover their costs. The business plan for a trust is a balancing act between core costs, some core funding and a portfolio of projects.

One solution is for the trust to develop an asset base – some land or a building which can be let to yield income. Many trusts see their hopes of future sustainability in their ability to create this asset base with the help of a local authority or partnership prepared to provide an endowment to them.

Some are also looking to the example of fund-raising and grant-making community trusts, which aim to build up an administrative endowment fund to cover their core costs. However, the capital sums involved for a Development Trust to do that are considerable.

The start up process

Setting up a Development Trust is a complex process likely to take a year and involve the very different complexities of creating both a successful small business and establishing a voluntary body.

The process does not fall neatly into stages – and it won’t ‘run on rails.’ There will be false starts and diversions, conflicts and compromises as well as moments of creativity and celebration.

The process is complex because it involves creating a structure which works for the people involved and delivers project, while drawing in funds and help from many sources. It involves much more than buying a company off the shelf, changing the name, and getting started. This section describes the process in general – there is also a section on the stages in more detail.

Development trusts may be started ‘bottom-up’ by local groups or individuals, or ‘top-down’ through the support of a public or private sponsor. Whatever the starting point, an effective trust must deal with a number of tensions:

The partners on the Board will come from different backgrounds with different priorities – there may be no initial team spirit.
To stay in business when initial core funding declines the trust should rapidly develop projects which are income earners. These must help pay for the cost of running the trust and subsidise socially desirable projects which lose money.
Projects and running the trust will demand a wide range of Competences from the small team of staff and Board.
While struggling to set up the business and develop the first projects, the trust staff and Board must also gain the support of local groups and individuals.

Unless these issues are addressed in the setting up process the trust may spend many years dealing with internal conflict or facing criticism from local people and groups who resent the new-comer.

The process described here is designed to bind together the ‘hard-edged’ tasks of incorporation, business planning and project development with ‘softer’ issues of team building and community involvement.

The building blocks

The three main building blocks in the process, bringing together the different strands, are:

Communication and commitment. This may start with a few conversations of enthusiasts, then move through the formal and informal processes of workshops and presentations, newsletters and exhibitions to a formal launch.

Planning and projects. Mapping out the process, deciding what the trust will do, and developing a business plan which will ensure the trust is financially sustainable in the long term.

Structure and staffing. Building the organisation, creating the systems, recruiting the Board and staff, and training them.

Start up checklist

When starting the setting up process consider:

Do you understand the nature of Development Trusts and how they differ from other organisations?
Do you know who are the key interests in the area, and their concerns?
Do you have a broad understanding of the local economic, environmental and social issues, problems and opportunities?
Is there an obvious geographical area of operation for the trust?
Do you have some initial guidelines and principles to suggest for the process and the trust?
Are you prepared to be open about why you think a trust is worth setting up?
Will you try and broadly define the type of projects – social, environmental, economic – you think the trust should tackle?
Can you test your first ideas informally with others likely to be sympathetic and prepared to join a first steering group?
Are they likely to promote or support a setting up process involving local public, private and community interests?
Can you nominate or employ a development officer to run the process, and raise other setting up costs?
Are you likely to be able to raise core funding to run the trust if other local interests support the idea of a trust?
Are there fixed milestones in the setting up process – perhaps dates by which bid for funds must be made?

Stages in the start up process

While bearing in mind that the start up process isn’t completely linear, it may be useful to divide it into four stages:

Getting started and planning the process. Finding out whether a trust is appropriate, and what is involved.
Building the partnership. Gaining the commitment of other by giving them some ownership of the projects the trust will carry out and forming the steering group which will shadow the Board.
Developing proposals. Turning research, project ideas and funding opportunities into a bid for resources.
Forming the trust. Creating the formal structure, recruiting staff and Board, setting up systems.

1 Getting started and planning the process

Is a Development Trust the answer?

Brief yourself on trusts by reading this guide, talking to the Development Trusts Association, and visiting one or more trusts.
Also talk to the Groundwork Foundation.

Develop a vision

Who will the Trust benefit, and why is it being suggested?
What projects will it carry out, and how will these be funded?
What area will it cover, and when does it have to be in operation?

Who are the key interests in the area?

What is the attitude of the local authority, and other major public or non-profit agencies?
Who are the key voluntary and community interests?
What private firms might wish to help or be involved?
Who can give you contacts, make some introductions and champion the idea of a Trust?

What are the opportunities and problems in the area?

How will you find out more about the area?
What are its strengths and weaknesses, the opportunities and threats?
What might the Trust do?
Is a full-scale study needed? Have studies been done already?

Plan the process

How will top-down support be mixed with gaining bottom-up commitment?
What are the guiding principles for involving people, choosing projects, and controlling the Trust?
What funds are available for the start up process?
Who will be the development officer?
Who will be members of the first working group, and what will its terms of reference be?
Where will the temporary base be?
What advice and support will be needed?

2 Building the partnership

Develop the vision

Prepare a first newsletter or leaflet
Hold workshops to brainstorm and prioritise projects
Carry out a community profile or other survey
Develop a statement of purpose, defining aims and objectives

Gain support and develop ownership

Gain formal support from public, private and voluntary sector interests
Create working groups
Find champions for projects

Form the steering group

Review the functions and responsibilities of a steering group
Set out terms of reference and responsibilities, interim constitution
Explain business planning and the idea of a competent Trust
Provide training and support
Appoint development officer
Research funding
Developing proposals

3 Developing proposals

Develop project ideas in detail

Review results of workshops and studies
Carry out detailed feasibility studies on projects
Develop budgets, identify funding sources

Develop a bid

Identify staffing and overhead costs
Identify core funding opportunities
Prepare funding bid as a draft business plan

Keep people informed

Produce a newsletter
Holds open meetings and socials
Run a seminar to gain commitment to the funding bid

Develop structure

Draft memorandum and articles of association
Make/change steering group to shadow Board
Develop a management structure of committees, task groups

4 Forming and launching the development trust

Incorporate the Trust

Take specialist legal advice
Consider charitable status
Circulate memorandum and articles of association for approval
Register the company and, if appropriate, seek charitable status

Recruit the Board

Identify a chair with leadership qualities
Consider a balance of competence, contacts and status among members
Provide briefing and training

Recruit staff

Develop equal opportunities policy
Recruit, appoint and brief executive director
Recruit and train other staff

First Board meeting checklist

Appoint chair, officers, auditors, bankers
Admit company members.
Confirm staff appointments
Approve any contracts
Disclose interests
Approve budgets, premises, procedures
Delegate powers
Ratify agreement with partner organisations.

Premises and systems

Set up the office
Develop financial and administrative systems

Communications and launch

Keep everyone informed
Plan and hold the launch

Checklist of milestones and resources

Overall the process is likely to take up to a year. The main milestones are:

Initial planning sessions and informal discussions by those promoting the Trust to develop a vision and action plan.
Workshops to brainstorm and prioritise projects, principles, and find other steering group members.
Steering group and Board meetings.
A seminar of all key interests.
Preparation of the bid document or draft business plan.
Presentations to funders and supporters to secure core funding.
Staff recruitment.
Legal incorporation and securing charitable status.
The launch event.

During the setting up process you will need to find cash or help in kind to cover:

Communication materials and events
A development officer and temporary office
Legal fees and project feasibility studies