Creating a 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.