Category Archives: Rural Broadband

Not For Profit

There is much confusion around how some people, possibly with no prior experience in charitable fund raising, view the “profit” status of B4RN.

In its Business Plan B4RN states that it “was setup as a not for profit social enterprise rather than as a standard limited company to reflect its commitment to the community rather than any profit”.

In UK law a “not for profit” enterprise has no legal status.

The Resource Centre explain it as follows: “Not-for-profit organisation” is a broad term for all independent organisations that do not make private profit for directors, members or shareholders. Many different types of organisation can be “not-for-profit”. It is not a legal structure in and of itself.

B4RN is specifically registered as a Community Benefit Society.  That is its legal status.

Myersons Accountants, who specialise in such enterprises, explain: “Community benefit societies are incorporated registered societies which operate for the benefit of the community in which they operate. They must be able to demonstrate their social objectives and these must continue to be met.

These are not the same as co-operatives as these operate primarily for the benefit of members. Depending on how they distribute profits and what activities they undertake, co-operatives can also be social enterprise entities.

Put simply it is not the fact of making; or failing to make; a profit that determines the nature of a Society.  It is the purpose to which the profit it generates is employed.

Charities which trade, like Scope, The British Heart Foundation, Age UK and so on aim to make a profit, which they then invest in the charitable causes which they support.  They are still called “not for profit”.

Organisations such as Lancaster Advocacy, Advocacy Focus, Beacon etc are charitable organisations that do not trade.  They are funded by organisations such as the NHS, Lancaster County and Lancaster City Councils and so on.  These charities have to operate within their means as their only income is pre-determined at the beginning of their financial year and they cannot spend more than the funds they are provided with.  They are also ”not for profit”

In the case of B4RN.  The plan was to raise £3m in a mix of Shares, Loans and Grants, between 2011 and 2014.  For B4RN to meet the Social Objective the Loans would be fully repaid by 2021 .  The Shares would also be repaid over ten years (increased to 2017 in recent Invitations to Subscribe), including  interest, currently targeted at 5% pa,  paid in the form of additional shares credited to the investor’s account.  However the rate of interest paid  is determined by the board after taking into account the financial position of the society, which of course has made mounting losses since inception.

The Grants would, of course not be repaid.  However B4RN have been unable to secure Grant funding, therefore an additional amount of just less that £1m needed to be sourced from repayable, interest bearing, funds.

It is a simple matter of fact that in order to repay the shares and loans which the community have invested in B4RN, and provide the broadband infrastructure they planned, the organisation must make a profit.  In the Business Plan this is shown as a positive cash flow balance between income and expenditure

To suggest that making losses year on year, for the last six years is acceptable because B4RN is a “Non Profit” organisation is palpable nonsense because it runs counter to the declared Social Objective.

Indeed at their AGM in October, Hornby Swimming Pool was raised as an example of a community project that would benefit from funding, and shareholders were assured that once B4RN was generating sufficient income, the income would be returned to the community in a variety of ways.  In his reply however Barry Forde gave no indication when trading was planned to become profitable, bearing in Mind that Monica Lee had said the they would be in profit by March 2017.

It is time the Managing Board brought operational cost under control and curtailed some of their more grandiose schemes, however desirable they may be.

John Keegan