Phil Reynolds
Financial difficulties
It can be argued that rather than external events being the cause of distress that this is a symptom of the Trustees and management failing to pay enough attention to the external environment to enable appropriate contingency plans to be implemented. In this respect regular forecasting is vitally important although the practical reality is that not all organisations in the sector, in common with other SMEs, budget effectively or provide management information of a sufficient quality (or vitally in a timely manner) to enable the Trustees and management to make informed decisions. The tendency for charities to operate with thin management teams and the difficulties many charities find in recruiting sufficient financial expertise to their management and Trustee boards can also make both the production and vitally the scrutiny of financial information more difficult. The particular risks in this sector come from delays in obtaining funding from long-standing donors and the loss of contracts for services, with many organisations effectively providing outsourced services for central or local government and non-government organisations (NGOs) this is a particular area of concern. Such issues need to be reviewed carefully to ascertain whether they are merely temporary slippages or part of a longer-term pattern. Are donors or funders experiencing financial difficulty themselves and pulling back on their philanthropy? Are central or local government contracts going to be withdrawn/reduced? Many organisations have a close working relationship with their funders/customers and Trustees should be able to freely discuss such issues with them and agree the future direction of the relationship. In my experience there is sometimes a marked reticence to outline the difficulties being faced and to seek help despite the fact that the organisation in difficulty was set up to provide help to others. Having recently dealt with with a legal services charity whose Chair approached me with a request to help them close the charity, my first question was whether the Trustees approached their key funders, the main law firms who provide the pro-bono support, with a request for help and the answer was ‘no’. My response was ‘what is the worst the funders can say given you are already looking to close?’. We therefore helped the charity come up with a robust business plan and related funding requests to provide continued services at a number of different levels. The response from the funders was positively received and was provided at the high-end of the requested range.
200,000 UK registered charities 870,000 UK voluntary workers 0.85%
Total UK GDP
5
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