Charities - A Briefing For Charitable Organisations, September 2009

A SURVIVAL GUIDE FOR THE DOWNTURN - THE CHARITY

COMMISSION'S BIG BOARD TALK

The Charity Commission's publication on surviving

the recession focuses on strategy, financial health, governance and

making the best use of resources.

The Charity Commission has issued its Big Board Talk in

response to the economic downturn. This report is a useful

checklist of what trustees and senior management should be

discussing in order to equip their charities for survival in the

current recession.

A lot of the suggestions seem like common sense, and some of you

may feel that you have already dealt with all of the questions

raised. But how many of us never have time to get round to

housekeeping and strategic planning? All too often we find

ourselves firefighting when things go wrong; just the day-to-day

running of the charity takes up so much time that planning for the

future health of the organisation takes a back seat.

The commission urges all trustees to sit down and talk about the

impact of the downturn on four main areas:

strategy

financial health

governance

making the best use of resources.

1. Strategy

   The recession brings both opportunities and risks. All trustees

   need to ensure that the impact of the recession is understood and

   that their charity is in the best possible position it could be to

   deal with the downturn.

   The risks are obvious and some will need to be tackled urgently.

   How certain is your future funding? Are you reliant on an income

   stream that is reducing or disappearing altogether? Is income from

   your investments reducing, and if so, will this cause problems? Are

   there other ways that income can be maximised, for example by

   letting unused space in your property? Does increasing unemployment

   and poverty increase the demand for your services and can you cope

   with this increase?

   There are opportunities as well. For instance, there is a

   growing pool of potential volunteers as unemployment and part-time

   working increases. Some of these people could have the skills you

   need. The downturn provides an opportunity to re-focus operations

   and ensure they still match your charity's objects. If there

   has been some object drift, what do you want to do about it?

2. Financial Health

   Charities and companies have, on the whole, benefited from a

   strong UK economy in recent years. In some cases, –

   perhaps more so in the corporate world – this has led to

   complacency. Expenditure hasn't been as tightly controlled as

   it should have and continuity of income has been taken for

   granted.

   Most organisations are now looking at expenditure to see where

   cost savings can be made. This might be through staff costs with a

   redundancy programme, or something less severe like reviewing your

   internet service provider, your professional advisers and your

   banking arrangements. Accommodation costs are falling in line with

   the downturn in the property market so this might be the right time

   to move to cheaper premises or negotiate a lease with your

   landlord. If your charity has been considering a purchase of

   property, and if you are in a financial position to do so, now may

   be a good time to buy.

   Are you aware of all your organisation's contractual

   obligations? Can you continue to meet these obligations, or do you

   need to review and renegotiate?

   This might be the time to use some of the charity's

   reserves. All charities should have a reserves policy and most

   choose to have free reserves equal to, say, six months' or one

   year's expenditure, so that if income was to reduce the charity

   could continue to operate. If you do not have a reserves policy,

   now is the time to develop and put in place a policy that works for

   you. If there is already a policy in place, trustees should

   consider whether to use these reserves now, either for operational

   spending or to implement a restructuring plan to secure the

   charity's future.

3. Governance

   Trustees have ultimate responsibility for directing the affairs

   of their charity. This requires them to ensure that it is solvent

   and well-run, and delivers its charitable objects for the benefit

   of the public. Working through the commission's Big Board

   Talk checklist will demonstrate that trustees are taking

   appropriate action in the current economic climate.

   The trustee body has a great responsibility and it is clearly

   useful to have a broad mix of skills on board. Consider whether

   your current trustee body has the right knowledge and experience to

   guide the charity through the economic downturn.

   Trustees should evaluate whether the charity has adequate

   controls in place to prevent and detect fraud within the

   organisation. In a recession there is...