Wellers' health check for charities in the current climate

In the heat of the day to day running of a charity in the current economic climate, it’s easy to forget the bigger picture.

Ross Andrews of Wellers Accountants says it’s important to carry out regular reviews and health checks and offers these four key pieces of advice to ensure you stay on the right track when all around is proving challenging.

1. The wider effects of the recession

When looking at the long term direction of the charity, it’s important to consider the effects of the recession on the charity’s main funders. The economic climate is likely to affect the funders in different ways which may not be obvious, especially if the main source of funding is from a non government body. As such, it’s important that the Trustees have a thorough understanding of the issues surrounding each of their funders and their anticipated responses to these issues. The charity’s own risk register can then be updated accordingly, facilitating better long term planning. Particularly when looking at the funds that cover core salaries and overheads.

2. Review of contractual commitments

Again for planning purposes, the charity should be clear of any “off balance sheet” liabilities to which they are committed. This may include rental guarantees, costs of making redundancies but conversely, any contractual commitments they have made as part of providing services to third parties.
It’s important to consider such liabilities as these are quite often missed when reviewing the level of reserves that are needed in order to discharge all obligations in the event of a significant loss of funding.

3. Unlocking all available funds

Changes incorporated within the Charities Act 2006 offer greater flexibility when looking at spending permanent endowment funds that have previously been inaccessible. If funding pressures are mounting, this could be a change that Trustee’s may find a relief.

4. General housekeeping

As part of assessing risk, the charity also needs to pay attention to governance and ensure that it has the right resources at management level to cope with necessary strategic change. i.e. it needs to ask the question “are we an effective Trustee body”. At a time of economic uncertainty, it’s important that the management team have the skills to facilitate effective decision making, especially as some of these decisions may be inherently tough.

A useful report can also be found at http://www.charity-commission.gov.uk/library/about_us/ccnews29check.pdf

For more information visit www.wellersaccountants.co.uk.

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