Wednesday, 21 September 2016

Charities at risk of financial difficulty - proactive review

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/554357/charities_at_risk_of_financial_distress.pdf

Charities at risk of financial difficulty - proactive review

The Charity Commission’s objectives include to ensure trustees comply with their duties and to increase public trust and confidence in charities. The closure of a number of charities in recent months has highlighted the importance of trustees managing financial difficulties well, the public interest in charities (particularly high profile charities) that collapse due to financial difficulties and the negative impact this can have on public trust and confidence in charities more widely.
In response, the commission:
  • carried out a proactive scrutiny and review of various charity accounts that signal they may be in financial difficulty
  • included the theme of charities at risk of financial distress in its programme of proactive monitoring and inspection visits
The 2 reports contain details of wider lessons for trustees of other charities. We would also encourage trustees to refer to the commission’s range of financial guidance:
  • Managing a charity’s finances: planning, managing difficulties and insolvency (CC12) provides advice for charities that are facing financial difficulties and how they can reduce the risk of insolvency
  • Collaborative working and mergers: an introduction (CC34) provides information about the factors you need to think about when working in partnership or merging with other organisations - charities that work together can operate more efficiently, deliver better services and save money
  • Charity reserves: building resilience (CC19) provides a guide to what charities need to consider when thinking about the levels of reserves they hold and describes what to think about when drafting a reserves policy
  • Users on board: beneficiaries who become trustees (CC24) provides advice on how to manage charity assets and resources, including cash and investments, staff and volunteers
  • Internal financial controls for charities (CC8) provides guidance on managing a charity’s financial activity and using internal controls to reduce the risk of loss
  • Trustees can also use Charity governance, finance and resilience: 15 questions trustees should ask as a helpful starting point to consider the health of their charity
(Source: Charity Commission)  

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