Charities & The Credit Crunch ~ Sweet TLC Ltd

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Charities and the Credit Crunch

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2008- 2009Volatile world financial markets Instability within the banking sector Anxiety at every level of society

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Things will get difficult for charities Demand for services will increaseFunding will decreaseSome charities will face insolvency

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2008- 2009

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Charities and the Credit CrunchTrustees must:

Review financial positions and cash flow forecasts

Fulfil their duty to preserve assetsCarefully consider where and how

assets are heldEnsure they have an appropriately

diverse portfolio 7

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Charities and the Credit CrunchWhat other issues should trustees look into?

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Charities and the Credit CrunchReconsider credit ratings where deposits are held

Ensure deposits are covered by a Government protection scheme

Even trustees who have advice from investment managers have further questions to consider….

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Qs

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QsQsQs

Qs

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Does your charity use its investment portfolio to finance its grant funding?

If so, can it still continue to meet agreed funding programmes?

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Does your charity’s portfolio consist of “permanent endowments”, which prevent expenditure of capital?

If so, will you have a shortfall of income?

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Does your charity receive grants from large grant making trusts?

If so, are you considering the likelihood of cuts in grant income?

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Has your local authority had its deposits frozen in Icelandic banks?

If so, will your charity be able to continue its programmes?

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Charities and the Credit CrunchYou need to seriously consider risk:

The Medium TermMergersRestructuringInsolvency

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Charities and the Credit CrunchAnticipate:

Government spending will be tightened Consequences of cuts in funding Aggressive contract procurementFalls in individual and corporate giving

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Charities and the Credit CrunchAnticipate:

Small charities mergingLarger charities merging with small

ones to prevent their failureNeeding to prepare for merger….

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Charities and the Credit CrunchPre merger considerations:

Undertake a financial and legal due diligence exercise

Ensure understanding of assumed liabilities

Identify the potential costs in terms of management time and reputation if a merger were to fail

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Charities and the Credit CrunchConsider:

Fair redundancy programmes Dilapidation claims in relation to property leases

Implications from contracts or grants with repayment or claw back provisions

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Charities and the Credit CrunchTake every step to minimise potential loss to creditors

Where a charity is unincorporated, Trustees are, on the face of it, personally liable for its debts

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Charities and the Credit CrunchSo be prepared:

Global attempts to rescue the financial sector may succeed

But even if they do the financial fall out will continue for some time yet, so….

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Get support….

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Speak with Charities CommissionContact the National Council for Voluntary Organisations (NCVO)

Seek specialist financial adviceSeek specialist legal advice

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ReferencesThe GuardianRussell-Cooke Solicitors

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FFI visitCharity CommissionNCVO

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Thank you for your time

Charities & The Credit Crunch ~ Sweet TLC Ltd

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Transcript of Charities & The Credit Crunch ~ Sweet TLC Ltd