CHARITIES AND NOT FOR PROFIT ORGANISATIONS
The economic and social environment, together with increased scrutiny and media attention, means that charities have rarely faced more difficult times.
CVR has the experience and expertise to provide specialist services to this sector.
With over 168,000 registered charities in England and Wales (1), many facing funding challenges and increased demands at a time of ongoing public scrutiny, inevitably problems have arisen in this significant sector. Some will be manageable by CEOs with an effective board of trustees, others may require specialist assistance from external advisers and turnaround specialists, services which we are able to provide.
The charity sector in England and Wales generates a total income of £75bn (1) and provides a range of vital services across local, national and international communities. In April 2018 the Local Charity and Community Group reported that “local charities are stretched to breaking point.” The report added: “Over recent years, cuts and austerity measures have increased the burden on local charities and community groups. Many groups are now facing a trade-off between the quality and durability of their services.”
Approximately 80 per cent of all registered charities are defined as ‘micro’ or ‘small’ with annual income of less than £100,000. Most of these will also be unincorporated entities which means that their trustees are facing personal financial exposure if things go wrong. Even many larger charities are unincorporated. Neither should it be assumed that the trustees and other officers of corporates will not face difficulties if things go wrong. The media storm that followed the demise of Kids Company in 2015 is testament to that, with the trustees facing disqualification proceedings. Similarly, the high-profile scandals which have hit the sector recently have led to a break down in public trust and a haemorrhaging of cash from private donors, with problems compounded by government cutbacks. None of this bodes well for the sector.
The main regulator for charities, the Charity Commission for England and Wales, has launched formal inquiries into the conduct of a number of charities, big and small. Given the size of the sector though, the challenges of effective regulation are huge and it is important to understand how best to interact with the Commission in the event of a charity facing financial distress. Prompt engagement is essential in certain circumstances which we can help with, e.g. with the completion of serious incident reports.
When cash is tight, as it often is, it is also vital to understand whose money it is. Many charities receive funds for specific purposes on terms which restrict how those funds may be utilised. Trustees, as well as CEOs, must understand their obligations and responsibilities in this regard.
As a firm we have restructuring experts with experience of operating and advising in the charity and Not-For-Profit sector including extensive experience of dealing with insolvent Credit Unions. We never assume that closure or insolvency is inevitable when an organisation is facing financial distress, and we will look carefully at the available options, whether that is a managed turnaround or perhaps identifying an appropriate merger partner or securing additional funding from stakeholders.
Charities can often be more involved to turn around than an equivalent commercial entity. It may be that an insolvent solution is the only realistic outcome and contingency plans for that may well need to be run in parallel with turnaround options given time constraints.
Our specialists will be pleased to discuss issues and potential solutions discreetly with a view to achieving the best possible outcome for all stakeholders and beneficiaries.
For further details contact Charles Turner at firstname.lastname@example.org