Release date: 20^th November 2013

Trustees warned as economic woes hit charities

Trustees of charities need to be acutely aware of their legal responsibilities – and their potential liabilities if their organisation falls on hard times.

That’s the message from experts at Cranfield Business Recovery at a time when the efforts of charity workers have recently been highlighted during National Trustees’ Week.

The annual event, organised by the Charity Commission, is in its fourth year and showcases the work of charity trustees. It also highlights opportunities for people from all walks of life to get involved in charities as a trustee.

But Brett Barton, from Coventry insolvency service Cranfield Business Recovery, says many trustees have no idea the problems they might face personally if the charity they work with runs into financial difficulties.

Brett Barton said: “Third sector organisations and charities are generally set up by people who are passionate about a particular cause or social issue. Often directors and trustees find themselves in positions of responsibility for which they are ill-prepared. What starts as an informal, voluntary role, can change over time as people take on positions like secretary, treasurer or trustee.”

The people in charge of a charity might be called trustees, directors, board members, governors or committee members, but they are the people with ultimate responsibility for directing the business of the charity and it’s down to them to seek help before it is too late.

In the normal course of events, trustees are not liable for a charity’s debts if it goes into insolvent liquidation but if the trustees have allowed the charity to continue to operate at a time when they knew, or ought to have known, that the insolvent liquidation was inevitable, they may be held personally liable for debts incurred during that period.

The impact of the recession on charity groups is well documented. UK Giving 2012, Britain’s biggest annual survey of charitable giving, revealed donations had fallen by 20 per cent in real terms during 2011 and 2012. This meant that charities’ income was reduced by £1.7 billion in cash terms.

A Guardian Voluntary Sector Network survey of 1,000 charity professionals found 8.5 per cent did not believe their organisation would survive the next five years, while a further 18 per cent said they were unsure about their future.

Against this backdrop, Cranfield Business Recovery is giving this advice to managers and trustees at charity and third sector organisations:

·         Be aware of the legal constitution

Trustees, directors and management need to be aware of the constitution of their organisation, and communicate it to staff and volunteers. They need to know exactly what it means to them personally in terms of their responsibilities and the potential liabilities.

·         Understand individual roles and responsibilities

An informal role can easily turn into something more official in the charity sector. The Charities Commission and the National Voluntary Organisations (NVCO) both provide information about the roles and responsibilities of trustees, directors, staff and volunteers.

·         Train staff and volunteers

The turnover of staff at charity organisations is often quite high, but it’s really important that systems are set up to train and educate staff about their roles and responsibilities, and what is expected of them. If an organisation doesn’t have someone on the board who can advise on HR and financial issues, it may be storing up serious issues for the future.

·         Seek sound financial advice

There is no substitute for sound financial advice, no matter what sector a company operates in. Third sector organisations and charities should make sure they receive specialist help from accountants and financial advisers who have expertise in working with charities, voluntary organisations and social enterprises.

Brett Barton stressed that even if an organisation is financially successful, it is still worthwhile putting together a plan of action just in case funds unexpectedly run dry.

 “If organisations seek help early enough, steps can be taken to remedy a potentially serious situation through changing management practices, implementing stricter financial controls, or seeking alternative funding streams and revenues. This is the key to helping charities ride through the recession.”

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About Cranfield Business Recovery

Cranfield Business Recovery is the number one insolvency practice in Coventry, employing a total of 15 staff. Set up in November 2001 to offer a professional service to individuals with corporate, business, and personal financial problems, they work closely with professional advisors to assist their clients. Cranfield offer a bespoke and sympathetic service in circumstances that are often difficult and stressful.

For more information contact

Denise Taylor, Bridge PR & Media Services Tel: 024 76 520025, Email: denise@bridgepr.co.uk

or

Brett Barton, Cranfield Business Recovery, Tel: 024 7655 3700, Email: brett.barton@cranfieldbusinessrecovery.co.uk