Show your supporters you are in control
The Charity Commission has published an article reminding charities to highlight any financial difficulties they may be having in their annual reports and accounts.
A recent review carried out by the Commission showed that almost half of all charities whose accounts showed net current liabilities i.e. whose current debts were greater than the funds available to cover them, had failed to discuss their financial difficulties in their annual reports. In doing so, charities are not showing their funders, supporters and beneficiaries how they have managed their financial risks in the previous year and that the charity is actively in control of the situation.
The review also found that most of the charities whose accounts showed net current liabilities were funding these liabilities using payments made in advance of services being provided or through bank loans and overdrafts. Furthermore, although 1 in 10 of these charities were in serious financial difficulties, many of the charities whose accounts showed net current liabilities were in fact sustainable.
To read the Charity Commission's article, please click here.
Trustees need to carefully consider their charity's financial position and report appropriately in their annual reports and accounts. If you are concerned that your charity may be in financial difficulties, and you require advice, in relation to reporting, risk management or insolvency concerns, please contact our charities team.