Charities & The Credit Crunch ~ Sweet TLC Ltd

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Charities and their Trustees need to think and plan for an uncertain financial future.

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  • Sweet TLC Ltd
  • Charities & The Credit Crunch ~ Sweet TLC Ltd

    1. 1. Charities and the Credit Crunch www.sweet-tlc.co.uk
    2. 2. Charities and the Credit Crunch <ul><li>2008- 2009 </li></ul><ul><ul><li>Volatile world financial markets </li></ul></ul><ul><ul><li>Instability within the banking sector </li></ul></ul><ul><ul><li>Anxiety at every level of societ y </li></ul></ul>
    3. 3. Charities and the Credit Crunch <ul><li>Things will get difficult for charities </li></ul><ul><ul><li>Demand for services will increase </li></ul></ul><ul><ul><li>Funding will decrease </li></ul></ul><ul><ul><li>Some charities will face insolvency </li></ul></ul>
    4. 4. Charities and the Credit Crunch
    5. 5. Charities and the Credit Crunch <ul><li>2008- 2009 </li></ul>
    6. 6. Charities and the Credit Crunch
    7. 7. Charities and the Credit Crunch <ul><li>Trustees must: </li></ul><ul><ul><li>Review financial positions and cash flow forecasts </li></ul></ul><ul><ul><li>Fulfil their duty to preserve assets </li></ul></ul><ul><ul><li>Carefully consider where and how assets are held </li></ul></ul><ul><ul><li>Ensure they have an appropriately diverse portfolio </li></ul></ul>
    8. 8. Charities and the Credit Crunch <ul><ul><li>What other issues should trustees look into? </li></ul></ul>
    9. 9. Charities and the Credit Crunch <ul><ul><li>Reconsider credit ratings where deposits are held </li></ul></ul><ul><ul><li>Ensure deposits are covered by a Government protection scheme </li></ul></ul><ul><ul><li>Even trustees who have advice from investment managers have further questions to consider…. </li></ul></ul>
    10. 10. Charities and the Credit Crunch <ul><li>Qs </li></ul>Qs Qs Qs Qs
    11. 11. Charities and the Credit Crunch <ul><ul><ul><li>Does your charity use its investment portfolio to finance its grant funding? </li></ul></ul></ul><ul><ul><ul><li>If so, can it still continue to meet agreed funding programmes? </li></ul></ul></ul>Q
    12. 12. Charities and the Credit Crunch <ul><ul><ul><li>Does your charity’s portfolio consist of “permanent endowments”, which prevent expenditure of capital? </li></ul></ul></ul><ul><ul><ul><li>If so, will you have a shortfall of income? </li></ul></ul></ul>Q
    13. 13. Charities and the Credit Crunch <ul><ul><ul><li>Does your charity receive grants from large grant making trusts? </li></ul></ul></ul><ul><ul><ul><li>If so, are you considering the likelihood of cuts in grant income? </li></ul></ul></ul>Q
    14. 14. Charities and the Credit Crunch <ul><ul><ul><li>Has your local authority had its deposits frozen in Icelandic banks? </li></ul></ul></ul><ul><ul><ul><li>If so, will your charity be able to continue its programmes? </li></ul></ul></ul>Q
    15. 15. Charities and the Credit Crunch <ul><li>You need to seriously consider risk: </li></ul><ul><ul><li>The Medium Term </li></ul></ul><ul><ul><li>Mergers </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><ul><li>Insolvency </li></ul></ul>
    16. 16. Charities and the Credit Crunch <ul><ul><li>The Medium Term </li></ul></ul><ul><ul><li>Mergers </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><ul><li>Insolvency </li></ul></ul>
    17. 17. Charities and the Credit Crunch <ul><ul><li>Anticipate: </li></ul></ul><ul><ul><ul><li>Government spending will be tightened </li></ul></ul></ul><ul><ul><ul><li>Consequences of cuts in funding </li></ul></ul></ul><ul><ul><ul><li>Aggressive contract procurement </li></ul></ul></ul><ul><ul><ul><li>Falls in individual and corporate giving </li></ul></ul></ul>
    18. 18. Charities and the Credit Crunch <ul><ul><li>The Medium Term </li></ul></ul><ul><ul><li>Mergers </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><ul><li>Insolvency </li></ul></ul>
    19. 19. Charities and the Credit Crunch <ul><ul><li>Anticipate: </li></ul></ul><ul><ul><ul><li>Small charities merging </li></ul></ul></ul><ul><ul><ul><li>Larger charities merging with small ones to prevent their failure </li></ul></ul></ul><ul><ul><ul><li>Needing to prepare for merger…. </li></ul></ul></ul>
    20. 20. Charities and the Credit Crunch <ul><ul><li>Pre merger considerations: </li></ul></ul><ul><ul><ul><li>Undertake a financial and legal due diligence exercise </li></ul></ul></ul><ul><ul><ul><li>Ensure understanding of assumed liabilities </li></ul></ul></ul><ul><ul><ul><li>Identify the potential costs in terms of management time and reputation if a merger were to fail </li></ul></ul></ul>
    21. 21. Charities and the Credit Crunch <ul><ul><li>The Medium Term </li></ul></ul><ul><ul><li>Mergers </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><ul><li>Insolvency </li></ul></ul>
    22. 22. Charities and the Credit Crunch <ul><ul><li>Consider: </li></ul></ul><ul><ul><ul><li>Fair redundancy programmes </li></ul></ul></ul><ul><ul><ul><li>Dilapidation claims in relation to property leases </li></ul></ul></ul><ul><ul><ul><li>Implications from contracts or grants with repayment or claw back provisions </li></ul></ul></ul>
    23. 23. Charities and the Credit Crunch <ul><ul><li>The Medium Term </li></ul></ul><ul><ul><li>Mergers </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><ul><li>Insolvency </li></ul></ul>
    24. 24. Charities and the Credit Crunch <ul><ul><li>Take every step to minimise potential loss to creditors </li></ul></ul><ul><ul><li>Where a charity is unincorporated, Trustees are, on the face of it, personally liable for its debts </li></ul></ul>
    25. 25. Charities and the Credit Crunch <ul><li>So be prepared: </li></ul><ul><ul><li>Global attempts to rescue the financial sector may succeed </li></ul></ul><ul><ul><li>But even if they do the financial fall out will continue for some time yet, so…. </li></ul></ul>
    26. 26. Charities and the Credit Crunch <ul><li>Get support…. </li></ul>
    27. 27. Charities and the Credit Crunch <ul><ul><li>Speak with Charities Commission </li></ul></ul><ul><ul><li>Contact the National Council for Voluntary Organisations (NCVO) </li></ul></ul><ul><ul><li>Seek specialist financial advice </li></ul></ul><ul><ul><li>Seek specialist legal advice </li></ul></ul>
    28. 28. Charities and the Credit Crunch <ul><li>References </li></ul><ul><ul><li>The Guardian </li></ul></ul><ul><ul><li>Russell-Cooke Solicitors </li></ul></ul><ul><li>FFI visit </li></ul><ul><ul><li>Charity Commission </li></ul></ul><ul><ul><li>NCVO </li></ul></ul>
    29. 29. Charities and the Credit Crunch www.sweet-tlc.co.uk Thank you for your time

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