The Charity Commission has updated its guidance on how Trustees can improve the finances of their charity. There is also further advice for what can be done when the Charity does find themselves in financial hardship.
Trustees should consider the impact the issue can have on the charity. One example of an issue that a charity can face is the lack of funds. They will then also need to consider whether the charity has or will become insolvent.
For charities that follow the Statement of Recommended Practice, there will need to be further consideration given to the going concern disclosures in the accounts.
There is a useful guide that Trustees can use to plan for the future of their charity which can help them to manage the finances better.
The Trustees can then check if the charity is facing financial difficulties by taking account of:
- The cash position of the charity
- Cash flow forecast – cash coming in and out over the coming weeks and months
- The assets and liabilities
This checklist can help Trustees determine if there is a risk of insolvency.
Once this has been determined, advice can be taken from the independent examiner/auditor or an insolvency practitioner. It is also recommended that the beneficiaries are contacted for their opinion.
If it is evident that the charity is not at risk of insolvency, then it should continue operating. Otherwise, the charity can be merged with another, or it can be closed. There is guidance for both situations which can be found on the Charity Commissions website as there is a process that must be followed.
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