Funders might see our charity as a risk, but we have little choice, says our columnist
At Voice4Change England, we have made a big decision: we will spend our reserves in order to carry on delivering our work.
We will hold enough in reserves to meet our liabilities. But we will use the reserves to subsidise our grants and contracts - and we will record how much we do so in each case.
Our approach may not be sustainable in the long term, but there is little point in continuing to exist if you are not delivering your objects.
As chair of the charity, I have had to weigh up two aspects of the situation - first, the liabilities we have and the message that is sent to existing and future stakeholders by having dwindling reserves; and second, a belief that if you have reserves they should be spent to meet your objectives and the knowledge that in a few months I will have to answer the auditor's question: "Are you a going concern?"
After weighing up the arguments, the charity has decided that spending reserves is the best thing to do.
I know that Voice4Change England is not the only charity in this position, but there seems to be a conspiracy of silence that is not good for the sector.
Full cost recovery is a myth, but I would like to see this period of austerity leading to some truthful reporting of the real costs of delivering a project.
Applying for funding has always been competitive, but when funds are constrained it feels impossible for trustees to say no to a grant or contract, even if it does not cover the full cost of the project. And if you are offered a grant that is worth 30 per cent or even 50 per cent less than you asked for, the project outcomes are never reduced.
I am wary that funders might see charities that are dipping into their reserves as risky organisations, but they can't have it both ways. Either they fund the whole cost of a project, or they have to accept that in difficult times charities will use their reserves to subsidise it.
I am acutely aware that funders want to make sure their money goes as far as possible, because I have often sat on the other side of the fence, doing work for major funders.
Funders have to make very difficult decisions about whether it is best to support a large number of charities by giving each one a little less money than they asked for, or to give some charities nothing so that others can have the full amount. These are not easy situations to deal with.
But, as I have seen at Voice4Change England, some funders' practices can contribute to the dilemmas that many charities are facing.
The right approach
So what advice can I offer for others facing a similar dilemma?
In this situation, trustees face a great deal of pressure. When they are setting budgets and making annual reports, their duties of fiduciary responsibility and public accountability come together.
There are two things that it is important to remember. First, even if trustees are facing similar pressures in their day jobs, it is important to make time for the trusteeship role and to remind themselves that all trustee meetings are important.
Second, they should make sure that the commitments they make are challenging but achievable. The numbers should match up to their planned achievements.
These are not easy situations, but the right approach from trustees can make a big difference.
Elizabeth Balgobin is chair of Voice4Change England and a charity governance consultant