'Insolvency looms larger'

By David Ainsworth, Third Sector, 1 October 2008

Poor governance could cause an increasing number of charities to become insolvent in the next few years, according to an expert.

Ian Oakley-Smith, charity insolvency specialist with PricewaterhouseCoopers, said the majority of charity insolvencies involved failures in monitoring and accounting by senior staff or trustees.

"Many organisations have gone bust because they haven't been organised," he told Third Sector.

"Charities keep spending money after it starts to run out, or they don't hit grant-related targets and lose the money, or they have to give it back."

He said he had started to see more redundancies than over the past few years, and added that he feared he would see a much larger rise after several years of tighter financial conditions.

Danny Davis, an insolvency lawyer at Mishcon de Reya, said charities should examine their procedures in the light of the credit crunch.

"Now is the time for charities to look at their reserves policies and internal monitoring policies to check they can cope with more difficult conditions," he said.

"Even if you cannot avoid insolvency, you can see the warning signs and make sure you put your house in order."

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