The Charity Commission has revealed that it looked into the finances of two charities after their accounts suggested they could be in danger of insolvency.
The commission opened monitoring cases on the York-based education charity Success for All and Gosling Sports Park in Hertfordshire after they were randomly selected from a group of 94 charities whose accountants had flagged issues in their annual returns in recent years.
Gosling Sports Park had made a net loss of £192,000 and had a debt of £7m in the year to 31 March 2015. In the year to 30 July 2014, Success for All had overspent about a third of its income as a result of rapid growth and was close to becoming insolvent, the commission said.
In statement published today alongside reports of both cases, the commission said its intervention had been proactive and was part of its work "to explore the financial resilience of the charitable sector and identify wider lessons for charities who may be experiencing financial distress".
Trustees in both charities had taken steps to protect their future of their organisations, the reports said.
Gosling Sports Park took out a loan to build a sports park in 2007, but struggled to repay it after the 2008 recession meant interest rates fell below the rate on the loan.
It considered several options, such as releasing unused land and creating a new loan agreement to reduce the cost of the debt, but eventually chose to transfer the management of its sports ground to another charity, which covered Gosling Sports Park’s debts and paid it a further £200,000.
The charity, which in the year to March 31 2015 had an income of £3.4m and spent £3.5m, intends to continue as a grant-making organisation.
It had rationalised costs and generated funding by selling an education programme, which meant that by the time the commission became involved it was 98 per cent self-funded, with an income of £1.5m and spending of £1.2m in the year to 30 July 2015.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: "The commission’s work looking at charities in financial distress has identified the importance of trustees being aware of their duties and responsibilities as trustees and the need to be proactive."
She said the two cases illustrated the importance of acting quickly and identifying solutions when confronted with financial difficulties.
"Trustees had to take tough decisions, but by addressing these head on and having frank discussions, they were able to make decisions in the best interests of their charities," she said.
She said trustees should regularly review their charity’s financial health.