It's not so easy any more to live on a wing and a prayer

Support is increasingly based on much more objective criteria, writes Peter Gotham

Peter Gotham
Peter Gotham

The changes to the NHS, welfare and housing brought in this month are certain to increase the workload of significant parts of the sector, while legal aid changes reduce the likelihood of successful challenges to decisions by statutory bodies.

We increasingly hear that charities are running out of options, and these changes will increase the pressure on much of the sector. It seems like the end of the football season - a few clubs in the relegation zone might avoid disaster, but the die is cast for most.

The writing has been on the wall for a long time, but I still see charities that have been living on a wing and a prayer. Unfortunately, this normally means there are insufficient resources to fund the charity for long enough to manage an orderly transition when the funding runs out. In such cases, funders are increasingly taking a tough line.

Whereas once local communities might have been able to rally round and assist a charity in trouble, perhaps with the assistance of local councillors and local authorities, there are now multiple demands and limited resources. The charity that has not managed its own affairs well is now getting less of a hearing. In one case I have been advising a charity for which the local authority took over the pension shortfall, albeit in return for the charity taking a loan over 20 years; but in another, the funder is threatening legal action over what seem to be misspent funds. Support is increasingly based on much more objective - even hard-nosed - criteria.

Trustees and the past officers of unincorporated charities are particularly at risk. Funders might decide to take action to recover funds lost through bad management, while staff claims and any defined-benefit pension shortfall might also constitute a substantial personal liability.

Just keeping on in a Churchillian fashion might have been sensible when the only other option was Hitler's tanks, but nowadays trustees should be realistic. It is difficult to be objective when your charity has been a big part of your life, so professional advice or counsel from experienced supporters can give you a better perspective. The interests of beneficiaries might be better served by compromise solutions, rather than the hope of a bright new future.

Peter Gotham is a partner at MHA MacIntyre Hudson

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