This article has been updated; see final paragraph
The disability charity Action on Hearing Loss has put in place a financial turnaround plan after concerns were raised about its future solvency.
Its recently published accounts for the year to March 2018 show that the charity had an income of £40.1m but spent £42.7m. It is the fifth time in six years that expenditure has outstripped income at the charity.
The accounts show it had about £1.3m in free reserves – just over a week’s running costs – in the year to March and trustees had to renew a £3m revolving credit facility with Lloyds Bank. They also agreed to sell its remaining investment portfolio to help generate additional cash.
A note from the charity’s auditor PricewaterhouseCoopers says that "material uncertainty" over fundraising income and other conditions cast doubt on the charity’s ability to "continue as a going concern".
Speaking exclusively to Third Sector, Mark Atkinson (left), who was appointed as chief executive of Action on Hearing Loss last October, said a robust financial recovery plan had been agreed with trustees and they were confident of steadying the financial situation over the next year.
"We are having to address some fundamental challenges, not just for how we stabilise our income but also how we grow our income in the long term," he said. "There’s a real pressure on liquidity and our dependence on the revolving credit facility with Lloyds Bank."
The recovery plan includes selling a number of assets, including the charity's head office in Islington, north London, and relocating some staff, including most of its finance team, to its office in Peterborough.
The cost reductions would lead to the loss of some roles, Atkinson said, but he didn’t expect there to be a large number of redundancies.
Atkinson said it was also exploring ways generating more income. He said the charity was too dependent on legacy fundraising - legacies generated £8.3m of the £11.6m raised in voluntary income in the year to March 2018. A further £1.4m was raised from restricted grants. Atkinson said it had appointed the consultant Leesa Harwood to review its fundraising strategy.
Income from support and care activities increased to £23.3m in the year to March 2018 from £22m the year before, but costs also rose by £1.2m.
Atkinson said the charity wanted to recover the full costs of the services it delivered under contracts to local authorities and other providers. "I don’t think it’s appropriate to use voluntary fundraised income to subsidise the responsibilities of the state," he said. "We need to be better as an organisation, and as a sector, at recovering the full cost."
Atkinson said the financial recovery plan would very quickly put the charity in a position where it was making a small operating surplus and could rebuild its reserves.
"I’ve been appointed to get the organisation back on to a strong financial footing and, most importantly, make the organisation relevant to the millions of people who have hearing loss or who are deaf," he said.
Atkinson said the charity’s brand would also be discussed this year.
The charity controversially changed its trading name from the Royal National Institute for Deaf People in 2011. But Atkinson said the old brand remained better recognised than Action on Hearing Loss and reverting back to the former name was an option being considered.
The amount raised in restricted grants - £1.4m - has been added to better reflect the total amount of fundraised income in the year to March 2018.