Charities must make radical plans to survive recession, says report

Study from Charity Finance Directors' Group and PKF urges swift action

Charities need to plan ahead to survive the recession, a new report warns today.

Managing Risk - keeping in control, published by accountancy firm PFK and the Charity Finance Directors' Group, says most charities have weathered the downturn in the short term but need to focus on long-term strategies.

Report author Richard Weighell, head of PKF's business risk services team, said that although some charities believed spotting risks was enough during the recession, it was necessary to "think more radically" if they were to put processes in place to deal with the problem.

"The reality is that, though recent headlines have claimed green shoots are visible, the country still faces sustained economic difficulties," he said.

The report says that 46 per cent of charities expect income to fall significantly over the next year, with "a number also anticipating write-offs". Although the impact of this will be mitigated for some by high reserves, most expect to make cost savings.

Keith Hickey, chief executive of the CFDG, said there was a danger the buffer of reserves would be used to "delay difficult, but clearly required, restructuring decisions".

The current economic climate, he said, made it more important for charities to use reserves for necessary overhauls, which would in time save money and allow them to rebuild reserves.

Hickey said: "If they fail to do so, with sustained economic difficulties ahead, the reserves will quickly start to dry up, leaving charities with depleted resources."

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