It's starting. More and more charities are going bump. In the past month we have seen People Can (formerly Novas Scarman), a services charity for vulnerable people, go into administration under the weight of an unaffordable pension scheme. Here in Suffolk, we have seen the sudden collapse of Out & About, a highly regarded charity that used volunteers to support disabled kids to do mainstream activities. Anecdotally I hear of many other voluntary sector organisations that are perhaps one setback away from insolvency.
It is inevitable in a downturn that some organisations will go to the wall, but it is important that their users, staff and funders are not left in the lurch. As a manager or trustee, then, what should you do if you see the writing on the wall?
All too often, the standard trustee response to an existential crisis runs a bit like this: 1. Deny it. 2. Admit the problem and blow all your reserves in the hope that Something Turns Up. 3. Realise the charity is probably screwed and hit the phones to funders and potential merger partners. 4. Get told that it's a bit late for all that. 5. Receive a bill you cannot pay and pull down the shutters.
Does it need to be like this? Of course not. Let me share my own wind-up story. A few years ago, a social business I chaired was experiencing problems that, cumulatively, raised the question of viability. We had lost a great founding chief executive and chair and the core business was tanking fast.
As trustees we had a choice: go into ostrich mode or deal with it.
We agreed to commission a quick external review of our options. This told us that the odds on a successful turnaround or merger were long and that an orderly wind-up was the best possible option. We were then able to signpost our clients, pass on our contracts, pay off our staff - and then relinquish the remaining money to a friendly organisation.
What I am driving at here is that it is far better to decide calmly and rationally to wind up before the water is slopping over the sides and everyone is in a flap. Remember that a messy end to a charity can be a lot more harmful than an ordinary business liquidation. As trustees, part of your job is to be captains of the ship - to get your arms around the problem quickly and assess the best course of action so that the fate of your particular vessel can be sorted out in a sane and rational way, even if that course of action is to abandon ship.
I can make no comment on particular cases, including those I mentioned earlier, but I am aware that a casual disregard of the evidence or, more commonly, a dogged desire not to give up can lead trustee boards to make a hash of things. It is worth remembering that if your board fails to plan for an orderly wind-up, you will, as the charity's legal custodians, be fully deserving of any eventual sanction or chastisement that comes your way.
Contact Craig, who writes in a personal capacity, at www.stepping-out.biz
Craig Dearden-Phillips is managing director of Stepping Out and a Liberal Democrat councillor in Suffolk