It's hard to believe that the Northern Rock Foundation was set up only 10 years ago. In that time, it has become a major player, not only in north-east England, but also across the UK. It has been able to do this because its funding includes 5 per cent of founder company Northern Rock bank's pre-tax profits. This amounted to £31.3m in 2006 and has totalled more than £190m since the foundation was established.
"That makes it an incredibly generous corporate donor, and we'd not have been able to do what we do without that generosity," says Rob Williamson, director of policy and communications at the foundation. If the bank is sold or taken over, the foundation would also get a percentage of the proceeds of that sale. As Williamson points out, however, there could also be a dramatic decline in its grant-making capacity.
Some sort of decline in income seems to be inevitable, in the short term at least. Earlier this month, the foundation announced its latest round of "large grants" of more than £20,000, totalling £2.2m. This comes after the £55,548 worth of "small grants" it announced in late September. These, and all previous grants, will be honoured. Funding will not suddenly run out because, in keeping with Charity Commission requirements, all funding was allocated from the budget of the specific year in which the grants were made, whether or not the money is actually paid out over a longer period. There has been enough in the reserves to cover the October round.
Unsurprisingly, it's not clear exactly what will happen from now. Nevertheless, Alastair Balls, chair of the foundation, put on a brave face at the time of the small grants round. "It's business at usual," he said.
The official line from the foundation is that it is scaling back expenditure and keeping budgets under review until the situation becomes clearer. It has also appointed Europa Partners as financial adviser in its dealings with the Northern Rock bank (Third Sector Online, 5 October).
It's not the first time a charity close to a bank has felt the knock-on effect of problems in the wider economy. In 1995, the Baring Foundation saw 85 per cent of its income disappear in the wake of the collapse of Barings Bank. It may not be long before another foundation finds itself in trouble.