For those of us trustees not entirely at ease with page after page of figures, the prospect of being required to oversee our charities' financial affairs five or even 10 years into the future is daunting. But it is not something that we can ignore.
As reported in the monthly Third Sector (June, page 52), the charities bureau in New York State in the US has resorted to "stress-testing" charities to ensure that they are not taking a wing-and-a-prayer approach to their future financial wellbeing. And although our own Charity Commission says it has no plans to follow this example, there is a growing realisation in the sector that good governance is about more than merely filing a return for the financial year just passed and making sure there is a reasonable budget for the next 12 months.
Contributing to that is the recent election result. Of all the parties standing in May, the victorious Conservative Party promised the toughest programme of austerity. It is unabashed in its ambition for there to be a smaller state and more self-reliance. Whatever the rhetoric of seeking partnership with the third sector to achieve that, it is fair to assume that in the next five years funding from government and local authorities will fall at the same time that need increases as a result of the cut-backs.
So any service-providing charity needs, at the very least, to have its own five-year plan if it is to cope. Surely we have learned from the experience of recent decades that to assume central and local government funds will continue to flow year after year can be fatal. Perhaps not: in a recent survey of 120 charities carried out by the accountancy firm Baker Tilly, 40 per cent of respondents said that they did not include future projections in their financial management reports.
There is, of course, a danger in coming over all corporate about this. Charities are not the same as corporations. Much of our revenue comes from donors rather than customers buying goods, so there is more unpredictability about the funds that can be generated in the coming years. The same programme of appeals, applications to trusts and fundraising events can raise four times more in one year than in the previous one.
It's not an exact science – thank God – and luck certainly plays a part. There is, therefore, an element of gambling in fundraising. Handy, too, if somewhere in the background the charity or its patrons have access to the sort of people who have the wherewithal to underwrite future expenditure should the worst come to pass and donations suddenly dry up.
But these caveats are not sufficient reason to turn a blind eye either to the middle or distant future. And we certainly all need to be prepared for the rough ride that lies ahead as public expenditure, already tight, is reduced further. Trustees, prepare yourself for plenty more figures, spreadsheets and five-year projections.
Peter Stanford is a writer and broadcaster, and was a charity chair for more than 20 years