The Charity Commission has concluded that BeatBullying ran into financial difficulty because of its reliance on grant funding and lack of reserves, but found no evidence of financial misconduct, in an operational compliance case report published today.
The Commission found that the collapse in 2014 was triggered by the charity missing out on two expected grants leading to significant cash flow problems, as the charity outlined in a document for creditors last year, and that because the charity had not complied with its own reserves policy “it was quickly affected by the cancellation of anticipated funding”.
BeatBullying went into liquidation owing £1m to creditors on 7 November 2014.
The report reveals that the charity struggled to secure new funding after a funder warned others against investing in the charity.
The regulator said: “Another funder also shared information within the funding community and advised the charity should not be invested in or funded at the present time.”
The regulator said that trustees appeared to "actively attempt to manage the charity’s finances throughout” and that there was no evidence of financial misconduct or mismanagement, or misapplication of funds.
It concluded that: “It is very unfortunate that the charity failed, and we are aware of the deep distress of many beneficiaries, volunteers and staff, as well as the wider public.
“However we have seen no evidence that this arose due to financial misconduct or mismanagement, or misapplication of funds. This is a deeply regrettable instance where despite the best efforts of the trustees and staff, who continued to work amidst much uncertainty, the loss of anticipated funding was too great for the charity to continue operating.”
The Commission was first alerted to issues at BeatBullying in June 2013 when it was contacted anonymously about the state of the charity’s finances. It contacted the charity and was satisfied that there was a plan to improve its finances.
In December 2013 a law firm contacted it to say that it believed the charity to be insolvent. After contacting the charity, the Commission was satisfied that the independent auditor had assessed the charity as a going concern.
An operational compliance case was opened in October 2014 after the charity submitted a serious incident report about its financial difficulties. The Commission met with trustees and reviewed its financial accounts and other documents.
The consolidated management accounts for December 2013 showed the cumulative loss for that year was £417,814.
The report notes that it is difficult for grant-funded organisations to put aside money because of the conditions attached to many grants, and said: “Charities which have no reserves and which rely heavily on a single method of funding (such as grants) are always going to face a serious risk to their viability. This case shows that even experienced charities with conscientious trustees at the helm can suffer and find themselves in a position where the charity has no choice but to close.
“Trustees should identify their reliance on grants as a risk and build this risk management into their business plan.”
Karl Wilding, on behalf of the former trustees of BeatBullying, said: “We have noted the contents of the report and hope that the recommendations in it will be useful for charities more broadly.”
Alongside the operational compliance case report the Commission also published a 15-point checklist for trustees to help “review how your charity operates and make sure it’s prepared for the future”.
