The Charity Commission has published guidance on what trustees of charities facing difficulties related to the cost-of-living crisis should consider, after reports of voluntary organisations facing increased energy bills and struggling to meet higher demand.
Its guidance notes these challenges may include charities’ own cash flow but also those they serve and their own staff facing cost-of-living pressures.
“Some charities are also experiencing increased demand, particularly charities providing services to people in need. Donors may also be feeling financial constraints, leading to reduced income for some charities,” it adds.
Its guidance comes as a study by Pro Bono Economics reported that energy bills have risen for 41% of charities across the UK, with 49% fearing they will be unable to meet demand this winter.
The report, written with Nottingham Trent University, found that 17% of charities were cutting services, while 8% had reduced staff numbers.
Asset sales and closures
The Commission’s guidance covers topics including whether or not charities should consider selling investments and assets and the potential advantages of merging with other organisations.
It is especially aimed at trustees of smaller charities and states “it is important that trustees continue to understand and comply with their duties to provide effective financial stewardship, and to ensure that any decisions are in the best interests of the charity and legally sound”.
Trustees are required to promptly report serious incidents to the Commission, which can include issues related to financial pressures and the associated consequences.
The guidance says in reaching decisions, “it can be helpful to have open communication with beneficiaries, supporters, staff and volunteers”.
“However, those consulted should be clear that the final decision will be made by the trustees.”
It adds that trustees must assess the risks that may arise from the decisions they make, which may include whether the charity will continue to be able to safeguard beneficiaries as it goes through potentially significant change, or whether it is prudent to sell assets in order to release funds for expenditure.
Trustees should record clear reasons to support the decision, it reads.
The regulator adds that it recognises that decisions will often be difficult, and that there may not be an obvious correct decision.
The Commission also recognises that “things may go wrong despite the best efforts of trustees to act in their charity’s best interests”.
It adds that in a minority of cases, after full consideration of the circumstances and the options, trustees may decide that closure of their charity is necessary.
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