# Early trustee action in financial difficulties reaps better results, says Charity Commission

- Link: https://fundraising.co.uk/2016/09/21/early-trustee-action-financial-difficulties-reaps-better-results-says-charity-commission/
- Published: 2016-09-21T08:01:06+01:00
- Author: Melanie May

**Trustees who act promptly to actively manage their financial difficulties, such
as by exploring mergers, collaborations, and new income streams, will secure better
outcomes for their charities and beneficiaries, according to new Charity Commission
research.**

The Charity Commission has published two reports, [_Accounts monitoring: Charities with audit reports identifying that they may be in financial difficulty_](https://www.gov.uk/government/publications/accounts-monitoring-charities-with-audit-reports-identifying-that-they-may-be-in-financial-difficulty),
and [_Charities at risk of financial distress: Group case report_](https://www.gov.uk/government/publications/charities-at-risk-of-financial-distress-group-case-report)
as part of a project undertaken to explore the financial resilience of the charitable
sector and to identify wider lessons for charities experiencing financial distress.

It identified a total of 94 charities with incomes of over £1million, totalling 
over £462 million, highlighted by auditors as potentially being in financial difficulty.
The Commission reviewed the accounts of these charities to assess the reasons why
the charities were in financial difficulty and the actions that the trustees were
taking in response. It also undertook more detailed monitoring and compliance visits
to 10 charities, selecting five of those from the list of 94 and a further five 
from reports suggesting that the charities were in financial distress.

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The reports highlight a number of key themes and wider lessons for other charities,
including:

 * Early steps to address financial difficulties and confront them pragmatically
   minimised the risk to beneficiaries
 * Charities have a number of different options to explore including the possibilities
   of mergers and collaborations to achieve positive outcomes despite their financial
   difficulties
 * The future outlook for charities remains challenging and trustees must stay alert
   to the risks of financial distress and manage them actively.

Paula Sussex, chief executive of the Charity Commission, said:

> “The economic reality for charities across the UK is a challenging one. But trustees
> will better serve those they need to support by exploring mergers and collaborations,
> diversifying income streams or taking other steps to manage those difficulties
> at an early stage. A head-in-the-sand approach raises concerns about the ability
> of trustees to run their charities effectively. Charities should not take unmanaged
> risks, but the risk of doing nothing is only too real and the consequences can
> be devastating, particularly where vulnerable beneficiaries are involved.”

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