Charities are feeling the pinch too
Posted: Thursday 25 February 2010
One of the biggest issues facing charities at the moment is how to survive through the recession, and in this sense, they are really no different to any other business. While donations are significantly down (even charity clothes shops are seeing a dip in clothing donations, as people hold onto their clothes for longer), at the same time, more and more people are seeking help and support from charities. This has prompted the Charities Commission to launch the 'Big Board Talk' initiative, which encourages charity trustees to ask themselves 15 specific questions relating to their charity's strategy, financial health, governance and their use of resources. The Charity Commission is the regulator of English-registered charities, but the questions are pertinent to any charity trustee anywhere in the UK.
The initiative aims to provide 'sound advice that will help trustees take the steps necessary to protect the vital services they offer'. The questions posed range from ‘do you know what impact the economic climate is having on your donors and support for the charity?’ to ‘are you making the best use of your staff and volunteers’? These questions are supported by links to publications issued by the Charities Commission and other organisations which contain further guidance.
One of the questions which we think is of particular relevance is – ‘should you consider the possibility of a formal merger with another charity in the interests of our beneficiaries’. In times of economic pressure, merging can be a good solution. The Charities Team at Morton Fraser is certainly seeing an increased level of activity here, with charities choosing to merge with other similarly minded charities principally in order to streamline resources.
New Philanthropy Capital has just recently published its report on charity mergers (What place for mergers between charities?) and concludes that while not enough mergers take place, of those that do, many can be extremely successful (Cancer Research UK is cited as a good example) . Any merger should of course be driven by a desire to become more efficient (and therefore save money), and to improve services – all ultimately for the benefit of those the charity is seeking to help. Interestingly though, the NPC Report finds that this is often not the principal driver for a merger, citing financial crises, or changes in the way central funding is provided as more common drivers.
Of course, any proposed merger requires careful planning and consideration, and it is likely that the charities in question will need to seek professional advice on the implications of merging (potential pensions liability is increasingly becoming an issue). However, no merger should occur if the costs (financial and otherwise) will outweigh the benefits.
More information on the Big Board Talk initiative can be found at:
http://www.charity-commission.gov.uk/tcc/ccnews29check.asp
New Philanthropy Capital’s report can be accessed at:
http://www.philanthropycapital.org/research/research_reports/improving_charity_sector/mergers.aspx
Morton Fraser’s Charities Team is led by Adrian Bell and has considerable experience in the formation of, and provision of ongoing advice to charities in Scotland including advising on incorporation, mergers and regulatory matters. The team adopts a cross-departmental approach drawing on both corporate/commercial experience and private client trust experience.
