When charities derail

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The accompanying photograph for this blog shows a Great Northern (Govia) train driver, who had to disembark from the train to check the station board and confirm the stopping points for his non-stop train! It reminds us of charities who may have great plans and a timetable of events, but what happens when these plans get derailed?

New train timetables were introduced on 20 May with the intention to provide more trains, more seats and new journey opportunities. Due to the large number of changes involved, Network Rail did not finalise the timetable until much later than planned. This has created chaos for train companies who failed to carry out specialist training for drivers required by the new schedules. It has resulted in misery for passengers and a blame game for all those involved. 

It is often said that charities are also on ‘a journey’ and always want to provide more for their beneficiaries, which is a poetic way of describing their strategy. They set a strategic plan with budgets, milestones, expected income and expenditure. These plans can go array due to unexpected events including planned income not materialising, an increase in demand for a particular charitable service, a contract failing or general volatile economic conditions. Like a passenger on a train, the charity is reliant on others to get them to where they want to go.

A passenger may decide to give up on the train and jump in their car. Equally, a charity may decide it can manage itself and avoid the dependency of others. This might include managing physical property or making investment decisions, or working out the balance to hold in each. How do trustees know if they have sufficient expertise and resources to make these strategic decisions themselves? More often than not they do but they are often held back through a lack of confidence about what they are allowed to do or lack of experience. 

A common issue we see at present is charities that have enjoyed huge growth in assets but cannot work out how to translate this growth into a higher spend on their charitable objects. This is because they are locked into a world of only spending income. While it might seem prudent to save for the future, charity trustees who see their assets grow to new heights on rising stock or property markets, will all too often see this wealth as a sign of success, rather than one of failure. After all, it is their spending that makes them charitable, not their saving.

We have grudgingly become used to unreliable and overcrowded trains in the UK. Charities must not allow the public to take a similar view of them by ensuring their financial governance is robust to weather the highs and lows of their journey, without needing stop half way through to see where they’re going.