Considering some recent examples of failure (and the causes) may provide a motivation for you to draw-up a register of risks. All the examples below are of charities that closed.
Older Persons Lunch Club | An employee took the charity to an industrial tribunal and won. Due to personality conflicts the trustees did not want to pay the compensation awarded and decided to close the club out of spite. The main funder – social services – heard about the imminent closure and withheld a quarter’s funding.
This resulted in insolvency. The underlying problems were an inexperienced director who passed too much on to the trustee group – they had little knowledge of the modern world. Employee issues were not dealt with over several years.
Counselling Centre | The organisation was run as a co-op with workers reporting to trustees on a rotational basis. Trustees did not check that work which they were told was done, was actually done. There was a lack of written reports to trustees.
Advice Centre | The Centre’s staff were too busy to monitor the work and so prove that it was being done and prove to the funder what was being achieved. There was also over-dependence on one funder.
Community Centre | There was a lack of financial controls and financial reporting. There was a failure to understand the overhead costs of the Centre. Additionally there was theft from the bar – free drinks to friends – and committee infighting.
Womens’ Refuge | There was a breakdown in communication between staff and trustees. No financial reports were provided to trustees. After many months the trustees felt they could not fulfil their responsibilities and appointed a receiver (someone who winds up an organisation). The organisation was probably solvent, but the trustees did not know this and it became insolvent when the receiver was appointed as the funders could then withhold funding.
Community Nursery | The Nursery expanded beyond the manager’s ability, taking on a range of projects that he could not handle.
There was poor rostering of staff, with too high a ratio of staff to children on many days. People were employed because they needed the money, rather than on the basis of the organisation’s needs.
There were no agendas or written reports for the trustees’ meetings and the role of the director was not defined or monitored. The payroll bureau was a contractor for the local authority, it failed to provide adequate information and a tax liability built up.
There was a minor fraud, reflecting poor financial controls. Now one of the poorest parts of the UK does not have a nursery.
Training Centre for Young People | The Centre failed to reach the outputs agreed in a contract with a government agency and did not provide written progress reports. As a result the group had cashflow problems and did not pay VAT and PAYE for about a year.
Following an audit by the funder action was taken to reclaim funds advanced through the funding contract. The bank provided records to the Inland Revenue and Custom and Excise (VAT) who were able to prosecute. Two company directors lost their houses.
The people involved were well intentioned, but naive and employed too many members of the same family.
Last updated: Mon, Mar 31 2008 - 03:53:04 PM
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