Guidance

Financial difficulties in charities

Protect your charity against financial difficulties and know what to do if the worst happens.

How to identify financial problems

As trustees, you have a legal duty to look after your charity’s money and other assets. You need to understand and keep track of your charity’s income and spending to spot any issues as early as possible.

To do this, you need trustees with the right skills and experience to understand financial information, identify and manage risks. Hold regular trustee meetings to keep track of income and spending against the budget. Put internal financial controls in place to make sure all spending is properly authorised.

Use the Charity Commission’s financial controls checklist to make sure your charity has the right controls over its money.

What to do if your charity has financial difficulties

If your charity is a company or charitable incorporated organisation, it could become insolvent and face administration or closure if it can’t pay its debts. If your charity is an unincorporated association or trust, you and the other trustees could be liable for its debts.

This means that if your charity won’t be able to pay its debts, either with its income or with its assets, you need to act quickly. Take professional advice as early as possible – this will help you work out what action to take. For example:

  • developing alternative sources of funding or launching an emergency appeal
  • borrowing money from banks, members or stakeholders
  • reducing actual or planned spending
  • stopping doing some of your charity’s activities

Read the commission’s detailed guidance for more information on managing financial difficulties.

If your charity needs to close

Tell the commission if your charity closes so it can be removed from the register of charities.

Published 23 May 2013