Trustees reminded of obligation to protect charitable assets

Finance | Ian Allsop | 28 Aug 2008

Trustees reminded of obligation to protect charitable assets
Charity trustees should not rely on a “government safety net” regarding the protection of their assets, according to a leading fund manager.

John Kelly, head of client investment at CCLA, was responding to the news last week that the Charities Aid Foundation (CAF) has written to the Chancellor, Alistair Darling MP, and the Financial Services Authority (FSA), requesting full protection for banked charity funds in the event that a bank fails.

The letter called for the proposal of full compensation for deposits of charity money to be included in the FSA consultation on changes to the Financial Services Compensation Scheme’s compensation limits that will take place in the autumn.

However, Kelly has reminded trustees of their “absolutely overriding obligation” to protect charitable assets.

“They can’t wait and hope for a government safety net that may or may not be extended. Relationships need to be reviewed not in the light of longevity or convenience but with prudence in mind.

“What this means in practice is diversification of risk, avoiding unnecessary exposure to any single bank or institution, and taking particular care with cash deposits.”

Inappropriate restrictions

In the letter, CAF chief executive John Low pointed out that most charities are classed as small businesses and therefore subject to the same restrictions, which seems inappropriate considering the nature of their work.

“Many charitable organisations retain significant funds to ensure their objectives can be met when required. To limit the amount of compensation available to £35,000, or even the proposed higher sum of £50,000, is inadequate.

“Many charities would simply have to close if they were left with such limited funds. The impact of this on the people and causes dependent upon them could be catastrophic.”

Directory: Charities Aid Foundation
Who's Who: Ian Allsop

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