Can a charity bank its profits for the future

rincelex

I work for a charity (pre-school) which usually only makes less than £5,000 a year in profit which ends up being used on equipment and resources. This year because of various issues we are in line for a £10,000 profit.

We desperately need a new building with an estimated cost of £40-£50,000. We have around £10,000 in savings and I wanted to add another £5 or £6,000 of the profit to this. I was told by our committee that we cannot have any savings like this we are only allowed to have enough in savings to pay out redundancies if they are ever needed.

Is what I am being told true in which case how are we ever going to get a new building if we are not allowed to save for it, there is no way that we can fundraise £50,000 in one year.

jobbingmusician

You are being fed piles of rubbish, if that's really what they are telling you! However, I assume that it is a garbled version of the following scenario.

Charities are supposed to have, and publish, a reserves policy. This will normally state (or at least, one common form of this is) that their reserves are intended to be a safeguard against the need for redundancy payments, and many policies will state that the aim of the charity is to have x months' operating costs put aside as reserves for this possibility. You are 'allowed' to have as much reserves as you like, but there is a downside to having large reserves - funders who give grants won't give any money to a charity who they believe is sitting on a large pot of reserves.

You state that there is 'no way that we can fundraise £50,000 in one year'. I would disagree with this. There are funders out there who will give for large capital projects. Indeed, many funders PREFER to give money towards a building (which should last for ages) rather than for operating costs (where, once the money is spent on things such as salaries, it's gone with no realistic possibility of continuing the service). It may also be the case that the senior staff at your charity are busy demonstrating to the local authority all the benefits the pre-school charity brings to the local community, and trying to persuade THEM to re-house you (that's one of the things I'd be doing, anyway!)

Hope this reassures you a bit......

WestonDave

There's nothing in charity law preventing you building reserves for a project like a big building but its possible that funding criteria for say the local council means that if you have more reserves you miss out on a grant that you normally get. It may be that having a "designated" fund (don't make it a restricted fund!) for a new building project rather than just a general fund balance may enable you to square the two competing demands if the funder is able to see that the funds held have been set aside for a specific purpose rather than just hogging funds.

rincelex

Thank you that makes me feel slightly better.

Unfortunately they have been applying for grants for a new building for the last four years and so far nothing has been given you are right in that they have this money ringfenced as operating costs in case they go belly up.

The problem they have is that they either save some money quickly in order to get a new building and lose out on the grants as you say or they save nothing, get no grant and in a few years time the building is condemned and the pre-school shuts down.

Sorry to sound so dire but it did come close to this a year ago when they thought that a building surveyor was going to close them down but fortunately they were able to carry out some repairs (at great cost) and ensure the buildings life for a few more years but probably only another five

This will be their fifth year now of applying for grants for a new building. Its so disheartening when you get nowhere after all this time.

Savvy_Sue

I'd suggest getting some help with fundraising ...

Does your local voluntary service council (google volunteer plus your area!) run fundraising courses? do they have access to any of the funding directories where you can make sure you are applying to the right places?

Robin9

Rinclex - There is grant money out there but the grant making bodies are over subscribed, often 4 or 5 times. I have been able to find funding for my Church Hall but it’s taken a lot of hard work Research the potential funders making sure your and their time is not wasted. Finding a funder just waiting to write you a cheque is very rare indeed but it has happened to me. Keep your eyes and ears open to see who has funded similar organisations. Some will require match funding, generally in cash but many are looking towards volunteer hours. In the mean time keep on top of your costs – swop utility suppliers, insurers – look at your hire charges if you hire the room out.

Of course you can accumulate funds and nominate them for your new building. As has been said you must have a reserve to meet wages etc should the worst happen.

Keep persevering. Raising £40,000 will not be easy. It’s surprising how the £1,000 here and £5,000 there will add up.

Savvy_Sue

Another possibility: assuming the pre-school own this building, would you be better off selling up and moving somewhere else? Is the site potentially useful for something else as well? Is there another organisation who also need new premises you could partner with? It really is worth thinking all around the box as well as inside and outside.

paddyrg

The freehold may still be valuable even if the building is condemned - can you look at a portakabin on site/nearby/on a school's land/a wellwisher's end-of-garden/wherever? Then demolish and rehouse the portakabin there?

Robin9

Many of the grants are local to the need - which city are you in? I will try and identify a couple of possible sources for you.

rincelex

Sorry for the absence and thank you for your support. We are in Cambridgeshire, we are in a small village which unfortunately keeps being told its an afluent village and sometimes we are not even eligible to apply for some grants.

We own our building but the land is the schools which we rent, we have looked at other options in the past such as moving but it would mean an increase in our expenditure and probably moving further away than most of our current attending families would want.

One of our committee members deals solely with our fundraising but by her own admission is no expert. We are a voluntary committee and at times its almost impossible to get people to volunteer let alone find someone with fundraising expertise.

Savvy_Sue

Google Cambridgeshire VCS, and contact the most appropriate group for your area. Ask them if they have a space for advertising for volunteer roles, and advertise for a fundraiser. Ask about the grant making directories. Talk to the school: presumably having the pre-school is a selling point for them too. And so on.