When facing a financial crisis, get back to basics

02 November 2011

ISTOCK

What advice would you give to a PCC that has used up its reserves, and is con­sidering borrowing from re­stricted funds in order to make up a shortfall in general funds? Is this ever permissible, and are there any penalties? The Charity Commis­sioners’ website says that restricted funds should be used only for the purpose for which they are given.

Having answered this question in last week’s issue, I received some good information on an emailed news­letter. Churches are not the only organ­isations in the charity sector who are feeling the pinch at present; so advice is being sent out.

 

The Charity Commissioners have a publication, CC12 “Managing finan­cial difficulties and insolvency in Charities”, which can be downloaded from their website. And, apparently, a charity can approach the Commis­sioners for permission to borrow from its restricted funds. Before any borrowing takes place, however, I would suggest some serious financial planning and budgeting, so that you can be assured that repaying the loan is definitely on the cards. Also, do not borrow without addressing the reasons for the problem in the first place. Consider an emergency appeal for funds, to congregation members and parish­ioners, to tide the PCC over while restructuring takes place, so that you don’t need to borrow.

 

There are several suggestions for the review of the financial structure and commitments.

 

Discontinue some activities. I have frequently found churches that con­tinue an activity that is peripheral to their mission but has long since run out of funds and is now running at a deficit. Stop the activity. Makes cuts in non-essential even though desir­able activities. Re-use the old hymn and service books and cut the paper and photocopying bills. Reduce administrator hours. Cut gifts to other charities.

 

Review all maintenance contracts and utility providers for better deals. Switch off the floodlighting, turn down the heating (and let people know why you are doing it), and reduce the lighting in spaces that are not being used. You may wish to hold off on paying some bills, but do negotiate with those to whom you owe the money, as you may in turn be putting their business in jeopardy.

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It is far better to put off ordering even essentials and finding alter­natives while you sort out the prob­lems. In other words, go back to the basics, work out what you can afford, and increase activity again only when income has risen.

 

Work at increasing regular income. How long is it since you last ran a thorough stewardship campaign that fully explained the church finances to members and parishioners? Are you gaining all the Gift Aid that you could; are there Gift Aid envelopes on the seats at every event? Are fees for occasional services and church let­tings realistic? Certainly, with lettings, it is better to not have bookings than be subsidising the work of others when you are going under.

 

Consider selling any assets or even having jumble sales and table sales of all that accumulated junk on the church balcony or storage cupboards. (It was a series of jumble sales that turned round my financially failing church when I became a vicar).

 

Above all, get diocesan help, sup­port, and advice. Archdeacons, area deans, and stewardship advisers will be familiar with the issues, and may be able to alleviate some of the fear, panic, and discouragement that stop both individuals and church councils from taking productive steps.

  

Maggie Durran’s book, Grow your Church’s Income, is published by Canterbury Press.

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