Conflict between the needs of today with the demands of tomorrow
Using Conflict as a Catalyst for Change: month 3
We have now reached the third month in our 2019 guide for trustees: Using Conflict as a Catalyst for Change. This month we are focussing on how you can balance the needs of today with the demands of tomorrow.
The Trustee Dilemma
So, your charity has reserves, fantastic! It gives both the employees and the trustees the comfort that there is a pot of money if it was needed, if funding was lost, or an unexpected expense occurred.
However, the problem is how much is too much and when is it appropriate for you to use them. The conflict of spending now versus saving for the future; meeting the needs of today whilst securing the longevity of the charity.
Solving this problem lies with the board of trustees, those people who decide the strategic direction of the charity. Of course, the CEO and senior management team would be part of the strategic discussions, but the ultimate decision making on any spending of reserves has to lie with the board.
When is spending reserves a positive strategy?
There are plenty of good reasons to spend some of your charity’s reserves. However, to do this you need to be very clear about your reserves policy and the current level of reserves. Have the board agreed and completely thrashed out the reserves – not just rubber stamped six months of expenditure? Only once you properly understand how much you need and why you need it can you decide if you are able to spend any of it.
When spending doesn’t help the charity
There are occasions where it is possible to justify spending reserves, but the long term impact for the charity is detrimental. Examples would be:
- Plugging a gap in the funding to continue to provide services where there is little to no chance of obtaining longer-term funding for the
- Where you would be spending reserves that are invested for the longer term and provide an annual income that is already committed
If your board can’t agree, it’s often worth obtaining an external opinion. Is this strategy a well reasoned, thought out plan? Seek a variety of opinions that can look at the strategy from different perspectives.Read more on Today vs Tomorrow
Next month we will be looking at the conflict between the Board and the CEO.