Case Study: Crossroads Care

Crossroads Care Central London was part of the Carer’s Trust national organisation, providing respite care for carers looking after sick loved ones.

They, like many Crossroads organisations, relied heavily on income from local government who are obliged to provide relief cover for certain parts of the community.

And like many local government offices the years 2010-2014 saw enormous pressure for budget cuts despite demand rising. This meant an effective reduction in income per client/hour.

Overhead demands for any business operating in London are much greater than elsewhere in the country as costs of living are much higher and have not seen any downward trends over the recessionary period. This resulted in the charity operating on very low gross margins.

Similar to many charities, staff were incredibly loyal and rarely left after joining. This meant the financial impact of a wave of redundancies would be significant and any streamlining would be difficult to implement and achieve.

We were conducted at a time when the charity was concerned about its long term future and we met with them to review the position. Our review of the financials highlighted the charity was currently insolvent and that every day of continued operation would see the charity incur further losses, putting the trustees at unnecessary personal risk.

Our advice had to be to close down the charity with immediate effect unless a miracle could be achieved with the local government departments. Immediate closure was far from desirable given the impact it would have on local carers who depended on the charity, but it seemed the most likely outcome at the time. A meeting rapidly took place between the chief executive of the charity, this firm and the government departments. After a very long and hard day, we negotiated a plan with them that saw the charity able to continue for a short period of time to effect a handover of care to another organisation. Most importantly for the trustees though was that settlement was reached at a level that meant no personal liability would be incurred by the trustees during that period.

Ultimately, it was not possible to save the charitable organisation and it went into liquidation. Without seeking our advice though the charity trustees would have incurred personal liability and run the risk of leaving no cover for their clients.