In 2008, at the start of the financial crisis, it was revealed that the venerable cat charity Cats Protection had potentially lost £11.4 million deposited in Icelandic banks that had gone bust.
As the total amount of money available to Cats Protection was about £34 million, the potential loss represented about one third of all cash assets, as I understand it. It must have been a very worrying time for management because most donations come from legacies in Wills and there is a loyal following which could have been tested. They could lose the trust of donors. There was talk of having to shelve some planned facilities.
At the time there was no news as to what happened. Did Cats Protection manage to recover the money?
A report online at charitystar.org informs me that between 78 and 86% of the money was recovered.
It was expected that in May 2012, £8.2 million would be recovered. I feel better having read that. However, it is also bad news because Cats Protection appear to have lost £3.2 million. This represents about 10% of cash assets, a very substantial proportion.
If the two stories are connected it is shame because the reason why Cats Protection deposited such a large percentage of funds in Icelandic banks was because the returns (the interest) was very attractive.
However, when interest rates are attractive and the banks are foreign some caution is required and it appears that this was not the case.
Donations from people to charities should be invested in highly secure investments and deposit accounts which are absolutely solid.
There is never a justification for taking even the slightest risk with donated funds.
Note: I have nothing but the utmost respect for Cats Protection. I am just reporting cat news. However, within the organisation I am bound to respect the volunteers at the front line more than senior management. It is just my preference.