Monday 20 October 2008

Cats Protection and lost millions

Is it fair to criticize Cats Protection and the lost millions (or to be more accurate the potential lost millions as they haven't actually been lost yet)?

Cat Protection may lose £11.2 million of donations because they put the money on deposit into an Icelandic bank that went bust. In their statement they say that the Icelandic bank concerned Kaupthing Singer and Friedlander, checked out on credit rantings checks.

I don't think it really fair to criticize for choosing an Icelandic bank. What I would criticize the charity for is that it seems that all the eggs (more or less) were put into one basket. That created a risk. Also the Iceland banks were offering high interest rates. With high interest comes higher risk. If the charity wanted to invest in high interest accounts they should have spread the investment over at least 5 banks perhaps more.

When personal, individual donations are concerned (some donations from relatively poor people no doubt) the investment of funds before expenditure should be risk free. The bottom line objective of Cats Protection is to give away money for the benefit of cats, not to invest it and make money from money.

So, Cat Protection risked albeit to a lowish level at the time (in hindsight it was a high risk) peoples' money. The chief executive explains this away rather casually, I think. They will have to put to stop to some major projects to the detriment of cats. 11.2 million is a massive amount of money in terms of cat welfare in the UK, which could all be thrown away (this may work out OK though - we all hope it does).

Risk is the problem. I don't think one can take any risks with gifts from the public. And I think the chief executive should apologize. OK we never really realized that banks can go bust but we did have warning signs with Northern Rock. That gave the Cats Protection board plenty of time to rethink where to deposit money well before the Icelandic melt down. There may be a problem to, with holding on to too much money. I think that it should be spent as quickly as possible as that is what it is given for.

Donations should be spent quickly or put into the safest investment possible. Nothing else is permissible with gifts from a supportive public some of whom are probably now fed up with Cat Protection. They might suffer a fall in donations as a result. Although I hope not as Cats Protection do a great job generally.

Cats Protection and lost millions to Home page

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