Worst hit was the Baring Foundation, once Britain's ninth-largest grant- making trust, which said soon after the disaster in the bank's Singapore operations struck that it expected its annual income to fall from £l4m to just over £2m. Not only did all but a handful of this money come from the Barings group, the foundation also invested a substantial proportion of its assets in the group's shares: only about £50m out of the total of more than £300m assets was in other investments at the beginning of last year, according to the latest figures.
This looks like bad luck. But experts on charity finance suggest that such a situation looks self-inflicted. "You have really got to say, `Where's the diversification?'," says Paul Palmer, director of the Centre for Charity and Trust Research at London's South Bank University.
Similarly, other charities that held their funds with Barings - presumably on the basis that it was a "safe house" - could be regarded as not taking sufficient care of investments. The Prince's Trust, the youth charity set up by the Prince of Wales that often raises funds through high-profile rock concerts, has featured in most reports as being hard-hit. Early on in the crisis the trust said it could lose the £1bn - representing a seventh of its annual spending - that was frozen in a Barings account.
The charity had put its funds at risk, argues Mr Palmer, by having the money sitting around in cash. It did not seek to reduce the risk by asking Barings to divide the money among five or six other institutions. The chances are the coming weeks will see many charities reviewing their situations. In fact, recent days have seen no fewer than three merchant banks announce that they are looking into their policy of placing clients' cash deposits with the parent banks.
He contrasts the Barings situation with that of the Wellcome Trust, which has moved from owning 100 per cent of the pharmaceuticals company Wellcome to developing a spread of investments in the world's stock markets. A sign of its readiness to look at investments in the appropriate dispassionate manner came when it apparently upset the board of Wellcome by backing the recent Glaxo bid.
Such an approach puts greater demands on the trustees. And Mr Palmer, a charity trustee himself who served as a finance director in the sector before becoming an academic, is keen to see a shake-up of this aspect. In the recent book Rethinking Charity Trusteeship, written with his South Bank colleague Jenny Harrow, he calls for trustees to be more accountable to the public since charity funding is public money, and to be more attentive to the running of the organisations.
Describing most charities as "perpetual oligarchies", where small groups of individuals run them without any real accountability, he is seeking greater regulation of the way trustees operate and more support from the Charity Commission. He also wants the Bank of England guidelines on the running of charities to be updated.
Some help is on the way. The Charity Accounting Review Committee has recently published a final draft of a new statement of recommended practice (Sorp) on the way charities should report annually on the resources entrusted to them and the activities undertaken. This goes with draft accounting regulations published earlier this year under the 1993 Charities Act, and the two documents - designed to stiffen the regulation of larger charities - should be in force for accounting periods beginning at the end of this year.
As Pesh Framjee, head of the charities unit at Binder Hamlyn, the accountancy firm that is part of Arthur Andersen, points out, the proposed Sorp specifically highlights the structure of a charity's investment portfolio as an area of concern. Similarly, he says, the Charity Commissioners have for a while been uneasy about derivatives. They say charities need the explicit power to use them and are certainly against their use as a "profits tool". But just making those running charities think about such issues will not on its own prevent a repeat of the situation caused by the Barings collapse.
"A lot of people will re-examine where they put their money. Some charities put money in local authority deposits," he says, before adding that the financial troubles of California's Orange County suggested that that was not a sure-fire investment. "Things that look safe bets will have to be re-examined."