The rainy day has come for charities

During these unusual times most charities’ immediate response is how to support the people they are there to help.  Then comes the harder question of how do you fund the work if cash flow has suddenly dried up. I do not have the answer, but trustees have to carefully consider what they can do, and in some cases what they can’t do. The charity sector covers a wide area of activity from looking after a village hall to caring for vulnerable children or adults. By nature, the sector will want to help in this time of crisis, but you still need to be careful that what you want to do is within your charitable objectives and within any other restriction. You can make an application to change objectives but consider the longer-term impact of doing this on your existing beneficiaries. Also consider whether there are other charities in the area better placed to respond than you.

If you are unable to continue with your activities you may want to consider furloughing your staff and apply to HMRC for a grant to cover 80% of individual salaries up to £2,500 per month. However, if over half your funding is government funding then this is not possible. Also, if someone is on furlough they cannot come back to you as a volunteer.

The Charity Commission has, for a number of years, talked about charities having a reserves policy. Reserves are there for a rainy day, unexpected events and this is definitely one of those. They are also there to help sustainability. Trustees need to relook at priorities and amend their financial plans. What reserves can be allocated now to help get through this crisis. Where you have restricted reserves can you go back to the donor and ask for the restriction to be lifted? Make sure you have evidence that the restriction has been lifted.

It is important during these times to consider the safety of your staff, particularly those still working on the frontline. Do they have protective clothing, have you updated your procedures and notified them to the staff. Keep in touch with employees as this is a difficult time for them as well.

As trustees you should be talking together more frequently. The situation is changing daily and actions will need to be made quickly. Ensure minutes of all decisions are comprehensive and state how the meeting was held. In these unprecedented times virtual or phone meetings can be held even if these are not allowed by  your governing document. The responsibility lies with the Trustees and it can’t be delegated.

In summary, it is natural that you should want to help people caught up in this pandemic.  But, please:

• Do not act outside of your charity’s objectives;
• Consider the long-term effect on the charity and your current beneficiaries if you seek to de-restrict restricted funds;
• Seek all Government help that is available. Details of this help can be found on our website or on the Charity Commission website.

Above all, please stay safe.

If you would like to discuss any of the topics explored in this article, contact Susan Robinson, Accounts and Audit Partner, and Head of Charities and Not for Profit.