In such unprecedented times, the responsibilities of Trustees are amplified and so too is the pressure on those at the helm to make ‘agreeable’ decisions whilst taking into consideration various financial, operational and regulatory issues.
The sector has, long before the Coronavirus, proven itself to be resilient and to be capable of responding to the various challenges thrown at it; but this is a challenge not seen before or anticipated.
Many, as a result of the crisis, will need to take steps to safeguard their organisation and to continue to fulfil their charitable objectives, all whilst protecting those individuals associated with the charity.
The Charity Commission have confirmed that its approach to regulation will be flexible and pragmatic – but that isn’t to say that governance should be allowed to slip.
The circumstances we now face have the potential to do wonders for the sector in the long-term, in respect of collaboration for example, but in the short-term the Coronavirus pandemic also has the potential to trip organisations up when they least expect it.
As with other businesses navigating the crisis, charities can access some of the Government-backed support on offer but should also consider how they can be resourceful outside of this.
Charity finances during COVID-19
We understand that many charities are currently concerned about their financial position. In order to begin to deal with concerns, Trustees need to revisit previous financial planning and make changes to accommodate the current circumstances.
Just the same as any other business, charities need to consider the necessity of spends and activities; prioritising those that are vital to the running of the organisation and managing cash flow. When determining the financial resources that you have available, it’s worth reviewing current ‘reserve’ levels and how long these might last, in addition to other funds or assets and any associated limits on their use.
Decisions impacting upon financial matters should be taken collectively and recorded, where possible, particularly if they involve utilising ringfenced funds or reducing investment levels. It may also be worth seeking professional advice from, for example, your accountant.
On 8 April, the Chancellor announced funding for those frontline and smaller charities, to the tune of £750 million. Read more about this here.
Employers, whether charitable or non-charitable, can apply to HMRC for a grant to cover up to 80% of the wages of their workforce who remain on payroll but are temporarily not working (‘furloughed’) during the coronavirus outbreak. Any employer in the country will be eligible for the scheme. Read more about this here.
Guidance on AGMs during the Coronavirus outbreak
The disruption caused by the COVID-19 outbreak may mean some charities have little choice but to cancel or postpone AGMs and other critical meetings. If as Trustees, you decide it is necessary to do so, you should record this decision to demonstrate good governance of your charity.
It may become difficult for you to finalise your annual reports and accounts if it has not been feasible to hold your AGM. Wherever possible, annual reports should be filed on time. However, where the situation prevents this, charities can liaise with the Charity Commission about this.
Updated Charities SORP guidance
In response to the current disruption, the Charities SORP-making body has issued new guidelines intended to help Trustees understand the potential ramifications of COVID-19 on its annual accounts.
Recognising the likely impact of the restrictions imposed by the Government to limit the spread of the virus, the regulator suggests that when preparing accounts yet to be approved, Trustees “should consider whether information needs to be included to explain the impact of the COVID-19 situation on their charity”. It also flagged that there “could be changes to the financial statements needed as a result of the COVID-19 situation and it is important that trustees understand and consider these”.
The guidance, which is advisory only, covers the implications for the trustees’ annual report, going concern and the alternative basis to going concern when preparing accounts under the SORP. The regulator also recommended trustees consider the FRC’s guidance to company directors when looking at going concern.
Partner, Toni Hunter said “As auditors and Independent Examiners this is going to be a difficult conversation to have with our charity clients, who do fantastic work and will be severely hampered by a lack of donations, falling investment returns and perhaps a greater need for their services, alongside working remotely and the potential for key team members to be unavailable due to self-isolation.”
How can George Hay help?
We know that the coming weeks and months are going to be challenging and we know that many charities are currently grappling with big decisions, big questions and big concerns.
Currently, our priority is to support Trustees and key management, assist you with planning, advise you on any available opportunities to pursue diversification of income and to help you to accommodate temporary changes in guidance (e.g. SORP). In all our work with the Third sector, our proactive and practical advice is designed to help you find and, under challenging circumstances, maintain financial stability whilst also achieving your core objectives.
To discuss your circumstances with one of the team, in more detail, contact us today.