Charity Governance and Financial Support During the Coronavirus Pandemic

The three weeks to Easter saw a flurry of activity as charities cancelled events, furloughed employees, secured their premises and waited for a Government announcement of financial support. The announcement of a £750 million package of support eventually came on 8 April, just before the long weekend. In the weeks since Easter, charities have continued to make urgent decisions over service provision, fundraising and sustainability and started to confirm whether they are eligible for available support measures.

What Has Changed?

Over the weekend, Government departments released some of their priorities for distributing their share of the £750 million funding package, announced by Chancellor Rishi Sunak in April.

• Vulnerable families - the Department for Education has over £26 million for charities who work with vulnerable families, including disabled children and children leaving care.
• Domestic abuse - the Ministry of Justice has £25 million for charities working with survivors of domestic violence and sexual abuse. The Home Office will distribute just under £4 million to local domestic abuse services and organisations fighting modern slavery and £7.8 million for charities helping children at risk of sexual abuse or criminal exploitation.
• Housing - the Department for Housing, Communities and Local Government has £10 million for safe accommodation services.

Small Business Grants

The Government has announced a change to the rules on emergency grants for small businesses, which would make some grants available to charities for the first time. Local councils are to have the discretion to make grants of up to £25,000 to small charities which own properties and would normally meet the criteria for small business rates relief. Previously, charities which had claimed the mandatory relief from business rates for charities were not eligible.

Coronavirus Business Interruption Loan Scheme

Following lobbying by the Charity Tax group, the eligibility criteria for the Coronavirus Business Interruption Loan Scheme were updated at the end of last week to remove the trading requirement which prevented many charities from applying. The requirement that applicants must generate more than half of their income from trading activities has been removed for registered charities.

Charity Commission Guidance For Charities in Financial Difficulty

The changes mentioned above mean more charities can apply for financial support but many will continue to face financial difficulty.

As sector bodies have highlighted over recent weeks in campaigns such as #EveryDayCounts, the coronavirus crisis has left many charities financially vulnerable. Some charities are on the brink of collapse due to insolvency, some face abandoning significant services to beneficiaries to survive for the longer term, and others can manage through the immediate crisis but will need support soon if they are to avoid similar difficulties.

The Charity Commission has published helpful guidance to help charities, especially smaller charities, manage these challenges.

The guidance begins by emphasising that charity trustees must make decisions in the best interests of the charity and outlining factors for trustees to consider. While recognising that their trustees face difficult decisions and there will often be no 'obvious 'right' decision',  the guidance emphasises that trustees will generally be protected from personal liability provided they have “carefully applied [their] skills and experience to decisions and taken advice when needed”.

The guidance distils the Commission's wider guidance into a four step process:

• Review the charity’s finances and operations - trustees should form an accurate picture of the charity’s financial position and cash-flow so that potential shortfalls can be identified in advance - and review the charity's financial position frequently.
• Reduce costs where possible - this may involve internal changes (eg restructuring or ending services and re-allocating staff, reducing non-essential spending or using technology to reduce costs) and external changes (eg collaboration with other charities). Trustees should consider whether any of the charity’s staff can be furloughed.
• Maintain/increase income - protecting income will be critical. Trustees should:
• talk to your funders at an early stage
• consider emergency appeals and other fundraising options
• review the use of designated funds and general reserves
• consider using permanent endowment assets, with Charity Commission authorisation where appropriate
• Worst case scenario planning - considering all options including restructuring, merger and closure - and seeking professional advice where appropriate.

The guidance cross refers to existing Commission guidance, signposts sources of support, and highlights the need for professional advice.

For specialist legal advice on your charity's response to the crisis, please contact Shivaji Shiva in our Charities team on 07788 313298, or complete the form below.