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COVID-19 update for charities 17 April

The COVID-19 pandemic is having a significant impact on charity finances. During these uncertain times, many trustees will be thinking about the cash required to enable a charity to maintain services while seeing a rise in demand.

Delivering services differently and remotely, furloughing staff, lost income and what the future will look like after the pandemic are all likely to be high on the list of trustees’ considerations. Trustees should also be thinking about the spectre of insolvency, and the personal impact on the clients and staff of the charity winding up.

In the first of two updates on charity finances, we look at the latest on the following:

The charity emergency rescue package
Resilience and Recovery Loan Fund
Coronavirus Job Retention Scheme

It is worth remembering that trustees have a duty to act in the best interests of furthering the charitable objects of the organisation. Placing this at the heart of discussions should help boards to focus on what needs to be done and when to make difficult decisions.

The charity emergency rescue package

On 8 April, the Government announced a £750 million rescue package for the sector.

Of that money, some £360 million will go to charities delivering frontline services (with £200 million dedicated to hospices and charities such as Citizens Advice), with another £370 million aimed at smaller charities funded by the National Lottery Community Fund also contributing to the pandemic efforts. The proposed ‘Big Night In’ hosted by BBC One and co-organised with Children in Need and Comic Relief is forecast to generate further funds matched by the Government. The Government has also donated a further £20 million to the National Emergencies Trust appeal.

For those charities that do not fall within the remits of the above schemes, other programmes may offer some relief. Other initiatives are not designed specifically for charities, and as such they may not be appropriate. Each charity will need to undertake their own research as to what grants and funds they might be able to access. A couple of schemes are outlined briefly below.

Resilience and Recovery Loan Fund

On 9 April, Big Society Capital (BSC) and the Social Investment Business (SIB) announced the launch of a new Resilience and Recovery Loan Fund for charities and social enterprises affected by the pandemic.

The Fund is being run by with an initial investment of £25 million and support from BSC. Social Investment Business is the lender, and will work on delivery in the first instance with three experienced social investor partners – Big Issue Invest, Charity Bank and Social and Sustainable Capital. Other delivery partners may be added in future.

Unlike initial loan schemes, the loans do not require a personal guarantee. Applications opened mid-April with funds likely to be distributed from May 2020.

Coronavirus Job Retention Scheme

For those charities with staff, the costs associated with employees are likely to present a sizable proportion of fixed costs. The Coronavirus Job Retention Scheme, also known as the furloughing scheme, might therefore be financially attractive to many charities.

Unveiled initially at the end of March, and updated subsequently in early April with further information on eligibility, payroll date and pension contributions, the scheme is open to all UK employers for a minimum of three months starting March 2020, but the resources may not be available to organisations until the end of April. An online process offers organisations the opportunity for the government to pay 80% of an employee’s salary, up to a maximum of £2,500 per month (plus Employer National Insurance contributions and automatic enrolment pension contributions). The employer can decide whether to pay the outstanding 20% so the staff member does not suffer a loss in income. Those wishing to take advantage of the scheme will have to follow HR legislation, and that may be challenging for some charities.

There are other drawbacks for charities wishing to access the scheme, most prominently the issue of whether furloughed charity staff can act as volunteers for the same charity. The guidance from government is unclear, but general opinion is that furloughed staff should not volunteer for their charity and if the staff member is undertaking work for the charity then they should be paid as such. The issue of training may be clearer, as this is possible if the employee receives the National Minimum Wage.

This is a complex area and there’s lots of information out there, so it is worth investing a little time to do your own research before deciding on whether the scheme is right for your charity.