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COVID-19 update for charities 30 April

COVID-19 update for charities

As the lockdown continues, it is likely that those charities that employ staff have looked at the Government’s Coronavirus Job Retention Scheme and for those experiencing a drop in income revised financial forecasts will have been made. Some charities will be using their reserves to maintain services, as best as possible during social distancing. All charities will have improved their digital skills, by necessity.

In this week’s update, we look at the latest on the following:

Furloughing staff
Charity Commission guidance to charities on managing finances
CBILS
Resilient governance
Coming out of lockdown

Furloughing staff

The Coronavirus Job Retention Scheme has been updated since our briefing on the subject a few days ago. The main changes include:

The scheme opened to claims on 20 April and will continue until 30 June;
The scheme is available to those employees on the payroll at 19 March 2020 (a change from the original date of 28 February); and
The minimum length of furlough is three weeks.

It is somewhat unclear as to whether staff can undertake work for the charity while furloughed. The guidance says that a furloughed staff member can volunteer for the organisation so long as she or he is not providing a service or generating income for the charity. However, Treasury guidance states that a furloughed individual must ‘cease all work in relation to employment…’ Trustees should investigate the scheme further before agreeing a course of action for their staff.

For those wishing to take advantage of the scheme, it should be noted that when applying for the grant, the portal is open for only a limited time to complete your application. It is therefore important to have all your paperwork to hand before starting the process. It is not possible to save your application halfway through to complete at a later date.

To keep up to date with future changes, go here.

It is currently unclear how long the scheme will be available, but that may become clearer as and when the Government articulates its approach to either relaxing or lifting the lockdown.

Charity Commission guidance

The Commission regularly updates its guidance for charities during the lockdown, and it is worth signing up to receive their updates.

The most recent update (23 April) focuses on how charities can manage their finances during this time. It proposes three steps for charity trustees:

Understand your current financial situation;
Consider options for minimising costs and protecting and increasing income; and
Regularly review operations and finances.

As noted in previous briefings, it is likely that trustees are meeting more regularly via tele- or videoconferencing facilities. Technological unfamiliarity notwithstanding, it should be made clear to those attending such meetings that they are indeed trustee meetings and, as such, proper records are being kept of what was discussed and decided. The Commission regards a significant hit to a charity’s income to be a reportable serious incident and trustees should bear that guidance in mind when considering the best way forward.

Meanwhile, the Charities SORP has also been producing briefings about reporting COVID-19 related financial information, including adding a statement to the annual report and accounts. Their briefing can be found here. There is also guidance from the Financial Reporting Council to help directors assess the level of going concern of their charity.

Where trustees have decided that there is no other option but to wind up, the Commission’s guidance provides more information about options and actions to take. It also details the information it requires from trustees.

The decision to wind up is not an easy one, and expert guidance should be sought to ensure the right actions are taken at the right time – not only for the benefit of the charity, its clients, staff, volunteers and supporters, but also for the impact it can have on trustees.

s ever, be diligent in your decision-making and demonstrate that trustees made decisions within a reasonable framework, in the best interests of the charity and acted in good faith.

CBILS

CBILS, the Coronavirus Business Interruption Loan Scheme, has amended its lending criteria, making it a more viable option for charities than previously permitted.

Charities are in principle eligible to benefit from the scheme, if they satisfy the other eligibility criteria. Now, in updated guidance, registered charities are exempt from the requirement that 50% of the applicant’s income must be derived from its trading activity. That guidance can be found here.

Resilient governance

We briefly touched above on the issue of trustee meetings delivered virtually, and this is an issue that deserves a little further consideration here.

To cope with the changing situation, it may be that trustees need to amend their standing orders, bye-laws, schemes of delegation, or terms of reference – to allow for videoconferencing, for example, or to provide the executive team with greater flexibility to take action at short notice. As these aspects of the governance architecture are usually supplemental to the governing document and represent the internal administration of a charity, it should not be unduly difficult to amend them to provide greater resilience.

If you are considering changing these documents, ensure any changes are completed in accordance with the governing document and relevant legislation. Remember, ‘regulated alterations’ still require Charity Commission approval. However, the governance framework should be a business enabler, and therefore if anything is preventing trustees from making timely decisions action should be taken to remove the obstacle, where possible.

While the pandemic may have resulted in boards working in significantly different ways, it should be borne in mind that none of the legal responsibilities of trustees have been waived.

Coming out of lockdown

At a time when it is unclear how long social distancing and the lockdown will continue it is difficult to think about the steps required to prepare for returning to a different form of ‘business as usual’.

Nonetheless, the current situation will, eventually, pass and as such trustees might want to dedicate some time to thinking about what the ‘new normal’ will look like for their charity, now, in the next six months, 12 months and beyond.

Some questions worth considering include:

How would the charity cope with a ‘phased return’ of some staff?
What was done differently during ‘lockdown’ that the charity would like to continue? If so, how could the charity prepare the ground for a smooth transition to new ways of working post-lockdown?
Has the pandemic brought to the fore the realisation that existing services and projects do not deliver a sufficient impact for the amount of resources invested? If so, could that service be dropped or replaced by something that delivers a bigger return for clients?
Can the charity continue to support the current staffing levels? Are different skills and expertise required for its future success?
If the charity does expect to be operating differently in the future, what income streams are there available to support the new programmes? Are there foundations that you could approach?
Could the charity derive greater benefit for those it seeks to support by collaborating or merging with another?

As a politician once said: “Never let a good crisis go to waste”. For some charities and their trustees, the ongoing lockdown presents an opportunity for reflection on what the organisation currently does and whether it could have a greater impact if it chose to work in a different way. After all, how many of us would have become so proficient at videoconferencing if it hadn’t been for the lockdown?

While no one wished for the current situation, many trustees will be surprised and reassured by the tenacity, creativity and commitment of their staff and volunteers. A new admiration and respect may have been forged and innovative ideas originating from unexpected sources to solve problems within the charity and to deliver for the communities the organisation serves.

For those people whose time is not totally consumed by firefighting – and it is appreciated that all trustees will be doing a certain amount of firefighting – the space to consider, reflect and investigate new ways of working could make the difference between those charities that come out of the pandemic stronger, more able to deliver for beneficiaries, and those that close up shop – in the immediate or longer term.