Fortunately, like businesses, charities are eligible for financial aid announced by the government in March 2020. This should help most charities get through this temporary uncertain phase. Some charities will have to pause their activities but will still remain in existence. Albeit at a lower level of operation. For charities that may be struggling with cash flow, there is guidance from the Charity Commission on the use of reserves. I wanted to make you aware of some guidance that has been issued that affect most charities
Charity Commission guidance to help the charity sector during COVID 19 pandemic.
The Charity Commission guidance highlights the following key areas for charities to consider:
- Financial support announced by the Chancellor for business is also available to all those charities no longer able to operate due to COVID-19. Like Coronavirus Job Retention Scheme. Do feel free to contact me if you would like to know if you need help under any of these schemes. Details of the scheme can be found at this link. https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses
- Reserves, general and designated, held by the charity can be spent to help cope with the charity’s financial position. However, trustees will still need to consider the short, medium and longer term priorities.
- Restricted and permanently endowed funds should only be considered after other options such as the use of reserves are not possible. But you should seek professional advice if you are considering this option and may need Charity Commission’s consent.
- If necessary, postpone or cancel an AGM or other critical meetings or hold video or telephone meetings (provided allowed by your constitution). This is acceptable given the current circumstances. However, you should record this and still try to get the annual report to the Charity Commission on time.
- Trustees should continue to file serious incident reports in accordance with the guidelines which include matters such as the charity no longer being able to function, theft, fire etc.
Guidance for additional disclosures required in trustees report
Given the current unprecedented time and economic uncertainties the SORP making body and Financial Reporting Council have issued new guidance to help trustees and independent examiners make necessary additional disclosures in the report and accounts as below.
Risk assessment in trustees report
The trustees should include a narrative in the report assessing the risks and impact of COVID 19 on fundraising, its charitable activities, staff etc. This assessment should be accompanied by the steps taken by trustees to mitigate those risks.
Going Concern assessment in trustees report
When assessing their charity’s ability to continue to adopt the going concern basis of accounting, trustees should consider all the available information about the future at the date they approve the accounts. In particular, giving consideration to information from budgets and forecasts for income, expenditure and cash-flows. Attention should be given to available unrestricted reserves and credit facilities (such as overdrafts). Additionally, consider any other forms of financial assistance available to the charity.
If there exists ‘material uncertainties’ to operate as going concern, these should be disclosed in the report and accounts. ‘Material uncertainties’ refers to uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. In other words, if Trustees identify possible events or scenarios (other than those with a remote probability of occurring) that could lead to Charity ceasing to operate or function, then these should be disclosed. If the trustees assessment remains that the charity remains a going concern, the Trustees should disclose their reasons for doing so which could include Charity’s access to government support and other measures put in place by the Trustees to mitigate these uncertainties.
Here are the links if you would like to know more on the above.
Serious incident reporting
COVID 19 pandemic will have had a direct or indirect impact on the activities of you charity. It is the responsibility of the charity trustees to decide whether an incident is significant. And whether it should be reported to Charity Commission under Serious Incident Reporting. If they decide that the impact of COVID 19 is a serious incident than it must be reported. This serious incident should also be disclosed in the trustees report. See further guidance from Charity Commission as below.
No doubt, due to the circumstances charities find themselves in, fundraising is more important than ever before. And so, avoiding unnecessary expenditure and staying on top of cash flow has become as important if not more.
If there is anything you would like to discuss please feel free to contact us.