Covid-19 impact on charity finances


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The Charity Commission has published guidance for charities facing financial difficulties because of the Covid-19 outbreak. This summarises the Charity Commission's more detailed general guidance on managing a charity's finance, and provides practical tips and information in the context of dealing with Covid-19.

Given the current uncertain times, situations may evolve and escalate quickly. Therefore, even if there is no immediate financial concern for a charity, it would still be advisable to consider the guidance and prepare robust stress testing and recovery plans. Should the worst happen then a charity would need to act quickly and early in order to secure a partner organisation or implement a rescue plan. Potential partner organisations would of course need to carry out effective due diligence, and consider the benefit to their own charity and impact on their beneficiaries before they commit to any arrangements. However, in the current climate they may need to act faster than they would otherwise do and so the earlier any steps can be taken the better.

The guidance usefully reminds charities that their number one consideration should be what is in the best interests of the charity. In considering this point there are a number of other factors that could be taken into account, including the balance between maintaining current services in order to help the largest number of beneficiaries now or scaling back services to secure a longer term future offering. There are no easy answers to these types of questions, and trustees should try to take decisions that are in the best interest of the charity bearing in mind what its ultimate purpose is.

More specifically, the guidance recommends that charities consider their current financial situation in order to identify the urgency of any actions needed. Charities should then look at options for minimising costs and protecting or even increasing existing incomes. Of course the Government has announced a generous package of support for businesses, and charities should consider how they can access this. The guidance provides other practical examples of steps that charities can take to minimise costs.

If, unfortunately, a charity is not able to continue to operate then preparations need to be made for an orderly closure and to ensure that the charity's best interests, and importantly its beneficiaries, are protected. Again, the earlier these preparations can be started the more successful they are likely to be. Again therefore we would reiterate that all charities should review the guidance and their own stress testing and recovery plans.

To view the Charity Commission guidance, please click here.
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