COVID-19: Key information for charities

Research firm Legacy Foresight is predicting that charities’ income from legacies could fall by as much as 27 per cent this year, as a result of the coronavirus crisis.

We have put together some key information for you to think about, and the charity sector team at Debenhams Ottaway, would be very happy to talk to you to see if we can help.

1. Understand how much cash the charity has

Understanding how much cash the charity has is very important for the ongoing success of your charity. Three areas you will need to be clear about are

• What income is guaranteed to be received?
• How long this income will last?
• Which non-urgent spending plans can you put on hold for the future?

As things are rapidly changing, it is more important than ever to plan for different scenarios on a regular and ongoing basis. What do the needs of your organisation look like given different situations occurring? Which are the most likely and why? How does this link into your business continuity planning exercises? What activities do you need to stop, start, accelerate and continue?

2. Understand what support is available to charities

At the beginning of April the chancellor confirmed that all of the nearly 170,000 charities in England and Wales are eligible for the Government’s Coronavirus Job Retention Scheme (i.e. ‘furloughing’ staff), as well as other forms of support (VAT deferrals, additional business rates relief.) Decisions to furlough staff were probably made at that stage. However, it is well worth looking again at your organisation and putting more staff on furlough leave if this will secure the long term future of the organisation. If you have any questions or concerns around furloughing staff, our employment team can help. Please click here to view our employment advice on employment law during the coronavirus outbreak.

3. Know what current grants you have in place and establish your relationship with your bank

Most charities have existing funding, social investment, or banking facilities in place. In the National Council for Voluntary Organisations (NCVO) guidance, you can see responses from funders here. The majority emphasise flexibility and support. Most funders will more than likely have their own guidance on their website, so you know what to expect. Communication is important, ensure you are in regular contact with your key contact.

If your charity has a business or charity banking account, then there is a relationship with a bank or financial institution you will have to consider. You may already have had a conversation with your bank but keep in regular touch as they will be a useful source of information about what support is available, how it is being distributed and how long that is taking. It is important to establish what the outcome of this will be and how they can help you going forward when lockdown is relaxed.

4. Think about the organisation’s continuity plan

The NVCO provides guidance to help charities to deal with the impact of coronavirus on their operations finances.  

Ensure you review your organisation’s contracts and licenses to understand how flexibly you will be able to respond to changing circumstances. There is a possibility that the organisation will need to renegotiate or terminate agreements.

You may also need to postpone your annual general meeting or look to hold it by alternative means, depending on whether this is permitted by your current constitution. This is something our corporate team may be able to help with if you need further advice

5. Think about your events and fundraising

The Institute of Fundraising and the Fundraising Regulator recommend that charities decide whether planned events should go ahead on a case-by-case basis, and that thorough risk assessments should be carried out. Even with the Government relaxing its ‘stay at home policy’ many upcoming events will have to be cancelled. You should always follow government guidelines intended to restrict the transmission of coronavirus.

6. Think about ways to negotiate with landlords on paying rent going forward

Many charities lease the premises from which they operate their activities, while others are landlords in their own right. Financial implications in the current situation mean that there may be a struggle to pay rents. Whether a landlord or tenant, you should be prepared to have conversations about your leasehold property and steps that will be taken going forward. Senior property lawyer, Jonathan Foy, has provided a guide to managing business leases, here.

Where a tenant is not able to pay their rent due to the impact of coronavirus, the Coronavirus Act 2020 will provide some protection to tenants from. However, tenants are not exempt from paying their full rent, nor entitled to a rent reduction, unless the lease itself provides for it. Review any leases to which you are a party to determine your rights and obligations, and if a decision is taken to vary the lease, ensure that a careful record is made. Senior lawyer, Simon Tucker has put together a guide for tenants in response to COVID-19, please click here to view.

7. Monitor your charity’s accounts for signs of difficulty

Unfortunately, the financial pressure created by the crisis will result in insolvency for a number of charities. Insolvency occurs when an organisation’s liabilities outweigh its assets, or where it ceases to be able to pay its debts as they fall due. It is vital that you monitor your charity’s accounts for signs that it is running into difficulties. The Commission’s CC12 guidance provides useful advice on this point.

If you suspect that your charity may be at risk of insolvency, the Commission recommends that you take professional advice as soon as possible.

If any of these issues are affecting your charity out team is here to help. Our experts throughout the firm are advising clients during this difficult time. For more information, please contact us.

For more information on Coronavirus (COVID-19) guidance for the charity sector please go to the Government’s guidance page here.