The Charity Commission has published guidance on coronavirus related financial difficulties in charities and how to work through them.
It states that “charities will be exposed to higher levels of risk than in more normal times” and that it will recognise this.
“We understand that many trustees are having to cope with serious financial challenges that will have a major effect on their charities and those who depend on them. We have therefore set out some guidance for trustees, especially at smaller charities, who may need help facing difficult situations or decisions,” the guidance reads.
The guidance states that in reaching decisions, open and informative communication with users, supporters, staff and volunteers will be important.
It adds that it is important to make sure to have as accurate a picture as possible of the current and immediate future operations and their financial implications on the charity.
‘We will take account of the fact that things may go wrong despite the best efforts of trustees’
It tells trustees to consider the best interests of the charity. This will likely include considering the trade-off between reducing costs in order to be there to support users in future, and meeting the immediate needs of the charity’s users with the possibility that in future the charity will have to reduce its services or close entirely.
The guidance adds: “As trustees you will generally be protected when you have carefully applied your skills and experience to decisions and taken advice when needed. We recognise that these decisions will often be difficult, that there may not be an obvious ‘right’ decision, and that charities will be exposed to higher levels of risk than in more normal times.
“We also recognise and will take account of the fact that things may go wrong despite the best efforts of trustees to act in their charity’s best interests.”
The guidance also states that if it looks as though the charity may not survive the Covid-19 period, “you should consider when to develop plans to close”.
“Also agree who will do this and when to trigger closure if the recovery plan does not succeed,” the guidance adds.
Charities should report a ‘serious incident’ to when an assessment reveals that either that the scale of financial loss threatens the charity’s ability to operate and serve its beneficiaries, or the charity’s financial reserves or other measures are not sufficient to cover the losses.
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