Charities facing hardships during Covid-19
- AuthorTim Field
As if being a trustee of a charity was not hard enough, the financial pressure that has been placed on the charity sector by Covid-19 has made operating a charity even tougher.
All charity trustees have a duty to act in their charity’s best interests at all times. In a time of financial crisis, this may place a greater burden upon those trustees. If trustees are concerned about the financial position of their charity at present, there are some actions that those trustees should be taking to ensure that they are able to discharge their duty.
- obtain as accurate a picture as possible of the charity's current financial situation, focusing on cash flow management.
- consider options for minimising costs and protecting and increasing income.
- regularly monitor and review the charity's operations and finances.
All of the above should be well documented in a minuted trustees meeting where clear actions are agreed. The Charity Commission is able to accept that not all charities will survive this crisis and that no matter what steps the trustees of a charity had taken, failure would still have occurred.
What the Charity Commission will not accept is a charity failing and having evidence that the trustees had not acted in the best interest of the charity or ‘buried their head in the sand.’ In these instances, the Charity Commission may well look to the charity trustees and hold them to account for the failure of the charity.
If a situation arises whereby the trustees reach an opinion that the charity’s finances are such that the charity may fail they should make a serious incident report to the Charity Commission. Trustees should not try to hide information from the Charity Commission but rather take an open approach.
The Commission usually expects charities to report any financial losses that do not involve a crime and exceed either £25,000 or 20% of a charity's income. However, these thresholds do not apply to financial losses relating to the pandemic. Charity trustees should focus on the significance of the impact of the losses on their charity and not the amount.
If you have concerns about your charity or your responsibilities as a trustee please contact Tim Field at Birkett Long on 01206 217366.