COVID-19: Mitigating the impact on the charity sector

This article considers how charity trustees and philanthropists can mitigate the impact of social distancing upon the delivery of charitable goods and services

15 April 2020

The social distancing measures introduced by the government in response to COVID-19 are directly impacting the delivery of, and demand for, charitable goods and services:

  • Charity staff, volunteers and decision makers are staying at home and avoiding public places at the advice of the government;
  • Public fundraising events, a key source of income for charities, have been cancelled;
  • Donations to charities are expected to decline as a result of the reduction in household incomes for many across the UK; and
  • Income from charity shops is also expected to decrease as a result of store closures and a lack of charity volunteers and shoppers.

As a result of the seismic changes and challenges we are all facing, the demand for services provided by a number of charities, such as food banks, and charities which support the aged and seek to relieve poverty, has risen sharply. At the same time, decreased income and the restrictions imposed by the lockdown has made it much more difficult, if not impossible, for charities to operate.  In response, charities are adapting and adopting new processes for carrying out their objects so that they may continue to benefit the groups that they are set up to support and protect their long-term financial sustainability.

What charity trustees can do

Funding

A charity’s reserves may be spent by trustees in order to cope with unexpected events such as COVID-19. If the charity’s reserves are unavailable or insufficient, there may be other ways of amending restrictions or releasing restricted funds which should only be used as a last resort.

Charity trustees should review the funds that are available to the charity and consider whether there are any restrictions as to their use, and whether these restrictions may be removed:

  1. Where the trustees have discretion as to how the funds are applied, any internal restrictions that have been imposed may be removed and the funds may be reallocated.
  2. Where restrictions have been imposed by the donor of the funds, the funds may only be used for the purpose specified by the donor. It is worth picking up the phone and asking major donors of restricted funds to consider lifting any restrictions.
  3. If the funds form part of a permanent endowment, there may be restrictions on when the endowment may be sold in order to release funds. 

Several funders have been quick to set up emergency funds to support charities facing immediate increasing demands for services, such as the National Emergencies Trust, the Coronavirus Charity Help Fund and the Steve Morgan Foundation. Contact them to see if your charity qualifies for a grant.

Decision Making

Trustees should review the governing document of the charity to confirm whether providing notice, participating in meetings and voting by electronic means is permitted. In recent guidance, the Charity Commission has sought to reassure charities that its approach to regulation will be 'as flexible and pragmatic as possible'. Where a charity’s governing document does not permit decision making by electronic means, the Charity Commission recommends that trustees document their decision to hold meetings virtually or by phone in order to demonstrate good governance.

Reporting

The Charity SORP has produced COVID-19 related guidance for trustees on the preparation of annual accounts. Trustees are advised to note in the charity’s accounts, where relevant, how the virus control measures affected the charity’s activities and ability to fundraise, its staff and volunteers, its reserves policy and any designated funds for future commitments. Charities should contact the Charity Commission if they need an extension to their annual accounts deadline.

What donors can do

Fund flexibly

In response to the unprecedented challenges being faced by the charitable sector, philanthropists in the UK and abroad are committing to funding flexibly and with less restriction. The London Funders, a body comprising public sector funders, independent foundations, investors and others, have committed to adapting agreed outcomes, reporting deadlines and funding allocations, where required by rapidly changing circumstances. Funding flexibly and with less restriction enables charities to focus more of their attention on providing goods and services to the people that they are set up to support and less time on administration.

Loosen restrictions on previous donations

Donors can also reduce the burden on charities by loosening restrictions on previous donations, for example by relaxing reporting requirements and visits, changing previously agreed activities and deliverables or allowing the repurposing of funds for urgent needs.

Communicate and listen

Donors can help their charitable partners by listening to their needs and communicating with them proactively and honestly about their plans in terms of future funding. Donors can also provide support by advocating for public policy change necessary to support those most affected, such as rental assistance and expanded sick leave.

If you would like to discuss any steps you could take as a charity trustee, or donor, please contact Catherine de Maid.

This article was written by Catherine de Maid and Alyssa Haggarty.

Key contact

catherine-de-maid

Catherine de Maid Partner

  • Head of Philanthropy
  • International Tax
  • Succession Planning and Wills

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