Posted by Ursula on 04/04/2020

Coronavirus: What next for Charity Finances

If you’ve had time to sit down and think at any point in the last two weeks, congratulations! In that time you probably sent most of your workforce to work from home; thought about how to keep your customers and beneficiaries safe; worked out which of your operations will close and what might be kept running, what you’ve committed to delivering for funders, and how much of that will still be feasible. All the time those things were happening, you probably had the lurking question at the back of your mind – how on earth are we going to survive this financially?

The first thing to remember is what it says on the back of The Hitch-hikers Guide To The Galaxy – don’t panic! In particular don’t panic in ways that could hurt your chances of coming through this crisis. No-one wants to be remembered as the homeless charity that made people homeless during coronavirus, or the advice charity that couldn’t advise people when they needed it most. Also, you’ve spent a long time building up relationships with supporters, so don’t throw that away. Many of them will also be under financial strain and won’t thank you for a barrage of begging letters.

Currently, the government has not offered any specific bailout for the charity sector, despite growing calls to do so. Many charities are facing a double whammy of increased demand for their services just as key sources of income – like sponsored events and festivals over the summer – vanish under lockdown. .

The good news is that there is a raft of government measures to help organisations ride out the crisis, and these measures apply to charities just as much as any business. First,, there’s the government commitment to underwrite 80% of the wages of furloughed staff between 1st March and 31st May. Although the portal to do so isn’t up and running yet, you can find all the details here. There’s also leeway to delay VAT payments. For charity shops, there are measures to offset business rates. This will also apply to museums, galleries and theatres, as well as sports clubs: you can find more detail on eligible properties here. In Scotland and Wales, measures are set by the devolved authorities, so please make sure you’re looking at the correct information.

When it comes to looking at what you need to deliver to funders, it may be worthwhile to look not only at the terms of the grants, but also your funders’ websites to see if they have temporary measures in place to cover this period of upheaval. Most funders offer a grant because they want your project to succeed, so it’s important to talk to them, explain the pressures you’re under, and come to some agreement together. At least one large funder, the Arts Council, has already said it won’t expect regularly funded organisations (RFO’s) to deliver some of their expected targets.

Beyond that, there’s the thorny issue of spending reserves. Some charity trustees see maintaining reserves as the most important part of their role, but it is worth mentioning that an actual purpose of reserves is to see the charity through a crisis! That said, there is a crucial difference between deciding to sacrifice a clearly marked amount on getting through a short-term scenario, and just spending your reserves out then plunging into disaster.

Most charities start a new financial year around now, with a brand new budget that’s just been signed off - usually the result of weeks of labour. Needless to say, that budget is probably toast, and you will be spending the next couple of weeks running alternate scenarios. At the moment, no-one knows how long the lockdown will last, and what the effects may be afterwards. So it’s important to look at a few scenarios, and discuss all the possibilities with your trustees. You’ll be meeting by Skype or Zoom, obviously – remember to keep minutes, all the same! This is particularly important for major financial decisions.

If you’re a large enough charity to have a dedicated finance director or team, they’re probably busy beavering away at spreadsheets to tell you what sort of situations you might be looking forward to in six months time. For smaller charities with only a finance officer or manager, that person may be spending all their time dealing with the unexpected payroll scenario or the financial fallout of event cancellations, while your CEO is fire-fighting on the frontline. Farming out emergency budget work to your accountants can be expensive for a small organisation, and they’re often busy at this time of year. Don’t write off the possibility of hiring in some short-term help with financial planning and budgeting scenarios, it may be cheaper in te long run, and also and more-sector specific. Like all crises, this one can be navigated with the right map, and remember – whatever you do, Don’t Panic!

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