In a recent webinar with The Association of Chairs, Nick Hobden, Head of Employment at Thomson Snell & Passmore explored the different ways COVID-19 has had an effect on charities. These have included:
- Affecting the level of fundraising they receive due to it being more difficult/impossible for individuals to fundraise. Events that would normally generate huge amounts of fundraising have been cancelled or rescheduled in the coming months, with the London Marathon an example of a postponed event which in recent years has raised in excess of £60 million. In addition, Captain Tom Moore is an excellent example of someone who has captured the nation’s attention by doing an extraordinary thing for money for NHS
- Challenges to ensuring adequate staffing, with members of staff self-isolating, shielding or on sick leave due to the virus. Certain charities that provide telephone helplines are experiencing unprecedented numbers of calls which increasingly dwindling finances and staff members to cope with them
- Employees – COVID-19 will affect not just the charities themselves, but the employees who work for them
- Employees will face difficulties as mentioned above, with difficulties attending work if faced with the need to self-isolate, or if they indeed fall ill themselves
- The social distancing measures and closure of communal areas will make the provision of services much more difficult or even impossible during the pandemic. This could potentially leave vulnerable individuals across the nation without the vital support they require
- Employees will have to quickly adjust to new ways of working if they have transferred to working from home, and also quite possibly cope with an ever increasing workload met but an ever decreasing workforce
- Furlough – no work and doing nothing, doesn’t have to be the alternative to redundancy, but can be opportunity for training/volunteering but not for your charity.
Furlough for Charities
Nick also gave an explanation of the Coronavirus Job Retention Scheme (CJRS). It was announced in an attempt to minimise how many individuals would lose their job in light of the diminished demand for services, or the enforced shut down of entire sections of the economy. Under the scheme the government will pay 80% of employees’ wages, subject to an upper limit of £2,500, for an initial three month period covering March, April and May. The scheme has now been extended for another month until the end of June.
As of 20 April the online portal at HMRC is open for organisations to apply to HMRC for the grant. The take up has been significant already. By the end of the first day 185,000 employers submitted claims, 1,300,000 were reported as furloughed and a total value of £1.5bn has been claimed. The Government expected £10 billion but has to revise its estimated cost to £40 million.
Can the scheme be used by charities?
- The Government confirmed that the scheme can be used by all organisations so long as they have a UK payroll, including businesses, charities, recruitment agencies and public authorities.
What if the charity receives public funding?
- It has been confirmed that organisations who receive public funding are still eligible to furlough employees if there is not work available. However, where public funding is received in order to pay wages it is expected that staff should not be furloughed, and should continue to be paid in the normal fashion. Some non-funded non-core aspects of the charity’s business that employs staff can take advantage of the scheme.
Providing support and assistance to employees
In response to the immediate and drastic changes we have all had to make to both our working and personal lives, it is possible that employees may need a different type and level of support than they would under normal circumstances.
Useful tips to be implemented include:
- Encourage strict adherence to core working hours, as it is easy to overwork when working from home
- The 45/10/2 rule – stand up and move around after sitting for 45 mins, take 10 mins of fresh air exercise each day and exert yourself for 2 minutes
- Have frequent conference calls/video calls if possible to keep in touch with employees and make sure they are doing okay.
Finance for charities
The impact of Coronavirus is likely to prove to be more disruptive and longer lasting than any disruption that has come before it. Consequently, it will have a huge impact on the finances of charities. Some useful tools to help mitigate the impact are:
- Use of the Coronavirus Job Retention Scheme
- Coronavirus Business Interruption Loan Scheme
- Available for charities with an annual turnover under £45 million who receive half of their income from trading activity
- Application made by approaching a CBILS accredited lender for a loan of up to £5 million. Lenders are still insisting on normal criteria for lending, but lobbying is happening to get more banks to lend on better terms.
- Deferred VAT for those charities with VAT taxable turnover is more than £85,000
- VAT payments can be deferred for the period 31 March to 30 June 2020
- No application is required, just adjustment of your payment method
- Charities will still need to submit their VAT return and pay the deferred VAT by 31 March 2021.
- £750 million government charity package - announced 8 April 2020
- £360 million to be directly allocated from the government to charities providing key services and supporting vulnerable people
- £370 million to become available to small and medium charities through lottery grants
- Awaiting further details on how funds will be distributed, with delays to the process of application for funds anticipated to take weeks.
- Expanded Retail Discount Scheme (business rates relief)
- Offers 100% business rates relief to businesses in the retail sector
- Helpful for charities with a property subject to rates that does not already receive 100% rates relief
- If uncertain over eligibility, talk to your local authority rating officer
- Retail, Hospitality and Leisure Grant Fund
- A one off cash grant per eligible occupied rateable property:
- £10,000 for property with a rateable value up to £15,000
- £25,000 for property with a rateable value over £15,000 and under £51,000
- Applies to properties which on 11 March 2020 had a rateable value under £51,000 and would have been eligible for discount under the Expanded Retail Discount Scheme had it been in force
- Charities who would otherwise meet the criteria but whose bill for 11 March had been reduced to nil by a local discretionary award should still be considered to be eligible
- If eligible, your local authority will get in touch to arrange payment.
- Gift Aid
- Cultural venues may claim Gift Aid on the value of tickets for cancelled tickets if donors have agreed not to be refunded for the cost of the ticket
- Awaiting further guidance from government, contact HMRC in the meantime.
- Charity Commission support
- Offering extensions on submitting annual financial returns if they are needed
- Issuing guidance and support on holding AGMs using tele-conferencing or where possible, postponement.
- Trustees must consider short, medium and long term objectives. Can certain spending be stopped or delayed?
- Reserves CAN be used to help cope with unexpected events such as COVID-19 if necessary – ensure restricted funds are not used inappropriately. Go back to the donor/trust to change the terms on which the grant is provided
- Extend time to pay, payment holidays for cash flow
- Accountants firm RSM has set out advice on the things that you should do on the governance and finance side, including looking at KPIs, looking at daily cash receipts and cash flow, recognising the importance of cash flow forecasts, assessing ongoing operations, preparing backup plans if any suppliers look like they will fail and stress testing operations. Whilst stakeholder engagement is key, some of your number may not be able to devote much time to the charity anymore.
Importance of good governance
In challenging times such as this, good governance is more important than ever. The Charity Commission, the independent regulator of charities in England and Wales, published a report in December 2016 entitled ‘Tackling Abuse and Mismanagement’, that confirmed poor governance is at the heart of most charity failings.
Key tips to get through tough times:
- Have trust in management team to make decisions, so long as the appropriate supervision and support is in place
- Monitor cash flow
- Check and stress test supply chains
- Consider the number of meetings required in lock down
- Consider what the future looks like cash, operations, staff resources
Other bodies there for support:
- National Council Voluntary Organisations
- National Governance Association
- Association of Chairs
- Small Charities Coalition