Navigating the new do’s and don’ts and what support is and isn’t available is a fast moving and crowded place. We hope this guide will keep you up to date with the main areas of concern for Trusts and Foundations.
The Charity Commission response
The Charity Commission has updated its guidance in response to COVID-19; please see here for details. In summary, the guidance states that:
- A charity cannot expand its beneficiary class because it suddenly wants to help a wider beneficiary group during the COVID crisis. If the governing documents do not give express powers to change the beneficiary group, then Charity Commission permission would still be needed.
- Some of the government’s business support measures apply to charities.
- Restricted funds may, in some instances and as a last resort, be able to be used by the charity facing financial problems but professional advice should be taken.
- AGMs. If trustees decide to cancel or postpone their AGM the decision should be recorded especially if it means annual reports and accounts cannot be finalised.
- The Charity Commission still asks that annual reports be submitted on time. Annual returns and accounts with an imminent filing date can email [email protected]
- It may be worth checking whether an AGM is necessary. Some governing documents including updated Articles may not require an AGM.
- Meetings online/telephone conferences. Some governing documents allow for e-meetings. If not the Charity Commission says “where there is no clause in your governing document and you decide to hold meetings over the phone or using digital solutions we will understand but you should record this decision and that you have done this to demonstrate good governance of your charity”.
- Safeguarding policies and procedures are highlighted given the speed of response, speed of new volunteers etc. The Charity Commission says it is even more critical to follow guidance.
Advice from an auditor on what to include in Trustee Annual Reports
There is a Charities SORP update https://www.charitysorp.org/about-the-sorp/covid-19/
Given the current issues, and the impact that these may have on the local charities, it is important that this is considered by the trustees and possibly reported in the financial statements.
This is primarily to streamline the process over the next few months, as the trustees make their decisions.
I can see three obvious possibilities:
- COVID-19 related situation does not impact the charity’s ability to continue
No changes necessary.
- COVID-19 has a major impact, with the trustees in the belief that the charity is no longer a going concern
Policy note to change from applying normal standards and historic cost on a going concern basis.
Potential revaluation of assets/liabilities into “lower of cost and expected sale value after costs”.
All assets/liabilities would be restated to show “due within 1 year”
A note should be included describing the reasoning behind the decision, if not detailed in the policy.
- There is a material uncertainty whether the charity may continue as a going concern.
Remain disclosing as a going concern.
Add a note in the financial statements to draw attention to the fact that there are unknown situations and outcomes that result in an uncertainty as to whether the charity remains a going concern.
The audit report would be amended with an Emphasis of Matter, directing people to the note that describes the material uncertainty.
For 2 and 3, comment must be made in the trustees’ report. However, for any circumstances, they would expect the trustees to comment on the impacts of Covid-19 in their trustees’ report (which shows that the trustees have considered this).
For further advice, you can call the Charity Commission Contact Centre on 0300 066 9197
The government response
The government announced on 8 April 2020 that charities would receive a £750m package of support to ensure they can continue their vital work during the coronavirus outbreak. In brief, this will be funded by:
- £360 million direct from government departments and £370 million for smaller charities, including through a grant to the National Lottery Community Fund.
- Government will match donations to the National Emergencies Trust as part of the BBC’s Big Night In fundraiser on 23 April – pledging a minimum of £20 million.
Priorities for support
Charities providing vital services and helping vulnerable people through the current crisis will benefit from the £360 million allocated by government departments. These will include:
- Hospices to help increase capacity and give stability to the sector
- St John’s Ambulance to support the NHS
- Victims’ charities, including domestic abuse, to help with potential increase in demand for charities providing these services
- Vulnerable children charities, so that they can continue delivering services on behalf of local authorities
- Citizens’ Advice to increase the number of staff providing advice during this difficult time.
How charities supported by TTP have responded
- Some have made one-off grants to their local Community Foundation to support charities in immediate financial crisis as a result of COVID-19 or identified national responses and made one-off donations to their efforts. Some we have identified are:
- Fare Share – the national food waste distributor, is seeing a huge spike in need and is adapting their services to suit and reduce the financial pressure on their member charities
- Shelter – They are also looking ahead to the impact this will have on many families as we emerge from this crisis and need to deal with the significant hit to our economy and job security for many lower paid workers
- National Emergencies Trust – They are fundraising via the British Red Cross to support the charity sector to ensure they are resistant to the impact on its financial security and can still provide their much-needed services to those most effected. They are distributing funds in conjunction with Community Foundations across the UK.
- NHS Charities Together – supporting the more than 250 NHS charities in the UK, which provide much-needed funds for individual hospitals and services; promotes charity best practice, fosters mutual support and discusses matters of mutual interest.
- Where a grant maker supports very specific beneficiaries, some have made one-off grants to benevolent organisations which support those beneficiaries.
- Many are considering making restricted grants unrestricted or allowing for a change in use of grants already awarded.
- Many are also taking a flexible approach to project delivery and changes in milestones.
- Where individuals are supported through small grants, some organisations are making additional grants in response to the crisis.
Things to consider
We don’t need to tell you that the values of good governance are appreciated even more in times of crisis. The following guidance from the Chartered Governance Institute may be helpful in that regard:
Focus on what’s urgent
Good governance often comes down to common sense and now is the time to apply what you have available. Be pragmatic in what you can cover in board meetings in this time of lockdown. Boards should prioritise the key decisions that support their charity and be proportionate in the decisions that they are planning on taking.
Deferring some decisions may be a reasonable approach for trustees to take, focusing board meetings on those issues that are urgent and business critical. Trustees are still accountable for the charity and the oversight of the management team, so producing a lean agenda which concentrates on those items that require the board to make a decision or approve an action should maximise use of limited time and resources. A lean agenda is likely to include issues regarding the safety and wellbeing of individuals who depend on the charity (clients, staff and volunteers), financial considerations (including fundraising activities, grant/contract conditions, and cash flow) and urgent governance considerations.
Take the opportunity to review your approach to board packs and remove any extraneous ‘for information’ or ‘to note’ items, which could be circulated by email at a more appropriate time. This frees up time to concentrate on what matters.
As the situation and information continues to be fluid, trustees may decide to meet more frequently to focus on a smaller number of urgent issues. Proper records of all meetings should be maintained.
Urgent decisions
Given modern communication methods it should be possible for charities to use virtual or remote meetings to take swift action. For charitable companies, a unanimous decision made by email (a written resolution) will be valid, even if the articles don’t explicitly permit it.
Further guidance on the use of electronic communications for charities can be found here.
Delegations, including chair’s actions
If the board decides to delegate authority to the senior management team or the chair, it should be aware of those things it simply must not delegate and put in writing and formally agree those that are to be delegated. These should be monitored and reviewed regularly.
It should be noted that chair’s actions can only be taken where there is power to do so in the governing document (or standing orders). This could take the form of power to delegate to an individual (such as the chair or a lead trustee).
Urgent actions not taken by the board collectively are likely to be subject to ratification at the next legally constituted board meeting.
Ratify later
Where delegations are made to an individual, in accordance with a formally agreed policy or schedule, it will be essential for trustee boards to ratify decisions at a later date.
Even where a trustee meeting may not technically be valid, the decisions made at it could also be ratified later when the usual meeting format can be re-introduced and the meeting deemed correctly constituted.
Change the governing document to permit remote or virtual meetings
Depending on the charity, it might be possible to amend the governing document in order to permit the use of electronic methods for trustee meetings.
As the change should represent an internal administrative amendment there is no need to seek external approval from the regulator. Although amended documents should be registered with the Charity Commission and Companies House (and OSCR and other regulators) where appropriate.
It is for the trustees to decide whether the administrative arrangements present an obstacle that is best removed or worked around for the time being. If action is required, the trustees should follow the process set out in their governing document for making internal administrative changes.
Keep records
Any decisions taken in good faith during this crisis are unlikely to be challenged now but may be subject to additional scrutiny in the future.
As such, it is essential that proper records of meetings, decisions made and supporting arguments are kept. Now is not the time to take short cuts to this essential aspect of governance. It will save time and energy later, should anyone question a decision of the board and the subsequent actions.
COVID-19 has not removed the trustees’ responsibilities under the law, although some common sense is advisable when the ‘business as usual’ approach to their work is no longer possible. It is essential that trustees continue to hold meetings and exercise oversight for the activities of the senior management team and the charity and can evidence as such.