COVID-19: guidance for trustees

Published on 1st May 2020

Charities are not unaffected by the current crisis and many trustees may be wondering what to do to ensure that when the situation eases and lock down ends, that their charity will remain viable.

‘Cash is King’

We do not know how long, or ultimately, how severe the crisis caused by COVID-19 will be.

The preservation of a charity’s reserves, especially its bank holdings, should be viewed as a priority.

Trustees need to assess the potential effect of a major drop in income on a charity’s operations, how this will affect a charity’s general reserves and act accordingly.

Easy decisions

To make operations easier or help to preserve reserves, the following decisions should be considered:

• How can you maximise use of the internet?

• Are there current costs that can be easily controlled, at least for the duration of the crisis?

• If you have staff, can they be furloughed?

• Are there any grants or loans available to the Charity?

• Prepare a contingency budget

Communication

Communication is key. It is important that in making your decisions you regularly update everyone associated with your charity, including members, volunteers, beneficiaries, donors and supporters.

Look ahead – ‘What if’

There may be more than one outcome to the current crisis and trustees need to consider them. As a body, trustees should prepare three realistic scenarios, of increasing severity, to assess how this crisis could affect the charity in the longer term.

These can be best classified as:

Bad – Current Situation

Very bad – Plan for mitigation

Worst case – Develop options now

You should consider:

• Impact on the main source of income

• Impact on other income

• Competing demands for expenditure

• Cost reductions (or increases)

• Other courses of action, e.g. alternative ways of raising funds

In a worst-case scenario, which would be the closure of the charity, trustees would need to consider what options that they have open to them and how long they have to develop them.

Overview

The general expectation is that the initial lock down phase of the crisis will be followed by a major recession. Therefore, do not assume that things will return to normal as quickly as you may hope:

• Plan for the worst-case scenario

• Keep reviewing the financial position and cash balances of your Charity

• Work as a team – don’t off-load the responsibility onto one person

• Your charity may need to hold more trustee meetings at this time. The Charity Commission have stated that it is permissible to hold online meetings if that is the only way to make decisions

Please see our previous article highlighting government support available for Charities.

If you are the trustee of a charity and would like to discuss any of the matters raised above, please contact your local Simpkins Edwards office.

Alternatively, further information and advice can be found on the Charity Commission website.