Charity in a time of crisis

Before Easter, Chancellor Rishi Sunak announced a £750m package to offer a lifeline to struggling charities during the Covid-19 pandemic. In recent weeks it has become more and more apparent that a huge number of charities are currently treading water with a reduction in income sources due to lockdown and donations drying up, all while they face the paradox of society needing them more than ever.  As the Chancellor said in his announcement: “We need the gentleness of our charities in our lives – it gives us hope”.   Could this be a glimmer of hope for charities?

Direct government funding

It has been confirmed that £360m of the Government package will be directly allocated by the government to charities providing key services and supporting vulnerable people during the crisis. These will include:

• Hospices, in order 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 demands for charities providing these services
• Vulnerable children charities, so they can continue delivering services on behalf of local authorities whose operations are restricted under lockdown
• Citizen’s Advice, to increase the number of staff providing advice to the public facing legal issues in relation to housing and employment.

National Lottery Community Fund

The Chancellor also confirmed that funds will be available to support small and medium size charities that experience financial difficulties as a result of Covid-19. The application system for the National Lottery Community Fund grant pot is expected to be operational within the coming weeks. In terms of practical tips for trustees and charities to consider when applying, it is apparent that priority will be given to organisations that support people who are ‘high risk’ from Covid- 19, as well as organisations that benefit communities that will face increased demand and challenges as a direct result of the virus. Any charity will be able to put in an application, but it is likely those charities who are not “priority” organisations will face greater competition and a delay in response.

The Treasury has also confirmed that charities will be eligible for a National Lottery Community Fund grant if they receive half their income from trading activity, which is likely to exclude many charities with a mix of different income sources.

So what alternatives are there for charities who do not fall into any of these categories?

The government support is clearly welcome, but given the scale of the demand facing charities, the financial challenges facing charities inevitably go far beyond help that government can provide.

Other resources are available. For example, a number of organisations and Community Foundations have launched funding programmes. A full list of these organisations can be found here.

All UK charities can also request funds, resources, skills and goods from companies via a live interactive tool that has been integrated to whatCharity.com which can be accessed here.

In the circumstances, charity trustees will also of course need to consider how best they can make use of any funds that their charity may have in reserve or restricted in some way. There are a number of categories of reserves and restricted funds and for charities lucky or prudent enough to have these resources, now could be the time to explore how they could be put to best use.

Reserves – Most charities also have some form of reserve funds in line with the Charity Commission’s guidance on this. These are precisely the sort of circumstances in which it is appropriate to consider spending reserve funds to help cope with unexpected events like those unfolding at present. Even when things return to some form of normal, then of course charity trustees must focus as a priority on rebuilding reserves for the future if at all possible.

Designated funds – these funds were at one point earmarked for something in particular, but the restriction is not binding on the trustees. Trustees can use their discretion to lift the designation at any point and now may be an appropriate time to do so.

Restricted funds – are funds subject to specific trusts that were given for an express purpose. These funds must legally only be used in the way in which the donor specified. However, trustees can apply to the Charity Commission to have the restrictions lifted and the unique challenges charities are currently facing are very good reason to contact the Charity Commission.

Permanent Endowment funds – these are capital funds that were meant to be held by a charity in perpetuity, so that only the income of these funds can be spent and the capital must remain intact. However, the law allows charities to spend permanent endowment in certain circumstances and again, trustees may need to apply to the Charity Commission to release the funds.  Trustees may not require the Commission’s consent if the permanent endowment was not given to the charity as such, for example if the charity created the permanent endowment itself.

Now is the time for trustees to review their charity’s financial portfolios and identify which if any of these resources may be available.

In the current climate, it is critical that trustees stay abreast of the financial condition of their charity and take early steps to try to mitigate the effects of the crisis as far as possible in order to ensure it can continue to meet its objects and stay financially viable. There is some funding available and action that can be taken to free up other resources to maximise the benefit to charitable organisations and, in turn, their beneficiaries – at a time when they need the help of charities most.

If you have any queries about this topic, please do not hesitate to contact David Goepel, Ania Chapman or Eva Moynihan from our Charities & Philanthropy team.

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