The Coronavirus pandemic has had a dramatic impact on charities, with a sudden drop in income on the one hand and an increase in need for their services on the other. Below we explore some guidance for trustees to help them navigate this unprecedented and extremely challenging situation.
Governance priorities
Trustees hold a strategic role in advising management on the effectiveness of charities so their immediate priorities should be to:
- Establish a regular and manageable channel of communication between management and trustees. In all probability this will be overseen by the Chair and a small group of trustees.
- Maintain those lines of communication so that the board can react quickly to the changing situation.
- Identify the urgent business activities that cannot be delayed. This will include the use of expenditure, contacting key donors and other funders and ensuring that all safeguarding procedures are in place for vulnerable beneficiaries.
- Ensure boards meet (virtually) to discuss key business and the impact of any further action the Government will take.
- Ensure that their governing documents allow for telephone/virtual meetings and that there are powers to delegate authority to small groups of trustees. Most modern governance documents allow for virtual meetings, but if the governing document doesn’t you must take a pragmatic approach and ensure that there is a clear audit trail to evidence decision making.
While these are unprecedented times, trustee boards should ensure that Coronavirus does not create an environment which allows for a lack of care and diligence.
Boards must manage the balances on restricted and unrestricted reserves to ensure that the charity has sufficient funds to meet ongoing obligations.
Non-governance priorities
Like any business, boards should focus on a number of other non-governance-related immediate priorities, which we have summarised here.
However, as part of the cash-flow management strategy explored in that article, charities must also consider their reserves.
Trustee boards must manage the balances on restricted and unrestricted reserves to ensure that the charity has sufficient funds to meet ongoing obligations.
Money tied into restricted funds, meaning they cannot be spent at trustees’ discretion, can only be used for a particular and defined purpose. For example, a fundraising appeal may restrict funds to a specific purpose, or if you have a permanent endowment, it may have restrictions on selling it to release funds.
There may be ways to amend these restrictions but accessing or releasing restricted funds should only be considered if other options such as reserves are not possible. However, trustees should always consider their long-term donor relations.
All decisions on such financial matters should normally be taken collectively, and significant decisions and action points noted in writing.
Contact us
If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please get in touch with your usual Blick Rothenberg contact or one of the contacts to the right.
We explore how charities can secure new funds or aid in our article here.
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