Charities – considerations for charity boards
The coronavirus pandemic has had a dramatic impact on charities, for some that might mean a sudden drop in income, for others they may find themselves being commissioned to deliver more or even deliver more with no additional funding. Below we explore some guidance for trustees to help them navigate this unprecedented and extremely challenging situation.
Trustees hold a strategic role in advising management and the effectiveness of charities. At this uncertain time the role of Trustees is crucial to the long-term sustainability of the third sector. There are a number of immediate priorities that should be considered:
- Establish a regular and adaptable channel of communication between management and Trustees. In all probability this will be overseen by the Chair and a small group of Trustees – your Crisis Team.
- 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 may take.
- Ensure that their governing documents allow for telephone/digital meetings and that there are powers to delegate authority to small groups of Trustees. Most modern governing documents allow for digital 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. Documentation of any decisions made will be crucial.
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.
Like any business, boards should focus on their financial position. There will of course be a desire to provide all the assistance possible regardless of the funding streams available. This delivery of charitable objectives still has to be balanced with available resources.
As part of the cash-flow management, charities must 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 for 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 free reserves are not possible. However, trustees should always consider their long-term donor relations.
Designated funds should also be reviewed as they may provide helpful pots of funding that can be redeployed to the current crisis.
All decisions on such financial matters should normally be taken collectively, and significant decisions and action points noted in writing.
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 organisation and your income, please get in touch with your usual Baldwins contact or one of the contacts to the right.