A lot has happened over the last 7 days as the country gets to grips with new ways of working and the workforce adapts.

What are the key themes emerging for the charities and not for profits we support?

Job retention scheme - furloughing employees

On 20 March the Government announced the launch of its COVID-19 job retention scheme, intended to pay employees who would otherwise have been made redundant.  Yesterday HMRC published guidance on calming for wage costs through the scheme. 

The key points are:

• The scheme will apply to all employers and will include charities. 
• It will only cover employees who were on the payroll on 28 February 2020.
• It will commence with (retrospective) effect from 1 March and will last for at least three months (i.e. to the end of May).  It will be extended if necessary.
• HMRC will reimburse employers for 80% of the gross salary of employees who are retained, up to £2,500 per month, plus employer's National Insurance contributions and minimum automatic enrolment employer pension contributions.  Employers can top up to 100% if they wish.
• The payment will operate as a grant not a loan and grants should be available by the end of April.  There is no limit on the amount of funding that can be given to an employer.
• Employees will stay on the payroll, in the expectation that they will go back to normal working when the crisis is over.  They will not be able to do any work for their employer while they are furloughed, but can take part in volunteer work.
• Employers have to designate employees as "furloughed workers" and notify them.  This is subject to normal employment law, which means that their consent will be required unless there is a lay-off clause in their contract of employment.  Employees have no right to ask to be furloughed. (There is nothing of course to stop employers having a conversation with their workforce to establish who may in fact prefer this – for example, those with caring obligations).
• Employers will have to submit information to HMRC (via an online portal) regarding furloughed employees and their earnings.
• Employees who have been made redundant since 28 February can be rehired and will then be covered by the scheme. 
• Employees can move on and off furlough leave but the minimum period on furlough leave is three weeks.
• If an employer makes an employee redundant instead of furloughing them, the employee could have a potential claim for unfair dismissal. 

HMRC will issue more guidance on how to calculate claims. Watch this space. 

Cancelling fundraising events

Where fundraising events are cancelled due to Coronavirus, can charities keep the monies received from ticket sales and offer purchasers "free" tickets for the 2021 annual fundraising event?

Given the circumstances, provided that it is made clear upfront and prominently to individuals that this is what will happen in the event that this year's event is cancelled, then there is a lower risk of this being regarded as unfair to those people. 

In the case of corporate ticket sales, you should ensure you have a clear and upfront clause in the event terms and conditions to enable you to apply the ticket fees to an event later in the year or next year.

Wording should be prominently included on the charity's website and other advertising literature, as well as included in the event's terms and conditions – and drawn to their attention. A lower risk alternative would be to give purchasers the option to either ask for a refund or to allow the charity to retain the money for next year's event. Again, this should be spelt out on the copy as well as the terms and conditions. 
 
It would also be prudent to hold any funds retained from 2020 ticket sales in a sub-account so that the charity can easily identify them as pertaining to the cancelled event. 

Financial planning

Reserves

The Charity Commission has clarified that reserves can be spent to help cope with unexpected events like those unfolding at present.

The Commission advises charities to identify which of their funds or assets have limits on their use. If these are internal (not legal) restrictions only – for example the charity has decided to earmark certain funds for a particular purpose – the charity may be able to re-prioritise these. If they are restricted funds, meaning they cannot be spent at the charity's (trustees') discretion, then they may only be used for a particular and defined purpose. For example, a fundraising appeal may restrict funds to a specific purpose, or if the charity has a permanent endowment, it may have restrictions on selling it to release funds.

Restrictions

If there are restrictions, in some instances there may be ways to amend these restrictions and this is likely to include asking the funder. The Commission states that accessing or releasing restricted funds should only be considered if other options are not possible. The Commission encourages charities to also carefully consider the wider and longer term impacts of making such a decision on the charity's financial resilience and donor relationships – in reality many charities will not have much choice.

Financial governance

Prudent trustees should be asking their management team for more regular financial statements and accounts, and these should record how Covid-19 is impacting on income and costs – thus the trustees can keep a track of it. Trustees should be asking their management teams to be modelling for different scenarios, and also asking how government schemes are being utilised to ensure the financial health of the charity. There should be a clear audit trail.

Accounts

The Charities SORP-making body has issued guidance that warns that government measures to limit the spread of the virus have “potential implications for charity income, expenditure and commitments, and the value of charity assets and liabilities. In some cases, the implications may be so severe as to cast doubt upon a charity’s financial sustainability.” The regulator has therefore advised that when preparing accounts that have not yet been approved, “trustees should consider whether information needs to be included to explain the impact of the Covid-19 situation on their charity”. In addition, the current situation means that “there could be changes to the financial statements needed as a result of the Covid-19 situation and it is important that trustees understand and consider these”. The guidance can be found in full here. 

Closure of workplace canteens

The new Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 came into force on 21 March and apply to England only. The Regulations list those businesses which can no longer sell food and drink for consumption on their premises. Aside from the obvious categories, the Regulations require cafes, including workplace canteens, to close, but excluding:

• canteens at hospitals, care homes and schools
• prison, military and defence industry canteens
• services providing food or drink to the homeless.

The Regulations do not specifically cover workplace canteens at colleges and universities. However, our view is that that university and college canteens should only continue to serve certain students (for example, vulnerable students or those attending as children of key workers), and should otherwise close.  

If you operate a café for your beneficiaries, outside of the above, then these will need to close. Consider then how your beneficiaries will be affected and if there are alternative ways to provide the benefit to them (including the social benefit). The charities that emerge from ovid-19 in a strong position, will be those who have adapted to meet the needs of their beneficiaries and stakeholders.

Membership fees and access to services

Some membership charities may currently, by law or by circumstance, be restricted from providing their services, facilities and benefits to their members. Members may have paid upfront for those benefits. Members may be asking about total or partial refunds.

Check your terms and conditions with those members to see how this affects you. The force majeure clause is likely to ensure you will not be liable for delivering the service during the force majeure event – this should be checked and you should also check if Covid-19 is a force majeure event. You may be able to suspend the contract.

You should also check payment terms. If members have paid up front, and their benefits are temporarily suspended, can you or are you obliged to extend their benefits beyond the period of payment, and if payments are made in instalments, can members refuse to pay future instalments. This is hugely relevant to your business planning.

It will depend on the contractual terms and the general law, and please get in touch if this is an issue for you. From a practical perspective, charities which communicate with their members, act transparently and treat them fairly are unlikely to be criticised, but you should nevertheless understand your legal position before going into those conversations.

Keeping donors happy

Charities may be concerned that they are not able to deliver projects funded by donors to the charity at this time. The terms of the donation may state that funding is dependant on key milestones being met. You may not be able to meet those milestones because of current restriction on activity and/or competing priorities.

First of all, understand any terms and conditions attached to the donation. Many donors will be content to receive assurance around the future of the project post Covid-19, others may be happy to allow their donation to be used for general purposes during this health crisis.

In any event, document carefully any variation agreed with donors, so there is a clear audit trail. And be ready to give donors confidence about your business continuing arrangements so they know that, despite the current uncertainty, your charity will emerge into the future because your plans are effective and resilient.

AGMs

The Chartered Governance Institute (CGI) has published new guidance (in conjunction with others) for companies planning their AGM in light of the spread of Covid-19. 
The guidance offers five suggestions reflecting UK company law and regulation, but companies will need to consider their own individual circumstances, including their articles of association and any other relevant matters. The five suggestions are:

• Adapt the basis on which the company holds the AGM.
• Delay convening the AGM, if notice has not yet been issued 
• Postpone the AGM, if permitted under the company's articles of association.
• Adjourn the AGM
• Conduct a hybrid AGM, if permitted under the company's articles of association.

Be careful not to plan an AGM in person too soon, you do not want members to incur costs and for the event to be cancelled. Until we have some certainty around the timescale for getting back to what we regard as true business as usual, facilitate engagement with members in other ways. Keep them up to date with your decisions, how you are reacting to these circumstances and ensure your trustees are visible in their actions. 

As the situation continues to evolve, the CGI notes that companies may ultimately have to use more than one of these options. The full guidance can be read here.

Some funding updates

Scottish emergency fund

The Third Sector Resilience Fund, delivered by the social enterprise agency Firstport, Social Investment Scotland and the Corra Foundation, is now open to charities, social enterprises or voluntary organisations based in Scotland and/or already primarily delivering services and activities in Scottish communities, in need of funding to stabilise cash flows as a result of the impact of Covid-19. Interested organisations can use the Scottish Council for Voluntary Organisations’ eligibility checker to find out whether they could be in line to receive a grant.

Further government support for the sector

Boris Johnson announced this week that the Government is considering a "package of measures" to support the voluntary sector in light of COVID-19. Watch this space for further details as they become available.

Please do get in touch if you have any concerns and would like support. Through ACEVO, we are offering a free initial consultation to charities to ACEVO members.
If you are experiencing issues yourself, let us know and we will ensure the next bulletin provides relevant and practical advice.