COVID-19: Clarity and Cash

Judith Miller, Partner

22 March 2020

Thank you to the government for the financial assistance announced so far, and for the hard work of all infrastructure bodies and MPs and others who are lending their support.

All welcome but more is needed. The sector needs clarity and cash.

Even before the pandemic, through my day job, we were receiving more requests for training on financial sustainability. So, times were already challenging.

The pandemic is recognised as a health, financial and social crisis. No charity will be unaffected. Their focus now needs to be on front line support, rather than back office financial stress. Charities of all shapes and sizes, particularly small charities, need support to be simple to understand, and easy and quick to access. So important, with 80% of charities having income under £200,000 – already limited resources in terms of time, capacity and money.

The challenge in charities is that income and expenditure, supply and demand are not always directly linked as they are in the commercial world. It is clearer how the substantial assistance, in particular the job retention scheme, has the potential to support those commercial businesses facing anything from drop off or complete disappearance of demand. It is going to be much easier to identify employees within a trading business “who would otherwise be laid off during the crisis”, those “furloughed employees” with bars, restaurants, shops and venues closed, or where production halted.

Of course, this will help some charities but not all. Charities are more likely to face a crisis of capacity, it won’t just be money to keep people on the payroll that will be needed, but money to spend on people to replace for those off sick, and funds to meet increased demand. This will be particularly acute in health and social care and many others serving the vulnerable. Capacity will also be stretched as many charities are supported by volunteers who are older and need to self-isolate. Our local foodbank is already having to rethink their rotating and volunteers with this in mind.

There is the question of how charities use their reserves right now. Undoubtedly there will be a place for this, but it’s no magic wand. Not all charities have substantial reserves, especially small charities. Some reserves may adequately weather routine working capital fluctuations; but we are not operating in anything like a “business as usual” climate – this isn’t any old downturn.

It is also not a good time to sell investments, and we can’t afford to have such depleted/exhausted reserves levels that leave a decimated charity sector, any more than the economy can cope with a massive wave of for-profit insolvencies. Non-profits will be needed after the immediate pandemic to support an undoubtedly changed society.

Thank you, Government, for what you’ve put in place. And yes, to all the requests from the infrastructure bodies and everything in yesterday’s letter from MPs. We need clarity and tailoring of the existing business assistance to charities, as well as charity specific cash support, so grants as well as NIC and VAT holidays. It needs to be directed to all charities – small charities as well as national names

Please keep it simple, easy to understand and quick to access for all. Thank you.

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