Use reserves if struggling, regulator advises charities

Updated guidance from the Charity Commission says organisations should identify any limits on the use of funds and assets first

Charities can use their reserves if they are struggling financially as a result of the coronavirus pandemic, the Charity Commission has advised.

In updated guidance for charities on the pandemic, the commission says that “reserves can be spent to help cope with unexpected events like those unfolding at present”, but charities should identify any limits on the use of funds and assets.

The commission adds that HM Revenue & Customs grants to cover 80 per cent of the wages of companies’ staff members temporarily without work due to Covid-19 will be available to charities, regardless of their size.

The new guidance adds to information released last week covering how charities can be managed and governed during a major pandemic that has seen increasing lockdowns and social distancing measures installed across the UK and rest of the world.

The commission says in its latest guidance that trustees should consider “their short, medium and longer-term priorities, and see if they need to amend their financial planning given their current situation”.

This should include deciding whether or not certain projects or activities could be stopped or delayed in order to focus on essential spending if the charity faces financial challenges because of Covid-19.

Limits on the use of reserves or assets should be ascertained, the guidance says, and if the limits are internal the reserves could be redeployed for use immediately.

Restricted funds might be accessible if the restrictions are amended, the guidance says, but the commission warns charities that this should be done only if other options are exhausted.

“The commission encourages you to also carefully consider the wider and longer-term impacts of making such a decision on your financial resilience and donor relationships,” the guidance says.

“You should seek professional advice on this if you can. The commission will be as helpful as possible and offer what guidance we can.”

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