Charity Finance Magazine update

Wednesday, October 07, 2020 9:45 AM | Farah Mendlesohn (Administrator)
  • Charity Finance delivered a report in September assessing how well charities did in lockdown. The key take aways;

  • ·       9 out of 10 charities expect their ability to deliver their objectives impaired;
  • ·       Charities face a possible £10bn funding gap in the next six months with smaller charities and cultural places/event based charities suffering disproportionately;
  • ·       Charities with incomes of less than £500,000 were more likely to expect reductions of over 50% they are less likely to have been able to take advantage of furlough schemes or to be eligible for funding grants, or to have substantial reserves.
  • ·       Larger charities have been able to draw down on invested income and have furloughed up to 90% of their payroll; but those dependent on local authority grants and contracts are faced also with the threat of local authority cuts: 5-8 local authorities are threatening bankruptcy, and none have committed to the increase in last year’s National Living Wage.
  • ·       Furlough has caused issues for operational finance: management information isn’t up to date, transactions haven’t been posted for months, and budget holders are often lacking in information and direction. In particular, costs of overheads need to be recalculated as they may need to be re-costed for services to break even at this time.
  • ·       Grant making charities are receiving ever greater calls on their resources: this will include fraudulent claims: ensure that due diligence mechanisms are in place, check that there has been a strategic review prior to the application which has a clear way forward in the crisis and does not simply extend pre-Covid planning; ensure that furloughed staff are not being used to deliver outcomes and are not part of a claim against a pre-Covid awarded grant. Some of your grants may be set up to be drawn down cash: ensure that this is available and that you are monitoring any increase in demand that might shorten the period for which funding was intended.

  • Charity Finance’s October included a report on transparent reporting. This remains poor, with particular concerns around:

  • ·       While risk registers were in place, several charities did not discuss how risks were to be mitigated.
  • ·       Reserves: most charities surveyed had a brief reserves policy which quoted working capital and income risks as a reason to hold reserves; although most explained the reason for their target reserves, many did not explain how they intended to achieve this target.

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