Many Visionary members are facing significant financial issues as a result of COVID-19, especially loss of income.
You do need to consider whether you need to report the issues you may be dealing with to the Charity Commission.
Working with our legal advice partners Russell-Cooke we have developed the below guidance regarding the reporting of financial losses due to COVID-19.
We have been working to support members in such times, should you have any concerns about your finances or simply wish to discuss support in their management then please do not hesitate to contact us.
Reporting financial issues to the Charity Commission
The Charity Commission do have guidance available upon what issues should be reported to them by a charity. Some of those issues are of a financial/operational nature and in current times it has come to our attention as to whether or not charities need to report the income losses they are experiencing as a result of COVID-19 to the Charity Commission.
Do we need to report financial losses due to COVID-19 to the Charity Commission?
Our overall view on this is that if the trustees are unsure whether to make a report about financial losses as a result of COVID-19 it may be better to report than not.
Unlike other more sensitive matters such as safeguarding incidents, a report in this case would be a generic one explaining that, like many other charities, income and assets have been affected by COVID-19 and the trustees are focusing on the financial position of the charity.
A charity cannot be criticised for making a report where it did not need to, but if a charity decides not to report something and the Commission later becomes involved (for example if the charity becomes insolvent) the trustees will need to be able to explain why they decided not to report it at the time. Where the Commission is satisfied that a reported serious incident is being handled appropriately, it is unlikely in the majority of cases to take further action.
Trustees should be using their judgement to consider whether an incident is significant in the context of their charity – there is no ‘one size fits all’ approach.
The guidance on serious incident reporting says that charities should report an adverse event, whether actual or alleged, which results in or risks significant loss of the charity’s money or assets, threatens the charity’s ability to operate and serve its beneficiaries, or where the charity’s financial reserves are not sufficient to cover the loss. The Commission’s table of examples of serious incidents is not a definitive list so the reference to a ‘sudden’ loss or to not having reserves does not necessarily mean that scenarios falling outside these examples are not reportable. In addition, the fact that organisations are simply complying with government requirements does not necessarily mean that the incident is not serious.
It may be better to focus on the right-hand column of that table, where the Commission lists examples where a report would not usually be required: where the value lost represents less than £25,000 of charity assets and is less than 20% of the charity’s income, and there is no significant impact on the charity’s services. If a charity falls within this, and there is no other factor which makes the incident serious, the trustees can be reassured in not making a report. Otherwise, the trustees should consider making a report.
The Commission published some guidance on 12 March about what charities should be reporting as serious incidents (this can be downloaded below). This was withdrawn the following day after being criticised for putting an additional burden on charities at an already difficult time. However, the examples mentioned are still helpful to understand the Charity Commission’s thinking:
- if a charity stops all or a significant part of its work due to coronavirus (e.g. a school that has to close or a charity that has significant activities in China which it has stopped);
- if a charity has to cancel a fundraising event and it might result in significant loss of expected funds and/or insolvency issues for the charity; or
- if coronavirus results in insolvency issues for some other reason.
The withdrawn guidance also said that where a charity thinks it might be affected due to the nature of its activities or service users but there is no impact yet, they do not need to make a report now.
Want further advice?
Please contact us at Visionary.
Or feel free to go direct to Russell-Cooke. They offer Visionary members up to 15 minutes of free advice per issue. You can submit details to Charity.NewEnquiries@russell-cooke.co.uk just ensure you quote “Visionary helpline” in the subject line of the email.