The Charity Commission has set out guidance to help charities facing difficult financial decisions as a result of the coronavirus pandemic.
The regulator said it had produced the guidance because it understood that many trustees, particularly those at smaller charities, were having to cope with “serious financial challenges that will have a major effect on their charities and those who depend on them”
It says that trustees must always start by considering the best interests of the charity. This is likely to include a number of factors, such as the trade-off between reducing costs and meeting the needs of the charity’s service users.
If a charity has any investments or other assets that it could sell, it should consider that it might receive a poorer return on those assets than in normal times, meaning charities should have clear reasons for supporting any decision to sell.
“As trustees you will generally be protected when you have carefully applied your skills and experience to decisions and taken advice when needed,” the guidance says.
“We recognise that these decisions will often be difficult, that there may not be an obvious ‘right’ decision, and that charities will be exposed to higher levels of risk than in more normal times.”
The guidance recommends charities go through a process that involves considering their existing financial situation, looking at options for minimising costs and protecting and increasing income, and keeping the charity’s operations and finances under regular review.
Paul Latham, director of communications and policy at the Charity Commission, said: “Many trustees are facing very difficult financial decisions, prompted by unprecedented demands on their services, sudden changes in the needs of their beneficiaries or significant funding pressures.
“Some will be choosing between meeting urgent need now or dialling down services in order to survive into the future. Others will be considering whether managed insolvency, joint working or merger with another charity is the most purposeful way forward. These are hard choices and the Charity Commission cannot solve the difficulties charities face.
“But we can try to help charities navigate the choices they face. This guidance aims to give trustees, especially in smaller charities, a clear framework for making decisions that will help them address the financial challenges facing their charity.”