Written by Adam Fouracre, CEO Stand Against Violence
We face uncertain times with no defined, or even estimated, time limit. While I cannot speak for all charities I can speak of our own situation and the impact coronavirus is having on SAV.
The third sector is vast with many organisations doing many things. Many will be key in providing support and help at this time. Yet as a sector we have been overlooked by Government. Some charities may indeed not have a need for their staff at this time and can furlough their workforce to avoid ongoing costs against the backdrop of uncertain funding income, and loss of other income sources. Many funders are also suffering the logistical fall out and delaying decisions on funding, this will inevitably impact on the grantees who are waiting with bated breath while bank accounts dwindle.
The real scandal for the charity sector is we are advised by the charity commission to hold 6 months’ reserves – many funders will not consider providing funding if you have more than these six months. I have come across this on numerous occasions and always disagreed, the current situation confirms my argument. As an organisation SAV has always maintained the view that we will hold enough reserves to honour our annualised contracts and overheads wherever possible. Given that many grant applications have a 3-4-month turnaround, 6 months’ of reserves would leave us very vulnerable and constantly on a knife edge – no bid wins would leave only 2 months funding remaining at any point. Charities who have stuck rigidly to the 6 month reserve limit will no doubt struggle in this time and may even disappear because there is no resilience in their finances. Currently all emergency funds announced have only been for those directly supporting the fight against coronavirus, but what about the many other small charities that do vital work in other areas. They may not be in such high demand now, but will be needed again when this situation settles. Will they have survived? This is a situation fuelled by some funders and the commission’s standpoint and must change for the future. If a charity can justify its reserves and policies by demonstrating all due processes are followed then they should not be penalised.
If SAV only had 6 months reserves at this stage we would have no choice but to lay off staff and risk closure in 6 months. However, we decided on a different course and chose to hold over 6 months reserves, sacrificing certain funding opportunities. As a result we are able to keep our staff in employment, we are able to offer them security in these uncertain times, and we are able to adapt our work to be able to offer virtual support to schools and parents who are now supporting their kids at home. We would not be able to do this if we had to furlough all our staff.
However, there is concern for the long-term impact on us. Without income generation for the foreseeable period, and without funders making timely decisions, we could see the knock-on effect of this for some time to come. How do we mitigate this, how do we ensure funding resumes in 6 months’ time? How do we survive once we hit our limit, and more importantly how do we ensure we deliver on our charitable aims without the resource to do so? Government has announced 80% of salaries to be covered in the event a worker is furloughed. We do not need to do this, and it would be immoral to do so just to save funding. However, we still must pay 100% of our salaries with a complete loss of income so how do we plug the hole and prevent the financial haemorrhage?
I am calling for the following:
- Government to make grant provision for charities of 80% of salaries for retained staff, if the charity has lost essential income and faces uncertain funding prospects for the next year.
- The Charity Commission should rescind the recommended 6 months reserves encouraging some funders to refuse applications for financially prudent charities. This recommendations should be replaced with guidance to trustees on how they should reach a decision on appropriate reserves to hold.
- Funders to reconsider their criteria and remove any considerations around reserves which ultimately encourage charities to be financially irresponsible and rely on short term planning and grant aid.