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Home / News and Insights / FAQs / COVID-19 and charities: Grant-makers and funders FAQs

We continue our series of FAQs for our charities COVID-19 Hub with questions raised by grant-makers and funders.

We will be posting these responses on our COVID-19 Hub. Here you can also access further updates and content from our charities team, as well as content in respect of wider COVID-19 related concerns, beyond those specific to the charity sector.

  • 1 We have funds – can we divert them from our usual grant-making strategy into the NHS or coronavirus relief?

    The Charity Commission’s Coronavirus (COVID-19) guidance for the charity sector acknowledges that many charities will want to help in the current crisis. It notes, however, that charities wishing to do so should first consider the terms of their objects. Charity trustees can only act in furtherance of their charity’s objects, so you will need to check if your charity’s objects are wide enough to encompass any grant you propose to make.

    As the Charity Commission notes, there are many ways in which charities may be able to respond to the crisis, either directly or indirectly, within their objects. They give the examples of a charity with an object to advance religion, which may be able to offer support as part of its pastoral work, or an arts charity, which might help relieve isolation through its online work.

    If your charity has a general charitable object which allows the trustees to act for any charitable purpose, then it would be wide enough to encompass responding to the crisis (provided the activity is in furtherance of a charitable purpose).

    If your objects are not wide enough for what you envisage, then it may be possible to change or widen the objects. There may be power to do so in the governing document, but it is likely that Charity Commission consent will be needed – and the Commission’s prior written consent would definitely be needed if the charity is a company or CIO. The Commission says that it is prioritising requests required urgently due to COVID-19.

    Before considering a change to your charity’s objects, however, the Charity Commission cautions that charities should consider:

    • whether there are other charities that may be better placed to respond than yours; and
    • the wider and longer-term impacts of changing your charity’s objects, including on your existing beneficiaries.

    Whether or not your objects are wide enough to enable the charity to support the crisis, deciding to change your grant-making strategy is a serious decision. The point above applies, as to whether there may be other charities (and central funds) better placed to offer the support. In addition, the trustees should consider the impact on those who would be recipients under your usual grant-making strategy – if they were to fold as a result, would that be the better result overall?

    If your charity receives funding from others, you also need to check there is no restriction on your funds which would prevent you applying the funds in a different way. Even if there is no restriction, if funders have given to your charity on the basis of its usual grant-making strategy, it would be prudent to communicate with them if a significant change from that strategy is proposed.

    In circumstances where there is heightened need and limited resources, these are not easy decisions. As ever, the trustees should be take care over their decision-making (the Commission’s guidance It’s your decision is helpful) and record their decisions.

  • 2 We have assets that could help – can we give or lend them to the NHS/Social care?

    We have seen various examples of such assistance in recent weeks, eg where a charity which is temporarily closed lends a 3D printer to the frontline effort.

    The charity’s assets can only be used in furtherance of the charity’s purposes. Just as with question 1 above, the first point to consider here, therefore, is whether your charity’s objects are wide enough to allow the trustees to use the funds for the proposed purpose.

    As above, if the purposes are wide enough, then the trustees can in principle apply them for the purpose. However, in deciding whether to do so, the trustees should consider what use they would have made of the assets otherwise and the impact on beneficiaries of any change, as well as the likely future need for the assets. As in question 1 above, it may be that other charities (or government funding) can provide the assistance you propose more easily and efficiently, whereas your charity may be better placed to assist the beneficiaries who would usually benefit from the charity’s assets. (In this respect, the question of whether to give or lend assets would be relevant, if the trustees decided they did wish to apply their assets in this way, as lending on suitable terms would of course enable the assets to be available again for beneficiaries).

    As in question 1 above, if the charity’s objects are not wide enough to support the move, then there may be an option to amend the objects (which is likely to require Charity Commission consent), and similar considerations will apply for the trustees in deciding whether amending the objects is appropriate here.

    Much will depend upon the particular circumstances of the case so, if charity trustees are in doubt as to what is appropriate, we would invite you to pick up the phone to discuss with your usual BDB Pitmans contact.

  • 3 We have permanent endowment/restricted funds – can we release those restrictions so we can apply funds for the relief effort?

    Although the Charity Commission considers the question of using restricted funds in its Coronavirus (COVID-19) guidance for the charity sector, it does so in the context of where the charity is seeking to access the funds due to concerns about its own financial position, rather than to divert the funds elsewhere.

    It may be possible to amend or release the restrictions to allow expenditure of capital – it will depend upon the terms of the permanent endowment or restricted fund in each case. In most cases, it is likely that the Charity Commission would need to be involved before the funds could be released.

    Where it is possible to release the restrictions, then, as well as following the appropriate procedure, the trustees should, as for the response to question 1 above, be clear that doing so is in the best interests of the charity and, in this case, that the funds could be used more effectively if the capital could be spent. Again, the trustees should also confer with the donor of the funds where possible.

    If the permanent endowment or restricted funds are currently held on purposes that would not be compatible with expending them for the relief effort, then that would be similar to the situation in question 1 above – the purposes for which the funds are held would need amending if the funds were to be applied in this way. Again, this may be possible (with Charity Commission consent), but would depend upon the terms of the fund in each case. Similar questions would need to be considered by the charity trustees as in the response to question 1 over whether it is appropriate in the circumstances to seek to amend the purposes and the likely impact on beneficiaries.

  • 4 We are not able to use our office space at present due to lockdown. Can we offer it (with or without rent) to assist the NHS/ frontline?

    Many charities have had to close their office or other space in the current lockdown conditions. Where space is being unused but might be re-purposed for those on the frontline, it is natural for charities to consider this.

    Where the property is not currently required for the charity’s purposes (eg because the charity cannot use it in lockdown), then it is appropriate for the trustees to consider options for the property to be used – although with the focus being on what is best for their charity. One option to consider might be offering space on suitable terms to those who may be able to use it at this time, which may include those on the frontline.

    If considering doing so, the first question, as in the previous questions is whether the charity’s objects are wide enough to permit this. If not, then the starting-point would be to rent the space on an arms-length basis (albeit within the confines of doing so in the current lockdown market), otherwise the charity would be benefiting a purpose which is not a purpose of the charity. In the current circumstances, where there is probably not a commercial market for the property, there may be a case to be made for any rental charge being close to nominal. Otherwise, if the charity trustees are minded to allow use of the space on favourable terms which are outside its objects, it might amount to an ex gratia payment, for which Charity Commission consent would be required.

    If the charity trustees wish to consider offering or renting out its space, they will need to consider all the relevant factors. These will include considering the terms on which the charity holds the property – do they have power to offer it or rent it out in this way? Do they need any consent(s) to do so? They should also consider that the property will be needed again when the charity can use it, and there is no clear idea as yet when that will be – how will the trustees ensure the property is available when the charity needs it? They should also check their insurance arrangements and any lockdown arrangements applied to the property which are outside the charity’s immediate control (eg imposed by a landlord) – is the building accessible? There is also the question whether the property would be suitable to be offered – would it be wanted? And, if it is, would those occupying want to make changes? While there may be positive aspects to the property being occupied, such as security benefits, there can also be negative aspects- what happens if the property is damaged? The charity will need to ensure that its rights are protected and it should also consider the tax consequences of its decision.

    As ever, the trustees should take care to record their decision.

  • 5 We want to make grants to help alleviate the crisis, but our usual policy on due diligence restricts us. We would not normally make a grant to a charity facing imminent collapse, but during these unprecedented times, what are our fiduciary obligations?

    As you note, we are not living in ordinary times at present, so it is appropriate for the charity trustees to consider whether and, if so, how they should adapt their usual policies to the current circumstances.

    The sudden impact of the lockdown has meant that many organisations have been thrown into financial distress, through no fault of their own, and may not have a clear idea whether they are financially viable. It is indicative of how widespread a problem this is that the Business Secretary has announced a suspension of the wrongful trading rules (due to be enacted in legislation shortly) designed to enable businesses to continue to run even if there are insolvency fears.

    In such circumstances, it would be reasonable for the trustees to consider a revised policy for the pandemic period, adjusting the due diligence requirements to the extraordinary circumstances in which their grant applicants now find themselves. In doing so, the trustees must be guided by the usual primary consideration of how best to further their charity’s purposes, combined with a risk framework suitable for these times.

    The Charity Commission’s guidance on risk management, although not written with a view to operating in a pandemic, can still assist here. It is a question of considering the (new) risks and how best to mitigate them, for example by making greater use of smaller regular staged payments. For higher risk grantees, the trustees may consider a more agile reporting mechanism, perhaps setting up a regular telephone call to gauge how matters stand – regular communication, as resources permit, will be key. Where grantees receive grants from other grant-makers, it may also assist to contact them and share your thinking (and perhaps the risk). Generally, as things are changing so rapidly, the trustees will likely need to adapt their approach to risk and due diligence more quickly, hopefully eventually returning to something approaching ‘normal’. It will also be more important than ever that the trustees take care to record their decisions.

    The trustees may also be reassured to note that, in its Coronavirus (COVID-19) guidance for the charity sector, the Charity Commission has stated, ‘We want to assure charities that our approach to regulation during this uncertain period will be as flexible and pragmatic as possible in the public interest, whilst helping trustees to be aware of and think about the wider or longer impact of their decisions on their charity.’

  • 6 We have made various grants and expect some of our grant recipients are now in difficulties – presumably it is ok for us to make contact with them and agree new terms for our grants?

    It is certainly appropriate to approach grantees and gain an understanding how they have been impacted by the crisis and, in particular, the likely impact on your grant projects. In contemplating new terms, the trustees should consider similar points to those in question 5 above – there will be risks to consider, and mitigate where possible, where a grant recipient is now in financial difficulties. In addition, any change to the terms, albeit for entirely understandable reasons, is a change to the decision the trustees made previously, so you should be clear as to the basis and rationale for that change.

    The trustees should also consider their priorities here and, as in question 5 above, how they may want to adapt their grant-making while the crisis is ongoing and, as usual, be careful to record their decisions.

    The trustees may also find some reassurance in the results of a recent survey carried out by the Association of Charitable Foundations which gives an indication of different ways in which funders are responding flexibly to the crisis.

  • 7 We are concerned that some of our grant recipients may no longer proceed with their programmes. We appreciate the difficulties but we do want to maintain our focus on our priorities. What is our best approach here?

    You are right to be concerned about the impact of the crisis on your grant recipients, and the resulting impact for your programmes. It will be important to communicate as soon as possible with your grantees to establish the situation and gauge the extent to which any of those programmes may now be at risk. The trustees will then be in a better position to consider the situation overall and decide what course of action may be appropriate.

    Depending upon the situation, this might mean deciding to revise your priorities (eg where certain projects cannot be performed efficiently, or at all, under lockdown conditions) or it might include increasing funding (with suitable safeguards) to support a programme, seeking proposals from the grantee for how to continue the programme (eg the grantee may seek to collaborate with another charity with complimentary resources), deciding to defer a programme for a time, or in some cases taking the difficult decision to cut funding (in accordance with the grant terms).

    Whatever decisions the trustees take, they should keep the grant recipients informed – they need to manage their cashflow and staff needs – and, of course, record those decisions.

Comments

We will be writing up further FAQs soon, but do let us know if you have any urgent questions in the meantime.

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