News and insight from our Charity team.
Can a charity's reserves and restricted funds be utilised to help through the Coronavirus crisis?
- AuthorJulia Seary
Understandably, many charities are currently very concerned about their financial position. As a priority, trustees should consider what are their short, medium and longer term priorities, and see if they need to amend their financial planning given their current situation. Trustees are encouraged in particular to think about whether or not certain projects, spends or activities can be stopped or delayed in order to focus on essential spending if they are facing financial challenges at this time.
Reserves can be spent to help cope with unexpected events like those unfolding at present. You should identify which of your funds or assets have limits on their use. If these are internal only and your charity has ring-fenced certain funds for a particular purpose, you may be able to re-prioritise these. If they are restricted funds (meaning they cannot be spent at trustee discretion) then they may only be used for a particular and defined purpose. For example, if you have a permanent endowment, it may have restrictions on selling it to release funds.
If there are restrictions, in some instances there may be ways to amend these restrictions, but accessing or releasing restricted funds should only be considered if other options such as reserves are not possible. You are encouraged to carefully consider the wider and longer term impacts of making such a decision on your financial resilience and donor relationships.
All decisions on such financial matters should normally be taken collectively, and significant decisions and action points should be noted in writing.
If you have further questions or concerns, please do not hesitate to contact us.