Bates Wells Briefing for Charities & Social Enterprises | 15 April

Bates Wells highlights

Last week we ran a webinar jointly with NCVO and CFG on Finance and Your Charity: Navigating the Government Schemes; Managing Solvency

You can access a recording by registering for the webinar at this link.


At a glance

Over the weekend, the government announced some coronavirus funding for NGOs.

The government has announced additional coronavirus funding for families with adopted children.

Big Society Capital has announced a £100 million programme of loans and investment to help social enterprises, charities and small businesses in disadvantaged areas affected by the coronavirus pandemic.

BOND has published a survey of its members about how COVID-19 is affecting international NGOs’ finances and operations. 

The House of Lords Library has published “Coronavirus: What does it mean for the Brexit transition period?”


Charity Commission

Updated coronavirus guidance

Last week the commission made a few changes to its coronavirus guidance.  In particular it has:

  • Added more details about the government support streams for businesses that are available to charities.  In particular: “In a letter to the Digital, Culture, Media and Sport Select Committee (PDF), Rt Hon Oliver Dowden CBE MP, Secretary of State for Digital, Culture, Media and Sport, confirmed that: charities can access the Coronavirus Job Retention Scheme – the Chancellor explicitly said this is available to charities; charities with fewer than 250 employees can also get support for paying sick pay to employees; charities and social enterprises earning more than 50% of their income from trading are eligible for loans supported by the Coronavirus Business Interruption Loan Scheme; charities with retail arms, such as charity shops, may also be eligible for the Retail and Hospitality Grant Scheme, if their premises has a rateable value of up to £51,000 – local authorities will write to eligible charities
  • Added the number for its contact centre (0300 066 9197) which is open Mon-Fri 9am-5pm, as well as a dedicated email address for charities who need to contact them about delays to their annual returns and accounts: [email protected].
  • Clarified the section on charities changing their objects in order to help out with coronavirus.
  • Added the Association of Chairs to its list of links to external resources.

Helen Stephenson, CEO of the Charity Commission, has written for Civil Society Media “Covid-19 highlights the lifeline that charities are to so many – and we are playing our part as regulator”.  She refers to the topics the Commission has issued specific COVID guidance about and says “If you have further ideas on what we should be doing, please let us know.”

Inquiry report

Name of organisationBrief descriptionAnything unusual e.g. unusual facts or novel/rare use of Commission’s powers
Markaz – EL Tathgheef – EL Eslami (The Centre for Islamic Enlightening) (328364)Inquiry reportThe commission opened a compliance following a report obtained from the liquidators of a company connected to one of the trustees showing the charity as a creditor of the company, and that it was owed £708,200. The monies owed by the company had not been reflected in the charity’s accounts.
The inquiry found no evidence that the connected trustee declared his conflict of interest and withdrew from any discussions or decisions in relation to the loan to the company. The inquiry could not see how the remaining unconflicted trustees could not be aware of the conflict and should have ensured the connected trustee took no part in the decision-making processes.
Despite the poor decision making and lack of financial oversight, the commission was satisfied there was no financial loss to the charity as a result of making the loan. The connected trustee resigned in 2016.

General

The Department for Culture, Media and Sport (DCMS) Select Committee has launched a wider  inquiry into the impact of COVID-19 on the industries and organisations that fall within its remit, including for example the cultural and creative industries, civil society, sport, tourism, heritage, publishing, media, journalism and telecoms.  The Committee calls for evidence relating to:

  • The immediate and long-term effects of the pandemic.
  • How well the government’s measures have addressed sectoral needs and what lessons can be learned.
  • What further support is, or will be, needed.
  • How the sector might evolve after the pandemic and how the DCMS might support innovation.

The Committee requests that responses be submitted by 1 May if possible. It expects to hold evidence sessions from late April into May.


Government funding

Main funding package announced last week

As you will know, on 8th April the Government announced £750 million of funding for ‘frontline’ charities across the UK:

  • £360 million direct from government departments to charities providing key services and supporting vulnerable people. These include: hospices – allocation of up to £200 million; St Johns Ambulance; victims charities, including domestic abuse; vulnerable children charities; Citizens Advice
  • £370 million for small and medium sized charities, including through a grant to the National Lottery Community Fund for those in England.
  • The Government will match fund whatever the public donates to the BBC’s Big Night In charity appeal on 23 April, starting with a contribution of at least £20 million to the National Emergencies Trust Appeal.
  • The Government said they will identify the recipients and charities should receive funds in a ‘couple of weeks’. The National Lottery Community Fund grant pot is expected to be operational within a similar time frame.
  • Devolved administrations are expected to receive £60 million through the charities pot, as calculated with the Barnett formula (which is the formula the government uses to automatically adjust the allocation of funds to devolved bodies to reflect their spending levels). There may be further Barnett allocations, dependent on the final projects funded through the £360 million direct grant pot. See here for further details.

For comment from:

  • NCVO’s Elizabeth Chamberlain see this blog 
  • CFG’s Caron Bradshaw see this blog 

Additional funding for international development

On Sunday (12 April) the government announced a package of £200 million which “will back UK charities and international organisations to help reduce mass infections in developing countries which often lack the healthcare systems to track and halt the virus”.  The £200 million is broken down as follows:

  • £130 million for the new UN appeal, including: £65 million for the World Health Organization; £20 million for UNICEF; £20 million for the UN Refugee Agency (UNHCR); £15 million for the World Food Programme; and £10 million for the UN Population Fund (UNFPA). 
  • £50 million for the new International Red Cross and Red Crescent Movement appeals to support services in difficult to reach areas such as those suffering from armed conflict. 
  • £20 million for international NGOs, including UK charities, which are “using British expertise and experience to deal with coronavirus”.

Charities’ eligibility for government support for the retail, leisure and hospitality industry

Charity Tax Group has produced a guide to whether charities are eligible for any of these three government schemes:

  • Expanded Retail Discount 
  • Retail Hospitality and Leisure Grant Fund 
  • Small Business Grant Fund.

The guide includes worked examples.    


Sector coronavirus loans

Last Thursday, Big Society Capital announced a £100 million programme of loans and investment to help social enterprises, charities and small businesses in disadvantaged areas affected by the coronavirus pandemic.  It includes:

  • A new Resilience and Recovery Loan Fund, managed by Social Investment Business (SIB), to enable social lenders to provide emergency loans to affected social enterprises and charities without requiring personal guarantees and charging no fees or interest for 12 months. Big Society Capital will provide an initial investment of £25 million, with loans backed by the Government’s existing Coronavirus Business Interruption Loan Scheme (CBILS) and issued through SIB working initially with Charity Bank, Social and Sustainable Capital and Big Issue Invest. Co-investment from social investors is being sought to supplement Big Society Capital’s initial investment.
  • Smaller, emergency loans will also be made available on the same no fee, no interest for 12 months basis to small businesses and social enterprises in more deprived areas, by ensuring the Community Investment Enterprise Facility (CIEF), administered by Social Investment Scotland, can effectively access the CBIL Scheme. £29 million of Big Society Capital’s and other investors’ capital will be invested initially, while additional institutional investors are being approached to co-invest. The loans will be delivered through the BCRS Business Loans Limited, Business Enterprise Fund, Finance for Enterprise and First Enterprise.
  • Up to a further £50 million which Big Society Capital will reprioritise and repurpose over coming months to address emerging funding needs among social enterprises and charities, either through the Resilience and Recovery Loan Fund or alternative funding vehicles as appropriate.

The initial funds will come through Big Society Capital repurposing existing investments and rescheduling planned commitments for future years. The aim is to significantly grow the response with support from other investors. The initiative has been enabled by the Department for Digital, Culture, Media and Sport (DCMS) accelerating the release of previously committed dormant bank accounts. In response to this, Bates Wells’ Sung-Hyui Park has commented “This is a hugely challenging time for charities and social enterprises, many of which need access to different financial options to stay afloat and keep key operations running. It is heartening to see such a rapid, practical and sizeable fund being made available by Big Society Capital, Social Investment Business and others to support charities and social enterprises at this critical time.”


Children’s services

The government has announced up to £8 million to pay for different types of therapeutic support for families whose adopted children may have already suffered trauma and be made more anxious owing to the uncertainty of the effects of the virus.


Education

Schools

The Department for Education has issued guidance to education providers on the safeguarding of children during the coronavirus (COVID-19) pandemic. The information has been issued to support schools, colleges, and other education providers with keeping students safe—both on site and online. The guidance addresses issues including child protection policies, designated safeguarding leads, attendance, online safety, and the recruitment/movement of staff and volunteers. The guidance is relevant to all schools, whether maintained, non-maintained or independent, and also benefits maintained nursery schools, pupil referral units and colleges. The guidance is being kept under review and will be amended and updated as necessary.

The Department for Education has also published guidance for schools on the financial support available to them when dealing with exceptional additional costs associated with the COVID-19 pandemic. The guidance covers the period from March to July 2020 (the end of the 2019 to 2020 summer term) and sets limits on the additional funding available to schools (relating to the number of pupils). The guidance states that exceptional costs are likely to include:

  • Increased premises costs due to schools having to remain open during school holidays.
  • Support for free school meals children who are not attending school and are not covered by the government voucher scheme
  • Additional premises cleaning costs.

Schools will be required to provide assurance that costs are legitimate additional costs incurred due to COVID-19 and to keep records of all expenditure. Payments should be made from schools existing budgets and claimed back. The DfE has stated that further guidance will be published in June 2020 regarding the claims process.

Further education

The government has set out how it expects vocational and technical qualifications to be assessed and awarded in the coming weeks and months.

Also see below under International development.


Data protection

COVID-19 has resulted in a wide range of organisations engaging with children online for the first time –  to provide learning and other educational resources. Mairead O’Reilly has written here about the some of the data protection issues that need to be understood by organisations engaging with children online.


Domestic violence

The Home Secretary has launched a new public awareness raising campaign highlighting that if anyone is at risk of, or experiencing domestic abuse, help is still available.


Social finance

Coronavirus resources – where to look for funding opportunities? The Impact Investing Institute has published a list of funding resources for social purpose organisations and investors.

Virgin Money Foundation gives over £850,000 to fund vital local community groups responding to the COVID-19 pandemic in the North East.

Impact Decoded: How the core principles of investing for impact can help us fund smart through uncertain times. Alessia Gianoncelli, head of EVPA’s Knowledge Centre, writes the first article in the Pioneers Post/EVPA Impact Decoded series, looking at how we can decode the core characteristics of investors for impact and explore how they can guide others to back high-impact solutions in the smartest possible way.

Phenix Capital has published the 2020 Global Impact Platform Fund Report: A market map for Institutional Investors. This report compiled data from 487 fund managers representing 1306 impact investment funds listed on Global Impact Platform, and provides analysis on the institutional impact fund market. The report can be purchased, but the landing page provides some headline findings.

For those working in the affordable credit landscape and with CDFIs, Fair4All Finance has launched two programmes to help the affordable credit sector during the coronavirus crisis: The Covid-19 Resilience Fund will provide up to £5m in grant funding to CDFIs and credit unions in England in April; and an expanded Affordable Credit Scale-up Programme will help the sector to play its part in the 10x growth challenge in the delivery of affordable credit to people in vulnerable circumstances.


International development

BOND has surveyed its members to find out how Covid-19 is affecting international NGOs’ finances and operations.  See here for the full results which include that:

  • Due to a drop in donations, nearly a third of the UK international development sector’s £3.89bn income is at risk.
  • 86% of BOND members are cutting back or considering cutting back in-country programmes. This includes postponing programme implementation, closing country offices and limiting income to global programmes.   This is for several reasons: contractual constraints prohibiting INGOs to continue to pay staff despite being unable to fulfil programme proposals, health risks to frontline staff and escalating inflation causing in-country costs to rise.
  • While most organisations said they would survive the next three months, their financial positions after three months were tenuous and uncertain. Only 37% said they could survive longer than six months without additional funding.
  • Many NGOs are still waiting to hear from government donors, like the Department for International Development (DFID), on whether they can use their restricted income to pay core staffing costs while putting activities on hold.

The Guardian reports the UK’s decision to spend tens of millions of pounds of Department of International Development (DfID) funding private schools overseas has been called into question following a decision by the World Bank to halt its investment in the sector.  DfID has given millions of pounds to low-fee private schools (LFPS) in countries around the world, including Nigeria, Kenya, Uganda, Ghana and Pakistan. It believes the money can help improve the educational prospects of children in places where public-sector schools are poor or lacking.


Volunteering

See here for NCVO briefings on:

Volunteering and furloughing: what do we know?” – this covers whether furloughed stuff who wish to volunteer and what the furloughing rules mean for charities wishing to take on new volunteers who have time to give due to being on furlough leave.

 “Five lessons from the past about spontaneous volunteering in emergencies”.


Local authorities

The Department for Education has published provisional guidance for local authorities in relation to their children’s social care responsibilities in light of the COVID-19 pandemic. The guidance covers (among other things) issues concerning keeping in touch with a child, the need for personal protective equipment, contact requirements and adoption introductory meetings.


State aid

The House of Lords EU Internal Market Sub-Committee has sent a letter to a Minister in the Department for Business, Energy and Industrial Strategy (BEIS), summarising the key findings from the Committee’s inquiry on the level playing field and state aid and asking various questions.  The Committee asks the Minister to respond to the conclusions and requests for clarification set out in the Committee’s letter by no later than 15 May 2020.


Brexit

See under State aid above.

The House of Lords Library has published an article in two parts, entitled Coronavirus: What does it mean for the Brexit transition period?  The first part explores how the focus of governments on COVID-19 has affected the progress of negotiations on the future UK-EU relationship and the implementation of the withdrawal agreement. It includes the following points:

  • Reportedly, informal discussions on the future relationship are ongoing, but it has not been possible to continue the negotiations by video-conferencing because of the number of participants involved and security concerns about the technology. It is not clear how the talks will progress over future weeks.
  • In the face of pressures on the negotiating process, there have been several calls for the transition period to be extended (for example, from the Scottish and Welsh governments). The deadline for agreeing an extension is 30 June 2020. The government has maintained that it will not ask for or agree to an extension.
  • The Institute for Government has described the scale of the task in implementing the citizens’ rights provisions of the withdrawal agreement and the Northern Ireland protocol as “huge”. In its view, the coronavirus outbreak has “cast doubts on whether everything can be done by the current deadline of 31 December 2020”.

The second part looks at how the UK is affected during the transition period by the EU’s response to COVID-19, what is happening with the UK’s plans to negotiate trade deals with non-EU countries, and what this means for Parliament. It includes the following information:

  • The UK is still subject to most EU rules, including EU rules on state aid, during the transition period. The European Commission has approved three UK state aid schemes under the temporary framework on state aid, which was adopted on 19 March 2020 in response to COVID-19. However, the UK can no longer take part in the EU’s decision-making and legislative processes in the same way as EU member states.
  • The Trade Justice Movement (a UK coalition of nearly 60 civil society organisations) wrote to the government in late March 2020 asking it to delay the start of trade negotiations with the US.
  • There is no statutory role for Parliament in deciding whether there should be an extension to the transition period. If an extension were to happen, further legislation would be needed to remove the statutory ban on UK ministers agreeing to it.

Regulators’ public law duties

Bates Wells’ Melanie Carter has written for the Law Society Gazette on regulators’ public law duties in the time of coronavirus – see here.  


Charity law cases

There has been another case in the First Tier (Charity) Tribunal where a trustee has been unsuccessful in an appeal against a disqualification order.  Samson Ochieng v Charity Commission for England & Wales.  Mr Ochieng’s appeal was against an Order made by the Charity Commission disqualifying him from being a trustee for a charity and from holding any office or employment with senior management functions in a charity for eight years. The Order was made under s.181A of the Charities Act 2011. The commission argued there were four areas of misconduct or mismanagement including: the transfer of charity funds to Mr Ochieng and his wife and into his bank account; the failure of the Charity to account to Comic Relief for a grant that it had paid or to repay it when asked to the sum of £350,000; and the failure to keep proper records.  The Tribunal agreed with the commission’s submission it was in the public interest that Mr Ochieng should be disqualified as a trustee as a large sum of money was unaccounted for from one of the UK’s largest and most high profile charities as a result of his misconduct and mismanagement.


Governance

In this blog, New Philanthropy Capital’s Principal for Strategy, Charlotte Lamb, explores what charity trustees need to be thinking about now, so they are prepared for the new challenges ahead.


Northern Ireland

The Charity Commission for Northern Ireland (CCNI) is highlighting changes to the joint guidance by the UK’s charity regulators for independent examiners and auditors for reporting matters of material significance when  dealing with charity accounts. Changes made include additional guidance on reporting at times of national emergency, reflecting the COVID-19 situation.


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Disclaimer – The information contained in this update is not intended to be a comprehensive update – it is our selection of the website announcements made which we think will be of interest to charities and social enterprises. The content is necessarily of a general nature – specific advice should always be sought for specific situations.


This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of April 15, 2020.