Charity reserves can be spent to “help cope” with Covid-19, says regulator

Charity reserves can be spent to “help cope” with the coronavirus pandemic, the Charity Commission has confirmed.

The verification comes as part of the regulator’s guidance for charities affected by the Covid-19 outbreak.

Commenting on reserves and restricted funds, the Charity Commission said charities should “consider their short, medium and longer-term priorities” and determine whether they need to “amend their financial planning” given their specific situation.

In some cases, this may include spending charity reserves, or restricted funds where reserves are not possible.

However, trustees are expected to first review projects, spends or activities which can be postponed to focus on “essential spending if they are facing financial challenges”.

In the guidance, the regulator says: “You should identify which of your funds or assets have limits on their use. If these are internal only – for example your charity has decided to earmark certain funds for a particular purpose – you may be able to re-prioritise these.”

Meanwhile, restricted funds – those which cannot be spent at your discretion – may only be used for a particular and defined purpose, “except in exceptional circumstances”.

“The Commission encourages you to also carefully consider the wider and longer-term impacts of making such a decision on your financial resilience and donor relationships. You should seek professional advice on this if you can,” the guidance states, adding that “all decisions on such financial matters should normally be taken collectively, and significant decisions and action points noted in writing.”

To view the guidance in full, please click here.

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