Charities and Banks – A difficult relationship

Banks are the most important stakeholder for charities with international operations. The relief they provide saves lives and protects dignity of beneficiaries in the most remote and desperate places worldwide. However, they can do this properly only when the banks allow them to do so.

 

The role of banks is often misunderstood – is it a regulator? is it an evil business? is it a money transfer agent? or is it a government spy? The answer is No, it can be all of that and more.

The role of banks is often misunderstood – is it a regulator? is it an evil business? is it a money transfer agent? or is it a government spy? The answer is No, it can be all of that and more.

Banks are private or public limited businesses and have all the pressures a business has – Yes, they can go bust and as we saw during the 1990s banking crisis, size did not matter. The failed banks had an effect of destroying livelihoods and dreams of many.

 

We live in a digital world; no activity be it a noble or a criminal can exist without it. ALL use banks and the banks then suddenly become the conduits in promoting the good and the bad – this is where the government regulation comes in, mainly aimed at stopping the bad as defined by the government and backed by hefty penalty regimes and licenses.

 

To stop the bad and to avoid penalties, the banks adjust their business practices. Each bank will have its own risk appetite, and this will dictate how they manage their customers, be it a business or a charity.

 

International charities can be a risky business for banks as they can and have been used to launder money to fund terrorist activities, evade taxes and used to hide personal wealth.

 

International charities can be a risky business for banks as they can and have been used to launder money to fund terrorist activities, evade taxes and used to hide personal wealth.

 

Banks design their systems to pick up the bad and money laundering – these systems are often sophisticated and based on artificial intelligence (AI) reflecting decades of banking transactional behavior.

 

To ensure business and commercial conflicts are managed by banks, many banks have in recent years centralised their anti money laundering checks and related decision making. As a consequence, local bank managers and relationship managers no longer have a say or control like they had in the past.

 

International money routes

 

Another layer of complication for international charities is the international nature of bank transfers.

 

In between the charity’s own bank and the bank receiving funds in another country, there are different intermediary banks subject to different regulatory regimes.

 

Each banking side (i.e. sending and receiving) does not necessarily control the banks in between. International transfers are only made possible when the intermediary banks allow them.

To understand this point, staying within your own country, we don’t need visa or custom and bag checks, however travelling outside the country, we are subject to all sorts of checks and regulations and depending on what passport you hold, your treatment will differ.

 

This is also the case with international bank transfers, like roads and flight paths there are various international money transfer routes with different intermediary banks in between. Each route is subject to its own compliance regime, regulator and political sanction regime.

 

It is in this context of money laundering risks, international charities can struggle to open a bank account, transfer money internationally or in extreme cases have their accounts closed (de-risked) with no recourse or remedy. I see this too often.

 

In my opinion, this necessarily is not because of a personal, an anti-charity or an anti faith agenda by the banks. It’s often a simple matter of compliance to anti-money laundering rules set by regulators and political governments.

 

Know Your Clients (KYC)

 

Banks need to update their systems with KYC (Know Your Client) details and below are the three main questions that they need to answer for money coming in and going out the banks:

  1. Who is donating to the charity? Does the charity itself know and make checks to ensure this is not dirty money?

  2. Who is the money transferred to? Is the bank account receiving money owned and controlled by a locally registered charity that has the permission to receive the monies by the local government or regulator?

  3. The money that is being transferred to a country, project or beneficiary – are there any sanction implications?

Once the money is in the banking system and transferred abroad, the bank becomes a facilitator, so they need to know and be satisfied that these questions can be answered.

 

Many times, charities fail to understand the importance of these questions and often lack the policies, systems and processes that can help them answer the banking concerns.

 

In the banking world, the banks do not wait for charities to develop their system, they expect them to have all the answers before any money is put into the banking system –

 

Banks are businesses and take a business approach to due diligence and anti-money laundering checks. If the bank feels the charity business is more risk than benefit in commercial terms, then it will simply fail the transactions or de-risk the charity. Banks are not obliged to give their custom to charities.

The impact of the pandemic – worst for charities

 

The pandemic has had the effect of escalating the move to a cashless economy.

 

Government Covid19 grants required businesses to have bank accounts, many small businesses did not. All this created a significant backlog in banks for business accounts. With staff shortages, working from home, closed bank branches and fewer staff, this all together has compounded the issue for charities specifically.

 

Unfortunately, it seems the banks have put charities way down down in the priority order. What was cumbersome and difficult in normal times has become impossible after the pandemic and this is most likely to stay like this for years to come.

 

Unfortunately, it seems the banks have put charities way down down in the priority order. What was cumbersome and difficult in normal times has become impossible after the pandemic and this is most likely to stay like this for years to come.

 

Charities need to up their game to stay relevant

 

In this environment, my advice to individual charities with international operations is as follows:

 

  1. Partner with charities that have proper systems in place that meet the banking anti money laundering requirements

  2. Invest in your back-office operations and do not underestimate the importance of treasury advise and protocols, especially in relation to anti money laundering processes and due diligence processes.

  3. Treat your finance function as a compliance function and not just a money transfer function. Recruit finance professionals with this in mind and relevant experience.

  4. Don’t take risks with money transfers, always assume each transfer will be questioned. Taking risks can backfire with the whole charity operation ending up in jeopardy. Ensure proper paperwork is in place before transfers are made.

  5. Anti-money laundering checks must be made on large donations (i.e. £5000 and above).

  6. Use the mainstream banking system and avoid using cash transfer agents. The audit trail often fails with cash transfer agents and increases the risk to banks.

  7. Work with local partners that have proper local registrations and due diligence in place.

  8. Large charities should establish a good working relationship with their bank relationship manager by treating this position as a key stakeholder of the charity. A transparent relationship should be forged with ongoing issues and future plans. This all helps to keep the bank informed with update to date KYCs.

 

In short, international relief should not be a about a mad rush for raising money and spending money abroad irresponsibly. It has to be done properly with proper policies, systems and processes for it to be sustainable and impactful for the beneficiaries in the short and long term.

 

Unfortunately charities can’t change banking behavior, they need to adapt to the new reality to ensure the lifeline they provide to the most desperate for their sake continues.

 

End –

 

Author: Nasir Rafiq BA, FCA is the Managing Partner of Dua Governance Chartered Accountants, an ICAEW firm specialising in charity financial governance and internal audit.

 

Nasir has directed treasury functions in large UK charities with operations worldwide.

 

Email: info@duagovernance.com

Webinar to simplify Covid19 Grants and Loans

 

Update on Q&A

Bounce Bank Loans and Charities

The condition for having more than 50% of the Business income from its trading activity does not apply to charities including Mosques.

 

Rental Income

Rental income is generally classed as non trading income, being investment income. For Bounce back loan purposes this may not be classed as trading activity.

 

Webinar Speakers

Nasir Rafiq BA FCA (Founder and Director @Dua Governance Chartered Accountant)

 

He is a widely experienced Chartered Accountant with over 20 years of professional experience. He specialises in helping organisations improve their financial governance and performance. He works with all size charities and businesses.

 

He graduated in Business Economics from University of Leicester and then qualified as a Chartered Accountant (ICAEW) with KPMG (UK). Having worked with PwC (UK) and KPMG (UK) for over seven years in the public sector, he later joined the world’s largest contract catering company, Compass Group PLC (FTSE 100). In his role as a Group Internal Auditor, he worked in the Middle East, South East Asia and Europe.

 

Nasir also worked as a Director and an Associate Partner at a Top 20 Accountancy firm in UK, leading the firms Business Governance Advisory service nationally covering the charity and business sectors.

Webinar: Furlough is Changing from 1 July. Is your Mosque / Charity ready

 

Webinar Speakers

Nasir Rafiq BA, FCA (Found Director @Dua Governance)

Nasir is a widely experienced Chartered Accountant and an expert in Financial Governance. He has extensive experience of working with charities of all sizes. He also advises many small to medium size businesses. During the lock down crisis he has been writing blogs on www.duathoughts.com and supporting many charities as they responded to the crisis.

 

Omar Rashid MCIPD (Director @The HR Dept)

Omar is CIPD qualified HR professional with widespread generalist and strategic experience. With a proven ability to work with senior managers to influence and integrate HR best practice into overall operational strategy. Omar has been working with charities and business during the lock down crisis, helping them to respond professionally and effectively.

Stress testing of the 20 large Muslim charities in UK

Ramadan this year will be like no other Ramadan before it. The virus lockdown will mean that there will be no prayers in the Mosques or community iftars (opening of the fast). Ramadan will be at home with family.

Ramadan is also a month when Muslims give their Zakat and increase their Sadaqa donations. Ramadan becomes a peak and most busy period for Muslim charities to raise funds, especially those charities that have international relief operations. They raise funds in UK to deliver projects abroad.

The fundraising planning for Ramadan starts three months in advance and the full year’s income’ depends on the funds raised during Ramadan. The lockdown this year during Ramadan will deprive the Muslim charities from carrying out many of their planned activities.

 

The story of 20 Muslim charities

 

Each year these charities collectively raise Zakat and Sadaqa monies for emergencies. This aid saves lives by providing shelter and food when local governments often fail to do so. They provide regular support to more than 100,000 orphans living in poverty. These orphans rely on this support for a better and secure future.

Each Ramadan millions of food packs are distributed worldwide and to coincide with the Hajj ritual hundreds of thousands of Qurbani sacrifices are carried out and the resulting meat is distributed to the most in need and often in the the most remote and hard to reach places.

In order to assess the impact of the lockdown on Muslim charities working in the international relief sector, I reviewed the latest submitted audited annual accounts of 20 mainstream Muslim charities. My objectives were to assess the following:

  1. Total income raised for International relief and how much is related to UK donors.

  2. Total staff employed and the total wage bill.

  3. The average liquidity of reserves and the ability of these charities to spend without selling assets or relying on debtors.

  4. The average level of unrestricted funds that that these charities held and the flexibility these charities had in responding to the economic downturn.

The table below lists the 20 selected Muslim charities in alphabetical order.

These 20 mainstream charities are responsible for a significant portion of the funds donated by the Muslim UK donor. They operate a similar business model and face similar risks and challenges. Their combined financial position can give a good indicator on the potential issues the Muslim charity sector is set to face due to the expected and forecasted economic downturn.

I reviewed each of the accounts and took an average of two years – these latest accounts covered mostly the year 2018. I noticed some issues that made the comparison and the assessment challenging. So, I had to use my own professional judgement and experience to moderate the numbers so that the findings were meaningful and relevant.

Below are the issues that I noted during my review of these accounts.

 

1. Accounts show historical position more than 12 months old

 

Often the accounts are submitted nearer the deadline which is 9-10 months after the accounting year-end. As a result, the reported numbers represent figures that may be more than 12 months old.

International relief is a fast paced sector – numbers that showed the position and performance 12 months ago may no longer be relevant. Its important International relief charities work to submit their accounts within six months after the accounting year-end.

 

2. Income breakdowns are not sufficiently broken down

 

Income disclosures do not provide enough breakdown to assess the type of income and the geography it relates to. This causes issues when comparing accounts. Different types of income attract a different cost and operating model.

 

3. Understatement of fundraising costs

 

Some accounts either understated their cost of fundraising by allocating most of their back-office operations to charitable activities or did not disclose them at all.

Within the Muslim charity sector, the slogan of 100% donation is heavily used and it may be this is resulting in charities to understate their cost of fundraising. Although this approach may suit a certain marketing narrative, it has an effect of hiding costs and the opportunity to control such costs. You cannot fix what you can’t see.

 

4. Large charity size effect

 

Islamic Relief Worldwide (IRW) reported income was £127m, the next largest Muslim charity had reported income of less than £40m. This is important to note because if IRW is considered in a similar manner to other charities then what happens at IRW can skew the averages derived from the selected sample that includes IRW. Therefore, it is important to review the averages with and without IRW to ensure the averages were meaningful and relevant.

 

Findings – the impact of the lockdown

 

After reviewing the 20 accounts and moderating to ensure they were comparable, my findings are as follows:

 

I – Income – £370m raised annually of which around £80m raised in Ramadan

 

In the last reported period these 20 charities raised a staggering sum of £370m during a 12-month period. The UK donations were £225m (61%) of this total raised. This balance included gift aid from HMRC and also included gift in kind income of around £25m – these are goods donated to charities, mainly medical from USA and food from various global Institutions.

It is estimated that these charities raised around £80m (35%) of their income during the month of Ramadan in UK. Due to the lockdown this part of the income is at risk.

 

Lockdown impact on Ramadan income

 

Due to the lockdown these charities may not be able to raise funds from the community through Events, bucket collections or within Mosques – this will deprive them from those donors that traditionally either gave cash or pledged money at Events.

The economic uncertainty, 20% salary decrease of furlough employees and a significant drop in self-employed and cash business income can have an impact of reducing the Ramadan income from the expected levels or the levels raised in the last reported accounts.

If the Ramadan income drops by 50%, this can potentially wipe off £40m in total income and around 18% of the total yearly income. Given some costs for Ramadan have already been incurred, this will have an immediate impact on charity finances and the ability of charities to raise funds during the remainder of the year.

 

II – Payroll – £40m with 1300 employed with many self-employed

 

In the last reported period, the selected 20 charities spent around £40m on wages and salaries. Using an average salary of £27,410, it can be estimated that these 20 charities employed around 1300 employees.

The total annual wage costs of these 20 charities is around 11% of the total annual income – this is competitive and better than the wider mainstream sector average.

This does not include staff employed abroad on local partner payroll and funded by these 20 charities or those that are on self employed contracts. The number of people that rely on these charities for their sole income is far higher than the reported figure in the accounts. 

 

Ramadan effect – jobs at risk

 

The sudden drop in income in one month can increase pressure on charities to reduce their overall costs, salaries being the largest costs will need to be reduced. Although the Government has announced to support 80% of the furloughed staff, this will have little effect on charities.

Furloughed staff will not be able to generate income, jeopardising the ability of the charity to continue employing staff after the lockdown when the funds are no longer there to support them.

The self-employed income support from the Government does not come in until mid-June 2020 – this is after Ramadan and may make it difficult for the self-employed to support the charities during Ramadan.

 

III – Cash reserves and liquidity – Charities had £107m in cash at year-end

 

At the end of the last reported period, 20 charities held cash balances of £107m – this was 68% of the total funds they held. This shows the biggest asset these charities have on their balance sheet is cash and the cash they raise is not significantly used to procure assets in UK.

The last reported period showed that six charities had cash balances below the sector average of 68% making them less liquid than others. During the month of Ramadan if the expected cash is not raised then these charities may suffer immediate cashflow issues.

 

IV – Low unrestricted funds can harm long term viability

 

On average the unrestricted income accounted for 23% of the total income raised. This is the portion of income where donors do not restrict the income to a project. Unrestricted income traditionally will include gift aid and Zakat monies that the charity can spend on any project that is eligible for Zakat.

During Ramadan, charities raise a significant portion of unrestricted funds by way of Zakat and Gift Aid. A significant drop in income during Ramadan will have a bigger effect of reducing unrestricted funds available for Muslim charities.

Charities held around half (46%) of their total funds as unrestricted. However, seven charities held unrestricted funds below the total average during the last reported period. If unrestricted income is significantly reduced then these charities will have less flexibility to use unrestricted funds to cover deficits in projects, overheads or charity activities that are funded by unrestricted income. 

 

The response by charities must be robust

 

Charities must act to protect themselves and the beneficiaries they serve. The response has to be immediate and for the long term. Economists are predicting a long period of economic down turn and recession and the Muslim charities must adjust to this new reality so that they can continue for the long term. I recommend the following key actions:

 

1. Cashflow forecasting should drive decision making

 

Trustees and management must base their short- and long-term decision making on a credible cashflow forecast. This must include all cash income and spend and should aim to keep the cash levels at a certain level. The target cash level will be different for each charity based on their strategic priorities and short / long term plans.

The cashflow forecast should be for at least 24 months and the assumptions should be realistic, so that risk is managed properly.

All Auditors will require to assess the going concern of each charity they audit. This means they will need confidence that the charity will be operating without any significant disruption for at least 12 months from the date they sign the accounts – they will need to rely on a credible cashflow.

 

2. Reducing costs should be led by strategy and plans

 

All charities will have to tighten their belts and reduce cost. Reducing the wrong costs or at levels more than required can have a detrimental impact on long term fundraising, programme quality and / or levels of compliance required to protect staff and beneficiaries.

Costs should be reduced within the context of an overall strategy and long-term plans.

 

3. Hidden overheads must not remain hidden

 

Overseas project overheads can become leaks like that in a water bucket. These overheads are not separately reported as part of the annual accounts and are shown as part of the charitable expenditure on projects. The bigger the overheads, the more funds are required to deliver the actual project overseas.

Charities must consider the costs of project delivery before committing to further spend. This may require pulling out from countries where it is too expensive to deliver projects or consider joint delivery with partners that may be able to deliver cost effectively using economies of scale. These decisions should be based on facts and figures and not mere emotions, which is often the case in the Muslim sector.

 

4. Annual reporting must improve

 

We are heading towards difficult times and during these times, charities must work to improve donor confidence in them. This can only be achieved with good audited accounts that donors can use to assess performance and compare. Within the Muslim charity sector many accounts are not user-friendly or provide sufficient detail.

Large charities should consider moving to charity specialist large audit firms. The challenge provided by such firms has an effect of improving the overall external reporting and financial governance.

 

5. Charities should consider merging to reduce back office costs

 

Many Muslim sector charities deliver the same service and operate a similar operating model with little that differentiates them. They should consider merging to save back office costs and possible project delivery costs abroad.

Branding can still be maintained with existing trustees still having influence and control. Where there is a will there is way. Muslim charities should be able to provide value for money to UK donors and this is one avenue through which value can be provided. This will also ensure charities can be protected in a tough future economic environment so that they can continue to provide valuable and life saving service to their beneficiaries. 

 

6. Dua Governance Webinars

 

Dua Governance is holding a series of free webinars tailored to the Muslim charity sector. These are aimed at trustees, management and those that work with Muslim charities. Topics include the following:

  • How to use Cashflows for decision making

  • Morals of Charity Finance for Trustees and Executive

  • How to Read Charity Accounts

  • Financial Governance for Charity trustees

  • Financial Planning for Trustees & Management- International charities

  • Accounting implications for overseas charity structures

  • Salary Benchmarking – Muslim charities

  • Effective Internal Audits – Charity sector

 

Author: Nasir Rafiq is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

He is the Managing Partner of Dua Governance, a Charity Governance specialist accountancy firm.

Nasir has held many senior finance positions within the UK charity sector and continues to advise many charities on financial governance matters.

Email: info@duagovernance.com

Please email info@duagovernance.com to register your interests.

 

Govt support for the Self Employed

My initial thoughts on the support for the self-employed:

 

1. You are eligible only if your self-assessment profits were below £50k and there is monthly limit of £2,500 – many will fall into this bracket which is good news.

 

2. If you have not been declaring your full income in your self-assessments, basically avoiding tax then you have a problem. I can see a large number falling victim to this.

 

3. HMRC will use your past three year self-assessment, being 2016-17, 2017-18 and 2018-19 to work out the average monthly income based on your average taxable profits. This will be done by HMRC.

 

4. HMRC will then pay 80% of this average monthly income as a grant directly to the self-employed bank account – this is not a loan and nobody will be required to pay this back.

 

5. People do not need to contact HMRC now, if they are eligible HMRC will contact them directly. I can see issues with many being missed due to wrong contact details. Please update your HMRC contact details.

 

6. The HMRC grant is taxable and you will be paying tax on this in your future self-assessments. This income should be treated same as sales in substance.

 

7. I don’t think there will be any VAT implications – many will not be VAT registered due to being below the threshold.

 

8. HMRC is sorting its house out so needs time to process this all, therefore they will make the payment in June 2020 for the past three months – the self-employed will have to survive from their own funds until then – this can create significant issues for many in the short term.

 

9. Those that played clever and set up companies to pay themselves dividends to save National Insurance, will now lose out as dividends are not covered by this scheme. They can only apply 80% of the minimum salary they were taking, which for many was equal to their personal allowance.

 

All in all those that declared all their income during the past 3 years will get something, be it three months late. The Government has also delayed tax payments to help cashflow.

 

Will this support be enough, time will tell – I am not sure.

 

If anybody needs to pick my mind, send me a message.

The reality of Furlough employees and Government support

Everyone is talking about Furlough employees and the fact the Government will fund 80% of the salaries of such employees from 1 March 2020.

 

Many think this Government scheme applies to ALL employees – this is not so and there is a small print.

 

The Government is not compensating organisations for loss of income. These organisations can be mosques, charities or businesses – the purpose of this funding is not that and the Government will not compensate for loss of income.

 

As a result of the current lockdown, organisations suddenly had staff that could not work anymore and businesses were at risk of going down under. The immediate response of businesses would have been to let staff go. This is when the Government stepped in and said that they will fund 80% of such staff that either have been made redundant or at risk of being made redundant.

 

This Government support is so that staff are NOT made redundant and kept on the business or charity payroll.

 

The Government said to treat such employees on leave “Furlough” and these employees MUST NOT work at all for their employers. If they do work, be it part time or with reduced wages that implies that they were not at risk of losing their jobs, so such employees are not covered by the scheme. In practice many employees will fall in this situation as businesses and charities will do whatever to keep the ball rolling.

 

The Government expects each employer to determine the employees that are or should be on leave for this lock down (i.e. 3 weeks) and declare them as Furlough employees by formally writing to them. These employees must not then work for that employer during this period.

 

Although this scheme keeps staff at risk employed, it does nothing to address the loss of income or donations in the short term or long term. The effected organisations must develop their own plans to address the impact of this interruption.

 

The Government has asked the banks to give loans to businesses or charities, backed by Government. The banks being banks have started to pick and choose. They are applying their normal due diligence and at times are requesting personal guarantees. Not sure how far this will address the issue in its current state.

 

There is some support for small cash donations from Local Councils – this is focused on small retail businesses and may take time to get through.

 

I sense turbulent times and it is imperative that organisations, be it large or small, plan ahead to weather this perfect storm.

Govt support for Businesses and Charities

This paper sets out my summary thoughts focused on mosques, charities and small businesses like gyms and tuition centres. Please contact Dua Governance (details below) if any further information is required on this topic or advise on how to manage the challenging financial circumstances.

 

Support through the Coronavirus Job Retention Scheme

 

1. All charities including mosques are eligible to claim this support.

 

2. The Govt will reimburse 80% of the salary of employees (those on payroll) up to a maximum of £2,500 per month – all Mosque employees will fall within this category.

 

3. This scheme applies to employees that would have been laid off as a result of the crisis. Mosques, tuition centres, gyms and leisure centres are all eligible. They had to shut due to Govt advise and now the employees in these establishments have no work – keeping them on payroll is not an option as the income that was funding their salaries is no longer available, for example no Friday prayers means no Friday cash collection, no evening schools, no fees. Same applied to gyms and tuition centres and similar businesses.

 

Considerations

 

1. Employees on payroll will have to be formally sent on “leave of absence” as per their contracts. Many Establishments may not have employee contracts in place – this gap needs to be addressed urgently so that there are no issues of conflicts in the future.

 

2. The Govt is yet to work out the process of reimbursement – The Govt is expected to set up a online portal through which claims can be paid.

 

3. Once the online portal is made available, I expect teething issues and delays due to the volume of businesses applying and the limited HMRC capacity for responding – In the meantime, organisations may need to consider the Coronavirus Business Interruption Loan Scheme (see below).

 

4. The Govt will not be funding 100% of the salary – businesses, Mosques and charities will need to determine if they will fund the 20% gap – this will have to be negotiated between the employees and employers. No organisation is obliged to cover the 20% gap.

 

5. Unfortunately, the consultants (self-employed) will not be covered by this scheme. This is applicable to many mosques and charities where many workers are on consultancy contracts. Maybe these organisations need to consider placing such workers on payroll to retain their services – again this is a conversation many of these Establishments need to be having with workers on such consultancy arrangements.

 

Support through the Coronavirus Business Interruption Loan Scheme

 

1. All mainstream banks will provide this and the Govt is providing a guarantee of 80% on each loan – This scheme will support loans of up to £5m. Banks will issue guidance shortly.

 

2. This is also applicable to all Mosques and charities and for the first 12 months – there is no interest rate charged as the Government will cover this.

 

3. There is a cap of income of £45m to be eligible, making all mosques and Muslim charities eligible expect for a few with annual income above £45m.

 

4. Many Mosques have ongoing construction projects that depend on qard-e-hassan. Due to Mosques closing, suddenly this option may no longer be available to Mosques.

 

5. I don’t envisage international relief charities to benefit from this unless they have committed costs and they are not able to raise the budgeted funds during Ramadan. They may want some cashflow support in the medium term and this is where this support becomes relevant.

 

6. Small businesses like gyms and tuition centres, may need cashflow support for various reasons to pay salaries, rent or other bills. This scheme then becomes relevant to them.

 

Considerations

 

1. Banks will have their own eligibility criteria – this will focus on how the Mosque or charity intend to pay the loan back – historic numbers with good forecasts will be required. Many Mosques and charities can provide this as these are sustainable businesses.

 

2. How fast will the banks process the applications is also a question mark when their own staff are expected to be impacted by the virus. I expect some time lag between application and cash hitting the organisations bank account. In the meantime, organisations must prepare all the historic costs / accounts and potential forecasts need to be prepared for the bank applications.

 

Business rates

 

Councils should cover business rates for charities and mosques – normally they cover 80%, I can see the exemption being extended to 100%. The Govt will waive this for leisure businesses, gyms may fall into this category. Again, local councils will use the existing business rates system to cover this.

 

Support for businesses that pay little or no business rates – mosques and charities that occupy a building can potentially qualify for this as they pay little or no business rate – the local council will be able to make a one off grant of £10,000. Again, local councils will manage this process.

 

Grants

 

Cash grants of £10k are available for small retail, hospitality and leisure businesses – this may include gyms – the local councils will introduce a process for this.

 

Written by Nasir Rafiq, (BA, FCA)