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Global perspectives and practical strategies: Financial viability for the NGO sector during Covid-19
Director Guidance
Centre for Excellence in Child and Family Welfare
April 2020
Agenda
15 April 2020Page 2
Item Page
Business continuity 4
Questions to ask your management 5
Financial management during a crisis 7
Government stimulus 8
Wellbeing 12
15 April 2020Page 3
Decisive & transparent leadership
Moving quickly
Plan your response
What does our experience tell us is important at times like these?
Prioritising into four key buckets can help action items quickly
Page 4
As a Director, there are 8 key questions you should be asking management…
15 April 2020Page 5
How are we supporting our staff?
How resilient are our supply chains?
Do we have sufficient working capital to see us through the crisis?
How are we evolving our business continuity plan?
Do we understand all our risks?
Are we making effective use of digital tools?
How are we using our organisation’s sense of purpose to guide decision-making?
Do we have a recovery plan?
Checklist for Directors & CEOs
15 April 2020Page 6
Health & safety
Financial management
Crisis management
Contingency
Recovery
Governance
Reporting
Communications
1
2
3
4
5
6
7
8
Ensure health & safety of client, employees & management as well as your own wellbeing
Preserve capital by reducing costs and delaying projects, maximise stimulus offerings and access debt facilities if in financial distress
Convene a special committee tasked with managing the crisis and report to the Board regularly – could be risk oversight or audit committee
Develop scenarios, understand your exposure and formulate short & medium term priorities and plan for them
Move quickly once pandemic peaks and recognise how the world has changed and orient your organisation appropriately – client, employee & partner needs
Review reporting timeframe and ACNC/ASIC requirements for disclosure and implement necessary changes to ensure compliance
Keep clients, employees, partners, accountant, bank and regulators informed
Hold board meetings frequently - provide input into business continuity and strategic planning and internal support to the CEO /management – ensure indemnity insurances are up-to-date
During a crisis, close management of your financial business is essential to ensure cash in-flows align to cash out-flows
Page 7
Gain visibility of your forecast cash position
and establish governance control over cash decision making
► Stabilise cashflow generation
► Manage working capital
► Cashflow forecast reporting in the short term – e.g. 13 weeks
► Ensure cashflow management is linked to you crisis management response
► Evaluate different cashflow scenarios and exposures
Opex
► Review all expenditure and categorise its criticality and ability to alter (e.g. workforce), defer or cancel
► Cancel, reduce or defer non-essential expenditure
► Consider changes to delegations policy – e.g. Financial controller now required to approve all expenditure above lower threshold
Capex
► Cancel, reduce or defer all capital projects if not essential
► Confirm milestone payments are in cash-forecast – delay if possible
► Assess the capacity you have in your existing debt facilities against daily forecast cashflow position
► Talk to financial institutions early
► Confirm banking arrangements with your bank
► Engage reputable financial providers on alternate finance products
Cash Management Debt Facilities
Develop concrete actions with cash
impacts, daily check lists and clear
accountabilities
Targeted discussions with relevant financiers
Spend Reduction
Identify stimulus measures relevant to you
and act
► Identify relevant government stimulus packages available to your organisation
► Contact the relevant government agencies
► Contact your financial institutions
► Work with your finance team / accountants
Government stimulus
Directors also need to be aware of your responsibilities and recent changes to insolvency, external conduct standards and financial reporting
15 April 2020Page 8
31Insolvent trading safe
harbourFinancial reporting
► ACNC aligns with the amendments made to the Corporations Act 2001 (Cth) by the Coronavirus Economic Response Package Omnibus Act 2020 (Cth).
► Governance Std 5, Insolvency: Temporary, 6 month period of relief for directors from their personal liability to prevent insolvent trading if a relevant debt is incurred:1. in the ordinary course of business2. during 25 March and 25 Sept
20203. before the appointment of an
administrator or liquidator
► Applies to all entities listed with Corporations Act, but not state incorporated entities
► Charity must inform its members & the ACNC it is trading insolvent and the NFP has an achievable aim for return to viability
► Reporting: ACNC has provided blanket extensions to charities whose 2019 Annual Information Statement is due between 12 March and 30 August 2020 to 31 August 2020
► AGM: Check constitution to see if AGM can be held using technology. If technology is not permitted, then discuss your options with ACNC. The ACNC will not take action against a charity for AGM delays if they cannot be conducted safely.
► Audit: Utilise technology as much as possible to enable audit of your financial statements to take place.
► Going concern: If the 31 December 19 financial report is being prepared on a going concern basis, consideration will need to be given to the disclosure required in the financial report explaining why the going concern basis of preparation is appropriate and likely uncertainties.
► NOTE: AIS extension excludes state based incorporated entities.
2Operating outside of
purpose
► Due to Covid-19, ACNC will not investigate certain breaches of the Governance Standard 1 and the External Conduct Standard 1 between 25 March to 25 Sept, 2020
► Governance Std 1 Purpose: Your organisation may apply a broad interpretation of its purpose, as long as you are acting in good faith to assist in the response to COVID-19
► To comply, you will need to: 1. Reasonably demonstrate that your
members would approve of the activity
2. Document how the activity in response to COVID-19 aligns with the purpose prior to undertaking the activity
Sources: AICD – Shifting regulatory landscape AICD – Impact of Covid19 on NFPsAICD – What Directors need to know ACNC – Covid-19 changes
A key part of your financial management is utilising government assistance measures
Page 9
Federal government
Small/medium business cash flow
support
A tax free payment between $20,000 - $100,000 to small and medium-sized businesses with
a turnover of less than $50 million that employ workers. There will be 2 payments delivered
from 28 April. 1. Payment is based on salary and wages withheld and goes up to 100% of
that amount (capped at $50k). 2. An additional payment equal to the total of all of the Boosting
Cash Flow for Employers payments received. Eligible businesses will receive at least $20,000 up
to a total of $100,000 under both payments.
Instant asset write-off Immediate deduction for assets costing less than $150k that are acquired by 30 June 2020
for business with aggregated annual turnover of <500m.
Accelerated depreciation until 30
June 2021
Accelerated depreciation deductions (50% on installation prior to 30 June 2021, remainder
over useful life) for businesses with aggregated annual turnover of <500m.
Supporting apprentices and trainees
- 1 Jan 2020 to 30 September 2020
A 50% subsidy on apprentice/trainee wages, up to $21,000pp - for small businesses with <20
employees.
ATO administrative concessions for
businesses affected by the
coronavirus
Some of these may be available to business who contact the ATO:
• Deferral of income tax and GST payments;
• PAYG instalment variation (including refund of prior payments);
• Change of business reporting cycle to monthly where GST refunds are available;
• Remission of interest and penalties on tax liabilities incurred on or after 23 January
2020 for COVID-19 affected businesses;
• The ATO may apply a low interest payment plan on ongoing tax liabilities for affected
businesses.
SME Guarantee Scheme From 1 April 2020 until 30 September 2020 the federal government will guarantee 50% of
new loans up to $250k by eligible lenders to small and medium entities (turnover up to 50m).
Temporary relief for financial
distressed businesses
Government is temporarily increasing the threshold which creditors can issue a statutory
demand on a company ($5,000 -> $20,000), and time companies have to respond from
personal liability for trading while insolvent.
Extension of AIS submissions Annual Information Statements (AIS) due between 12 March and 20 August 2020 are now
due by 31 August 2020.
The JobKeeper Payment is a significant reform assisting financial viability
15 April 2020Page 10
JobKeeper: $1,500 per worker per fortnight paid directly to organisations to help organisations to continue paying employee wages.
For more detailed information – visit the EY Webinar
Entities will be required to demonstrate decline in turnover through either the:
► Basic test:
► Comparing the GST turnover of:
► any month from March 2020 to September 2020 OR
► the April or July quarter
► with the corresponding period in 2019.
► Alternative test:
► If the entity was not in operation a year earlier OR where turnover last year was not representative of their usual turnover.
► The Tax Commissioner will have the discretion to set alternative tests.
Organisations
► Charities registered with the ACNC that experience a turnover reduction of 15%.
► Non charities with:
► turnover of <$1 billion and turnover reduction of 30%.
► turnover of >$1 billion and turnover reduction of 50%.
► Includes businesses without employees (self-employed).
► Subject to satisfying the turnover test.
Employees
► Must have been employed as at 1 March 2020 and is still employed (including stood down employees and those made redundant and subsequently re-employed).
► All full-time, part-time and casuals who have been regularly employed for longer than 12 months.
Organisational and employee eligibility Turnover test
With the ATO
► Register your interest with the ATO and subscribe to JobKeeperupdates. Do not contact the ATO further for information.
► You or a registered tax professional can enrol for the JobKeeperpayment from 20 April onwards. You will need to provide bankdetails, indicate if you are claiming based on business participation and identify your eligible employees.
► This must be done by the end of April if you intend to claim for the April period.
Key next steps
With your employees
► Continue to pay each eligible employee’s full wage or $1,500 (whichever is higher) per JobKeeper fortnight (fortnightly periods beginning 30 March, 13 April, 27 April etc).
► Notify your eligible employees that you are intending to claim JobKeeper payments on their behalf and check they aren’t claiming payments from another employer.
► Send the JobKeeper employee nomination notice to your nominated employees to complete and return by the end of April.
The State government also provides some financial assistance measures
Page 11
Victorian State Government
Business Support Fund $500 million fund to support small businesses that:
• Have closed or been highly impacted by social distancing restrictions
• Employ people
• Have a turnover of more than $75,000
• Have a payroll of less than $650,000
• Hold an ABN
• Operate in Victoria
The state government will provide a one-off $10,000 grant to be used towards utilities, rent,
salaries and business continuity planning.
Payroll tax incentives – refund &
deferral
• $550m in refunds on payroll tax paid in the first three quarters of FY19/20, for small and
medium businesses with annual payroll <$3m.
• Above businesses will also be able to defer any payroll tax incurred in the first three
months of FY20/21 until 1 Jan 2021.
Land tax payments - deferral Eligible land owners that have at least one taxable non-residential property and total taxable
landholdings below $1 million can have land tax payments deferred until 2021.
Commercial Rent Relief Commercial tenants in government buildings can apply for rent relief.
Outstanding supplier invoices • All outstanding supplier invoices will be paid by the Victorian Government within five
business days, releasing up to $750 million into the economy earlier – the private sector
has been urged to do the same where possible
• While this initiative relates to current outstanding invoices, it is likely that this initiative will
continue in some form.
RR Corona ResponsePage 12
Financial viability is only one part of the broader wellbeing of the organisation
Take Action Now
Plan for the immediate and medium term
Develop and enact a wellbeing approach to help protect people and minimise impact on business continuity, recovery and future performance.
Examine scenarios and their impact on wellbeing, critical success factors, parameters and non-negotiables
Consider the immediate wellbeing response as well as preparing for the return to BAU, transition to a new ‘normal’ and future disruption.
Take a risk-based approach
Define your organisation’s psychosocial risk profile specific to your operating context – the key risks relevant to your people
Targeted initiatives to enable cognitive agility, anxiety, sleep and fatigue, diet, exercise, financial wellbeing and social interaction.
Be agile and adaptive
Adjust and fine-tune initiatives in response to ongoing changes
Track progress and evaluate the effectiveness of initiatives, seeking feedback from your people
Cameron Bird
Partner
Melbourne
Melinda Leth
Director – NFP strategy
Melbourne
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Matthew Gould
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Lachlan Abbott
Director – Restructuring
Canberra
