COVID 19 Organisational Survival/Sustainability New Risks & - - PowerPoint PPT Presentation

COVID 19

Organisational Survival/Sustainability

New Risks & Challenges

SA non-profits

Prepared by Cathy Masters B Com Hons CA(SA)

COVID 19: New risks & challenges

Suddenly not able to operate A strong call to respond A short term crisis

• Can we survive?
• Do we continue to pay salaries? For how long?
• How will our funders/donors respond if we can’t meet our commitments?
• How do we respond to the crisis?
• Where can we source funding and relief?
• What will the future look like for our organisation - if this crisis continues?

PANIC!!

COVID 19: New risks & challenges

SCAM WARNING

If it looks too good to be true, it probably is not true.

COVID 19: New risks & challenges

FACING SOME DIFFICULT DECISIONS

• Close down some or all of our operation
• Change the way we work - restructure
• Jump into the relief efforts
• Use our reserves or savings to pay staff, critical costs and/or for relief
• “Borrow” funds intended for other purposes
• Reduce salaries, downsize, dismiss, or retrench staff?

What are the implications of our decisions in the short term and the long term?

COVID 19: New risks & challenges

THE TEMPTATION TO BORROW! BANKING & CREDIT PROVIDERS

Temporary payment holidays & extension of credit lines Finance costs (interest) and loan conditions may now be more favourable to borrowers but there is a cost and risk that must be weighed against the benefit.

COVID 19: New risks & challenges

STEP BACK & BREATHE – LEADERS NEED TO CAREFULLY CONSIDER

• The impact on operations, employees, contracts, stakeholders, and finances
• The financial plans – revisiting budgets and cash flow forecasts
• The new and emerging risks - health, controls, finances
• The processes that may need to change, including certain the policies and

procedures of the organisation

• The control environment to ensure financial discipline
• The financial health and future of the organisation - sustainability

COVID 19: New risks & challenges

IMPACT ON CONTRACTS: FAILURE TO DELIVER

Organisations may not be able to deliver on its contracts:

• A force majeure clause
• Event or circumstance unforeseen and

beyond the control of the parties

• Performance is impossible as a result
• Clause in the contract talks to what happens
• A supervening impossibility of performance
• Applicable if no force majeure clause in the contract
• No service/no work– No pay
• Contract can be terminated if
• the performance is objectively impossible; and
• the impossibility is unavoidable by a reasonable person

COVID 19: New risks & challenges

IMPACT ON EMPLOYEES

• What if employees are unable to work?
• If we work differently – employees will be affected
• There are new considerations - re working from home
• Considerations of employees working to provide essential services or returning to

work at Level 4 or Level 3. Protocols, protective gear, rotations

• What if operations must be closed down or funding is depleted?
• What if employees and/or their family members get ill and even die as a result of

COVID 19? Understand and follow the law & employer responsibilities – LRA, BCEA, UIF, COIDA, retrenchments Follow clear HR & finance policies and procedures

COVID 19: New risks & challenges

IMPACT ON REVENUE & FUNDING

• Decrease? Directly linked to activities

Lost momentum, contracts not renewed Economic downturn Financial distress of donors/customers

• Increase? Supportive partners/sound track record

Foreign funding – exchange gains New opportunities re Relief efforts Restricted funds? Existing funding but earmarked for specific activities & purposes

COVID 19: New risks & challenges

IMPACT ON EXPENDITURE

• Change to activities = change to expenditure
• Direct expenditure on activities
• Changed expenditure
• Tech, connectivity, data, coms
• Protective gear and measures
• Training, learning and emotional support
• Core costs – monthly commitments
• Salaries?
• Rental?
• Coms?
• High monthly expenditure commitments – not quick or easy to change!

COVID 19: New risks & challenges

IMPACT ON THE CONTROL ENVIRONMENT

Crisis situations call for more financial discipline not less

• Objectives of the organisation = primary framework for all decision-making
• Heart vs head
• The needs of the present vs the needs of the future
• Clear policies and procedures (adapted)
• Delegation of authority - who decides and when?
• Accounting and reporting?
• Retention of evidence? Document management?
• Defend against corruption – real or perceived
• Keep a systematic record of service delivery and finances
• Caution re accepting tainted funding
• Collaboration vs competition

COVID 19: New risks & challenges

IMPACT ON AUDITS

• Location of audit
• Approach – substantive vs systems
• Supporting documentation - physical vs electronic
• Going concern issues
• Audit questions
• Report of impact in the annual financial statements

COVID 19: New risks & challenges

IMPACT ON FINANCIAL HEALTH & SUSTAINABILITY

Know your current financial position and future commitments:

• Up to date accurate financial records
• Financial position: - end of prior month
• Balance in the bank accounts
• Plus receivables (if collectable)
• Less payables (including balances of any unspent restricted funds)
• Equals – Balance of funds available
• Financial commitments: minimum monthly
• Amount per current contracts – staff, suppliers, funders, SARS

Based on funds available – how mnay months can you continue to pay these minimum monthly commitments? The Survival Ratio

COVID 19: New risks & challenges

IMPACT ON FINANCIAL HEALTH & SUSTAINABILITY

The survival ratio: Balance of unrestricted available funds divided by the minimum monthly commitments equals the number of months you hold in savings.

• What is considered a reasonably healthy survival ratio?
• 3 to 6 months of minimum monthly commitments as savings
• to handle temporary delays or crises
• 6 or more months to take advantage of strategic opportunities

COVID 19: New risks & challenges

IMPACT ON FINANCIAL PLANNING

Changes = the need to revisit budgets Short term and longer terms Short term considerations

• Balancing the budget
• Revise or explain?
• Cash flow forecasts – month by month
• VAT implications

Longer term considerations

• Spending savings? Is this a temporary rainy day? Strategic opportunity?
• Building savings – setting aside unrestricted income

Communicate with all stakeholders – funders, employees etc.

COVID 19: New risks & challenges

IMPACT ON DECISIONS AND ACTIONS

• Consider your financial plans in the light of your current financial position?
• Are you already insolvent and therefore unable to pay your current debts?
• Negative balance of funds
• Caution continuing in operation & making further commitments
• Reckless trading - board members/leaders may be held liable for debts
• Are you realistically able to meet your commitments in the next six months?
• If not = financial distress, which can lead to reckless trading
• Be realistic - do scenario planning – what if??
• What decisions can or must be made and when?
• Set targets or benchmarks for taking action?

COVID 19: New risks & challenges

ORGANISATIONS better manage the impact of change and crisis through sustainability strategies such as

• Positive stakeholder relationships
• Diversity of income/funding sources
• Unrestricted income – flexibility of spending & for savings
• Building and managing savings & reserves – strategy, policy & practice
• Keeping fixed monthly commitments low – lean & flexible
• Financial discipline & high ethical standards
• Ability to demonstrate social change and impact
• Full & realistic costing of programs and activities

COVID 19: Support for non profits

COVID 19: Support for non profits

SUPPORT FOR NON PROFITS – A CALL TO FUNDERS

When funding the direct delivery of the relief and care products and services, also consider:

• the overall financial health and capacity of the organisations providing these

services

• efficiency, effectiveness and sustainability
• the people carrying out the services and the related salaries and volunteer costs
• the infrastructure and systems necessary to deliver services
• the costs of the necessary changes to operational methods
• the possibility that relief efforts may need to be sustained for much longer than

anticipated

COVID 19: Acknowledgements

THANKS & ACKNOWLEDGEMENTS

We wish to thank The Michael and Susan Dell Foundation for partnering with us to develop this presentation. Every effort has been made to ensure that the information included in this presentation is accurate, however, as it is almost impossible to keep up with every detail, errors and omissions are accepted We also wish to acknowledge the many others who are keeping us all informed and who are fighting for important changes and clarifications at the practical level. In particular, we want to thank Nicole Copley and her team at NGO Law, as well as Desrae Connold, HR practitioner at Connold & Associates. We urge you to seek professional advice regarding the HR, legal, and financial matters covered in this presentation before implementing any changes.

COVID 19

Thank you Please direct enquiries to:

Cathy Masters

B Com Hons CA(SA) cathy@cmds.org.za www.cmds.org.za Disclaimer

The material contained in this presentation does not necessarily represent the opinion of CMDS or MSDF. The notes do not constitute advice on the topics covered. While reasonable care has been taken to ensure the accuracy of these notes, CMDS expressly disclaims all and any liability to any person, whether or not a participant, relating to anything done or omitted to be done or to the consequences thereof in reliance upon these notes.