Charities play a major role in a broad range of industries, ranging from the arts and entertainment, education and training, healthcare and social care to a host of community activities of all types. According to the UK Civil Society Almanac 2020, the voluntary sector contributed £18.2bn to the UK economy in 2017/18.
Charities have been hit hard by the pandemic. In some cases, income has been decimated with reductions in donations, grants and the all-important gala dinner. In addition, the operational side of the business has been hit hard with many staff put on furlough or being made redundant.
Certain types of charities have been hit the most. The arts in particular have been badly hit as there are currently no live performances, and as social distancing restrictions are lifted, there are likely to be continued restrictions on capacity in venues and for functions.
However, it is important to bear in mind that many charities are also corporate entities that are monitored by the charity commission and have reporting requirements and legal responsibilities. The trustees (and the CEO) may well be directors and therefore have legal duties if they have any doubt as to the solvency of the entity.
Charity accounting is more complex and has nuances such as restricted and unrestricted funds. It’s important for these funding pots to be kept separate although there may be a temptation when funds are tight to delve into the restricted funds. Practically, given the current turmoil, it is possible that a donor may agree for restricted funds to be used to support the charity although authorisation should be obtained in writing before spending these funds.
Challenges faced by the Charity sector
- Movement to a digital world for fundraising as opposed to traditional methods
- Increased demand for services as charities filling in as a result of reduced local council support
- Reducing furlough support
- Covid-19 has increased societal inequalities and this has expanded the range of people that the voluntary sector needs to help
- Repairing balance sheets damaged by losses incurred during the pandemic
- Labour and skill shortages caused by the Brexit and Covid-driven exodus from the UK, which has raised labour rates and increased training needs
- Adverse workforce demographics caused by the high percentage of experienced older workers who will retire in the near term
- Diversity and inclusion issues, creating recruitment challenges and a need for a fundamental change to some aspects of the sector’s traditional culture
- GDPR rules came into place in 2018. The new rules detailed how fundraisers could lawfully contact donors and supporters, or identify and approach potential new supporters which decimated the list of contacts
- Since March 2020, there has been a lack of door to door activity, fundraisers and gatherings such as gala events. All of which play a significant role in donations and awareness of the work each charity does
- Less people with disposable income directly impacts donations
- Less volunteers due to general availability, Government guidelines, wellbeing and health concerns
Helping organisations in the Charity sector
Partners and employees across the Group at Opus have extensive experience and knowledge of the charity sector.
Ways in which we support charities, trustees and their management:
- Assisting trustees with their decision making
- Protecting trustees by providing professional advice in support of a chosen route
- Carrying out comprehensive business reviews to assess and advise on a broad range of financial and commercial issues
- Assisting with financial forecasting
- Reviewing financial and operational systems
- Providing strategic advice on changes to the business model or on managing growth
- Undertaking forensic investigations where circumstances dictate
- Planning and assisting with restructuring projects
- Offering independent advice on solvency issues
Market Sector Report
The UK Charities Market – Going through unprecedented disruption
Charities play a major role in a broad range of industries, ranging from the arts and entertainment, education and training, healthcare and social care to a host of community activities of all types.Read the Report
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Sector Briefing – Charities (June...
Charities are generally pretty good at planning and forecasting. Many trustee boards will include volunteers experienced in accounting, law and other professions however we are currently in such an unusual situation as a result of the lockdown that trustees need to keep one eye on the solvency of the charity at all board meetings.