The effect of Covid-19 on charities
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2021 Charity Commission research and analysis project looked at how charities of different sizes perceived the effect of the pandemic on their finances, governance and operations. It found that 91% of charities in England and Wales experienced some negative impact from Covid-19. Charities have lost income and access to volunteers, straining finances and their ability to function day-to-day.
Financial resilience
Recent research from the Charities Aid Foundation and the Institute of Chartered Accountants in England and Wales has collated views from charity trustees about the challenges they faced emerging from a difficult 2020 and 2021. One of the most significant challenges identified is financial resilience.
Resilience – the capacity to recover quickly from difficulties – has been tested in recent times. However, by identifying strengths and weaknesses and planning ahead, charities can attempt to address unexpected challenges and mitigate risks.
Below, we outline some guidance and practical points for charities to consider as we move out of the pandemic.
If you haven’t already, consider the structure of your charity and review your charitable objectives and purposes
- Objectives define the scope of what your charity can do, but these may need to be reviewed as the charity evolves. Many charities and not-for-profits change over time, and this may necessitate a change of legal structure to ensure a more streamlined operation. Sometimes restructuring or merging with another similar charity can create a stronger charity.
- Keep abreast of changes in the law. The Charities Act 2022 was passed in February 2022 and will be implemented over the next 18 months. The Act is intended to simplify the regulation of charities and make it easier for them to amend their governing document, spend permanent endowment and sell property. Seek legal and other advice where needed.
Increase your awareness of good governance. This will enable and support your charity’s compliance with the law and regulations
- Familiarise yourself with the guides and resources issued by the Charity Commission.
- Make use of other free resources such as The Charity Governance Code, which sets out the principles and recommended practice for good governance and is intended as a practical tool for trustees.
Review your income and property portfolio
- Consider whether your charity’s property assets remain right for the charity. Seek appropriate advice on disposing of property you no longer need, either by selling or letting it.
- Review your current income mix and consider whether you can become more diverse in terms of revenue streams. This can reduce dependency on sources of income and bolster financial resilience. It is also important for charities to consider new income streams based on personal factors like their charity’s reserves and risk appetite.
Consider working with other charities to develop financial resilience and foster more collaborative relationships
- Collaboration could mean sharing costs, fundraising, knowledge, or running joint events. Such measures can reduce expenditure and increase long-term sustainability, as well as expand networks and connections.
Look at the diversity of your trustees
- Review the current trustee mix and consider how best to attract new ones that most benefit your charity. This would involve monitoring the gender split, ethnicities, and ages represented on the existing board, and considering which perspectives, skills, and experiences are missing. Ensuring a diversity of trustees can enable a broad mix of knowledge and understanding to guide the charity through the range of challenges and opportunities it will encounter.
- The next step is to consider how new trustees could be found. Charity Commission research (Taken on Trust) showed that most trustees are recruited informally from within trustees’ existing networks. This serves to perpetuate the diversity challenge. CAF and ICAEW’s research found that trustees tend to have time and wealth enabling them to volunteer, meaning they are not always representative of wider society. Charities should think about who they are targeting and proactively advertise to attract new trustees.
Review and improve your use of digital technology
- A 2019 survey carried out by Tech Trust (now Charity Digital) found that 59% of UK charities still lack a digital strategy, as well as investment in the tools and training needed to implement one. Digital technology can be used to improve processes within charities, such as through applications used by employees and volunteers to speed up and simplify in-house administrative tasks.
- Digital technology can also be used to help increase fundraising and improve marketing and communications.
- One positive change that emerged from the Covid-19 pandemic is that charities are reportedly making better use of digital technology. During the pandemic, many services moved completely online. In-person fundraising shifted to online donations, virtual events replaced in-person ones, and donor and other external engagement became completely remote. As such, the lasting effects of the pandemic include an accelerated advancement in tech within many charities, who have welcomed its important role in supporting both the fundraising and service delivery of their operations.