Helping charities through the economic downturn
The downturn in the economy poses a challenge to charities with more people needing their services but many sources of charity income are in decline.
As the regulator of charities in England and Wales, we want to make sure that we are doing all that we can to support charities through the current climate. We have brought together on this page information charities need in order to understand, prepare for and react to the changing financial situation. These pages are regularly updated, so please look out for new information and resources, and news in our 'news' section here.
- Impact of the economic downturn on charities
- Big Board Talk: the conversation all charities need to have
- Relevant guidance
- Support for charities considering collaboration or merging
- Financial Services Compensation Scheme
- Charity regulation
- Other sources of information
Over the past 18 months we have been monitoring the impact of the economic downturn on charities through the largest, independent, representative surveys conducted of the charitable sector. Our latest survey published in March 2010, 4th Economic survey of charities, builds on research in September 2008, when the first indications of the downturn were registering with financial markets and our follow up research in February 2009 and September 2009 as the full global impact of the downturn was becoming evident.
This survey shows that 59% of charities now say they have been hit by the economic downturn, up from 38% of charities in September 2008. Other headline findings include
- 59% of charities report having been affected by the downturn, up from 38% in September 2008 and 56% in September 2009. Of those affected, 62% have experienced a drop in income.
- Larger charities have been hit hardest, with 79% feeling the impact of the downturn and a third seeing an increase in demand for services. These charities are also more likely to predict a decrease in income than small and medium charities, with 28% anticipating a drop in funds compared with 14% of small and 16% of medium charities.
- Yet, 84% of all charities said they were optimistic about the outlook for the next year. This figure has increased from 69% expressing optimism six months ago.
We have also published a summary of discussions we held with charities at three regional focus groups in May 2009, looking at the impact the recession is having on their organisations. You can view the summary of discussions or download a PDF version from our website.
No organisation, whether business or charity, will survive difficult economic times without those in charge seriously looking at their financial health, direction and whether they're making the best use of resources.
The big board talk initiative is the conversation all charities need to have. It covers key areas where charities tell us they are most vulnerable and asks 15 questions to help trustee boards look at both the options and opportunities available to them. It is intended to be a practical tool in the form of a checklist that can be used by all charities, particularly small to medium sized ones, to help inform their board and planning discussions. If your board carefully works through the areas in these questions that relate to your charity, it will help to demonstrate that your trustees are acting appropriately in the current circumstances.
The following guidance may be particularly useful to charities in the current climate.
- Charities and reserves (CC19)
- Internal Financial Controls (CC8)
- Charities and Investment Matters: A guide for trustees (CC14)
- Financial Difficulties and Insolvency in Charities (CC12)
- Charities and Risk Management (CC26)
- Home Ownership - Charitable Status and Tax
To be effective, trustees should always seek to improve the performance and efficiency of their charity. One way of doing this is to look at and assess innovative and imaginative ways of working. This can include working collaboratively with other charities and in some cases mergers between charities.
In September 2009 we produced resources for charities, including
- 'Making mergers work' - a mergers toolkit
- 'Choosing to collaborate' - a toolkit on collaborative working; and
- the report Charity mergers: experiences from the Charity Commission' - a short research report on charity mergers that the Commission has been involved in.
A full list of our resources to help charities considering mergers and collaboration can be found here.
Information about the Financial Services Compensation Scheme and what it means for charities.
In July 2009, the Charity Commission hosted a discussion which brought together a select group of figures from the charity sector and other regulators. The workshop was designed to examine in more detail the outcome of Lord Turner's review of the autumn 2008 banking crisis and financial regulation. The aim of the session was to explore any implications for the regulation of other non-financial sectors, in particular charities.
Like all good regulators, the Charity Commission needs to constantly review our approach, so the discussion was an invaluable opportunity to hear some external views on our current approach to regulation.
A summary of the discussion can be viewed here.
Here are links to other useful resources:
- Association of Chief Executives of Voluntary Organisations (ACEVO) www.recessionsupport.org.uk/
- Charity Finance Directors' Group (CFDG) www.cfdg.org.uk/cfdg/influencing_recession_watch.aspx
- National Association for Voluntary and Community Action (NAVCA) www.navca.org.uk/localvs/recession/
- National Council for Voluntary Organisations (NCVO)
- Big Society www.cabinetoffice.gov.uk/content/big-society-overview
- County Voluntary Councils in Wales
- Wales Council for Voluntary Action (WCVA)