The Impact of Covid on the Charity Sector

Since the pandemic began, there have been many reports in the media about how some charities have experienced increased demand, others struggled to fund their services as face-to-face restrictions were imposed and others still whose income skyrocketed thanks to extraordinary fundraising efforts. Who can forget the centenarian Captain Sir Tom Moore, who inspired us all with his £33 million of fundraising?

Because the charity sector is so diverse, the effect of the pandemic has affected different charities in different ways. The diversity of the sector is demonstrated by the fact that while many charities are very small and are entirely reliant on volunteers, others run complex national or international businesses, employing hundreds of staff. This makes it impossible to provide a simple summary of what COVID-19 has meant for charities.

Nevertheless, according to research conducted by the Charity Commission in October 2021, over 90% of charities surveyed stated that they had experienced some negative impact from COVID-19, whether on their service delivery, finances, staff, or indeed on staff morale, resulting from the months of frustration and uncertainty. Of the total, 60% saw a loss of income, 57% were forced to cancel events and a third said that they had experienced a shortage of volunteers.

Given these findings, it is perhaps surprising that we have not seen a significant number of charities fold since the onset of the pandemic. The fact is that charities have proved to be both adaptable and innovative, in some cases seeking new income streams. I can certainly testify that our own client base has largely been unaffected by the pandemic. Those charities that did suffer were already in poor financial shape to start with.

In the research, of the 90% that were affected by the pandemic, nearly half said that they took some action to adapt their services to the restrictions caused by the pandemic. Some changed the way they delivered services, moving them online, refocusing on core projects or taking difficult decisions to cut staffing levels. Around 40% said that they had dipped into their free reserves. One in four charities with incomes of less than £10,000 paused their activities completely during the first lockdown. It is also clear that government support, including the furlough scheme, provided greater opportunities for charities to remain resilient and robust.

So, while there has been a mixed picture across the sector, there is no doubt that the pandemic has had a significant impact on the way in which charities have delivered their services to their beneficiaries. Similarly, how they choose to fundraise in the future is unclear. The pandemic saw charity dinners, a source of invaluable injections of funds for many well-known larger charities, cease.  Crowdfunding, some with matched donations, has proved to be a more than ample financial substitute in many cases. When they decide their future strategies, charities will need to consider whether the benefits of dinners, where the networking of their donors and supporters and information sharing are crucial, outweigh the advantages of crowdfunding, which is cheaper to run and can introduce a whole new population of donors that were previously unreachable.

The pandemic has also placed extraordinary pressures on trustees, resulting in an increase in internal  disputes, which are often at the heart of governance failures. On a positive note, charities do report a better use of digital resources.

In summary, it is dangerous to draw firm, generalised conclusions from the Charity Commission research, primarily because the sector has been unevenly impacted by the pandemic. One thing that can be agreed upon, however, is that tough decisions lie ahead.

If you wish to discuss the any matters arising from the above article or any other charity-related matter, please contact Anthony Epton, charities partner at Goldwins Chartered Accountants, on 020 7372 6494 or aepton@goldwins.co.uk

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