Charity reserves sink in wake of coronavirus pandemic, study reveals

Charity reserves have sunk sharply in the wake of the coronavirus pandemic, a major study has revealed.

The research, published by the Charity Commission, is among the first to highlight the impact of the outbreak on charity finances.

According to the report, charities are “less financially resilient than they were a year ago”, with more charities reporting either negative or zero reserves.

For example, the proportion of charities with incomes of over £500,000 which have either negative or no free reserves has increased from 9 per cent in April last year to 28 per cent this year.

The figures also reveal that auditors are reporting more “matters of material significance”, such as financial difficulties or suspected fraud, and charities themselves are reporting more serious incidents, of which more than a third (35 per cent) relate to financial concerns.

Speaking to the Public Accounts Committee on this very issue, the Charity Commission’s chief executive, Helen Stephenson, suggested that the worse may be yet to come.

“We’re not seeing significant numbers of charities coming off the register as a result of closing, though it’s quite likely that would be delayed as we’re the last part of that process,” she said.

“What we are seeing is instances of worsening financial resilience in the sector.”

Last year, it was revealed that charities could face a £10.1 billion “funding gap” as a result of Covid-19, with the sector facing major shortfalls in retail and fundraising revenue.

For help and advice with related matters, please get in touch with our expert charity finance team today.

Posted in Blog, Covid-19.