Blog by Margaret Harris, Emeritus Professor of Voluntary Sector Organisation, Aston University, Birmingham firstname.lastname@example.org
Pundits are telling us that ‘nothing will be the same’ post-Covid. To what extent does this apply to the ‘voluntary’ or ‘third’ sector? Here Professor Margaret Harris will focus on service-delivering charities.
Growing Demand and Limited Resources
From March 2020, charities in the social care business, faced a huge surge in demand for their services. This was coupled with uncertainty about future income as fundraising events were cancelled, income from charity shops stopped, and additional costs were incurred in the scramble to adapt services to the crisis situation. Charity trustees were faced with competing legal and ethical obligations. Should they continue as long as possible to provide services, adapt those services to pandemic circumstances and meet the charitable purposes for which they were originally established? Or should they be prudent with the resources entrusted to them and scale right back on spending during the pandemic so that they could continue operating in some form for as long as possible?
Although a few of our largest charities had substantial reserves to draw on or were able to benefit from governmental commissions during the crisis, charities are generally discouraged from accumulating reserves beyond the minimum needed to wind up their operations in extreme circumstances. Charity regulators, grant-makers and philanthropists do not look kindly on charities which appear to accumulate funds rather than spend them on their beneficiaries. Much grant funding is short-term and for projects, leaving no resources for infrastructure core costs. So many charities, especially our medium-sized and smaller charities, operate hand-to-mouth – struggling to maintain cash flows and dependent on fundraising events for unrestricted funds.
Efficiencies and Savings
By April 2020, it was clear that face-toface fundraising this year was in jeopardy. The future for donations was also looking bleak as it became clear that an economic crisis was on the way. Some charity leaders hoped for the best – for Government support, loans, or a quick end to the pandemic. Others went into austerity mode; ‘furloughing’ paid staff, hoping for voluntary pay-cuts, and negotiating rent holidays on offices while employees worked from home. Charities with finances already pared to the bone (especially those operating in the local community and BAME arenas), tightened their belts even further, relying on volunteers’ enthusiasm to keep them going.
Financial Woes Ahead
Looking ahead, our charities - from the large national names to local community associations- are facing intractable financial problems. We can expect to see hasty mergers and take-overs within the charity sector as well as huge staff redundancies as the Government’s job-retention provisions are phased out. Some charities, including those delivering much needed front-line care services, will be left as mere shadows of their former selves and others will be wound up.
Social Challenges presented by Covid
Yet this is happening in the charity world just as local authorities (also hard pressed financially) are struggling with increased demands for care services as the tide of the pandemic recedes and we see the social and economic problems it has left in its wake. It is clear that social problems including homelessness, food insecurity, digital insecurity, trafficking, child poverty and domestic violence have been exacerbated during the Covid lockdown and local authorities will be hoping to partner with charities in responding to vastly increased social care needs.
Prudent Finances and Reserves in the Future
Charities themselves have shown resilience and imagination in meeting the challenges. They are already developing new ways of raising support for their causes including virtual dinners, virtual art and cultural events and new projects which capitalise on the wave of volunteering generated by the Covid crisis. But they will need external support as well. One idea gaining traction in the policy arena is to make temporary changes to Gift Aid so that charities and donors get more ‘bang for the donated buck’ .
We need to generate additional ideas to support our charity sector so that it can continue to partner governmental authorities in delivering social care in the aftermath of Covid-19. In the longer term we need to re-think our approach to charities’ reserves and acknowledge that accumulation of funds for a rainy day is prudent charity stewarding.