It's safe to say that 2020 was a year of considerable challenge for international charities. In addition to the inevitable difficulties caused by the Covid-19 pandemic, there was the merger of the Department for International Development with the Foreign and Commonwealth Office, and the end of the Brexit transition period. Against this backdrop, the needs addressed by the sector remain great.
In October 2020, we published our third annual report benchmarking the accounts of 180 UK-registered international development charities. In addition to our desktop research, this year we added a survey component to cover some of the key topical issues faced by international charities.
Rather unsurprisingly, over 90% of our survey respondents indicated that Covid-19 is among the top three risks faced by their organisation. However, we also asked the respondents about the measures they had taken in response to the Covid-19 pandemic, and the most common response was the implementation of new projects (79%), followed closely by postponing the implementation of planned projects (71%).
Around two-thirds of survey respondents said that they had renegotiated terms and conditions with funders as a result of Covid-19. Anecdotally, we hear that many donors have adopted a flexible approach in the context of the pandemic and this is clearly a welcome development.
The initial impact of the pandemic and lockdowns in the UK (and elsewhere) meant that many international charities needed to make strategic decisions quickly. Around half of our survey respondents indicated that their board had met more frequently as a result of Covid-19.
Our research covers accounting periods up to 31 December 2019, and therefore Covid-19 did not impact on the figures included in the research on annual reports. Nonetheless, the research gives a sense of the key trends and challenges impacting on the sector pre-March 2020, which, in some cases, impact on the level of financial resilience in the sector pre-pandemic.
One of the key disclosures in the trustees’ annual report is in relation to principal risks and uncertainties. Our 2020 research found that, on average, 3.9 principal risks were reported in the trustees’ report, which is an increase from 3.6 in our 2019 research. In both reports, the most commonly reported risks were those in relation to future funding and fundraising. Some 63% of international charities in our 2020 sample reported one or more risks in relation to future funding.
Whilst some risks remain relevant over time, the landscape is an evolving one. Safeguarding has been high on the agenda for many international charities given recent high profile press coverage in this area. We have found continued increases in charities reporting safeguarding as a principal risk. In our 2018 research, only 10% of our sample reported safeguarding as a principal risk. This increased to 35% in 2019 and 43% in 2020.
The annual report
Subsequent to the accounts covered in our research, Covid-19 has led to many international charities expanding reporting in areas such as risk, uncertainty, and going concern, with a significant level of explanation needed in these areas. In our experience, the preparation of the report has been a good opportunity to revisit key areas such as disclosures around reserves policies (and, in some cases, the reserves policies themselves).
We are now seeing a substantial number of international charities choosing to make additional disclosure in relation to safeguarding, with some making very comprehensive disclosure. Just under half of our sample included such a section within the annual report.
The average length of international charity accounts increased last year. In our experience, new sections tend to be added but little is removed, and this can mean that key messages are obscured. It may be helpful to step back and consider the audiences and key messages. There is much which must be included from a statutory perspective, however there are ways of bringing out the key messages such as through the use of a chair’s report at the front of the document.
I expect to see these trends continue – especially as the sector is able to move on from the initial crisis situation which was faced in early 2020.
Steve Harper is partner and head of international charities at haysmacintyre