Charities are less financially resilient than they were a year ago, the Charity Commission’s chief executive told MPs yesterday.
Helen Stephenson, chief executive of the Commission, was giving evidence to the Public Accounts Committee about the impact of Covid on the sector.
In response to a question about what impact the regulator was seeing on charities’ finances, Stephenson said: “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.
“What we are seeing is instances of worsening financial resilience in the sector.”
For example, she said, the percentage of charities with incomes of more than £500,000, which had either negative or no free reserves had increased from 9% in April last year to 28% this March.
She also said that auditors were reporting more matters of material significance to the Commission.
“That means that there are charities that are experiencing financial difficulties or are experiencing insolvency.”
She added that the Commission had received over 400 serious incident reports related to the pandemic and that 35% of these focused on financial concerns.
The Commission’s evidence echoes other pieces of research around the sector about the impact of the pandemic.
Research conducted by NCVO, Nottingham Trent University and Sheffield Hallam University warned that many charities were operating on tight margins.
Meanwhile a survey by Pro Bono Economics, conducted in partnership with Charity Finance Group and the Chartered Institute of Fundraising, projected a “capacity crunch” across the sector, due to rising levels demand combined with falling incomes.