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Charity finance round up: Locality report calls for more support for community organisations, & other news

Melanie May | 16 June 2020 | News

Locality is calling for better government support for community organisations with the publication of a new report highlighting the essential role these organisations have played during the coronavirus outbreak.
Locality would like to see the government expand the Community Ownership Fund to capitalise community organisation by leveraging Dormant Assets and other funding to establish a £1bn investment plan for community assets over the next five years.
It is also recommending that the government provides £500m revenue funding to protect, strengthen, and grow existing community organisations, and provide a pathway for new mutual aid groups to become established.
In addition, it says, the procurement flexibility introduced at the beginning of the coronavirus crisis should be spread across public sector contracting authorities, through further Cabinet Office guidance.
Locality questioned over 100 organisations for its report, which examines how community organisations have reacted and adapted to the challenges of the coronavirus crisis.
The responses reveal that when the crisis struck, community organisations were early responders, coordinating volunteers, delivering emergency supplies, supporting isolated groups and finding creative ways to keep communities together.
And, in areas where the public, community and private sector already have strong collaborative relationships, support was made faster and has been more effective. Community organisations have also been able to harness the upsurge in community spirit, working with and coordinating grassroots groups and other local support.
However, while they were quick to respond, the report highlights a need for support to enable them to continue to meet the challenges of the future.
Tony Armstrong, Chief Executive of Locality commented:

“We cannot overstate the role community organisations have played in providing and mobilising support during the coronavirus crisis.
“The challenge we face now is ensuring that these groups are given the voice, power and resources they need to support their communities through the recovery from the pandemic.
“Our recommendations for the devolution of power and resources to communities are radical but common sense. They would deliver much of the Prime Minister’s ambition to level up the country, build self-reliant and resilient communities and help us bounce back stronger from this crisis.”

This is just one of the recent calls for support for a sector struggling financially as a result of the coronavirus pandemic whilst seeing an increase in demand for services.


Why your supporters are wealthier than you think... Course by Catherine Miles. Background photo of two sides of a terraced street of houses.

Virgin Money Giving data reveals impact on fundraising during lockdown

Data from Virgin Money Giving (VMG) has shown that many UK good causes on the platform, supporting cancer, mental health, the homeless and those with disabilities, have seen a significant impact on their fundraising income during the Covid-19 lockdown.
In the month following the start of lockdown, total charity donations remained very strong with VMG processing a record-breaking 1.15m individual donations in the 4 weeks to 21 April, while the total donation value increased by 151% year-on-year to £19m.
However, the vast majority of these donations were driven by NHS focused charity activity. The total charity sector donation value through VMG, excluding NHS donations, declined by 44% in the month following lockdown compared with the same period in 2019, from £12.5m to £7m.
Some of the UK’s biggest charities have been particularly hard hit, it says, with the top 50 charities on VMG seeing fundraising income reduce by 93% in the month following lockdown compared with the same period in 2019.
Pre-lockdown, cancer related VMG registered charities for example were performing at an equivalent level to 2019, but in the month following lockdown donation income declined 87% year-on-year.  Similar numbers were seen for VMG registered charities supporting the mental health sector.
From 21 April, aside from the NHS, all charity donation performance improved in the following month to 70% of 2019. Smaller charities have had a stronger recovery than the larger charities, which have been more greatly affected due to event cancellations.
Jo Barnett, Executive Director at Virgin Money Giving said:

“Many charities have been impacted hard with reduced income during COVID-19, and it remains critical that they have support as we move into the first phase of recovery. These are the charities that will be providing vital support to those people who have suffered most during lockdown, including those affected by cancer treatment delays and increases in mental health issues, domestic abuse and child poverty.


Three quarters of charities face extra financial strain from pension deficits

A further issue recently highlighted for charities is the risk of pension deficits.
Increased pension deficits are putting additional financial strain on many charities already financially struggling in the midst of Covid-19, according to Hymans Robertson’s latest annual report on DB pension funding in the charitable sector.
The report looked at the largest 40 charities in England & Wales. Three quarters of those surveyed had a deficit.
Commenting, Alistair Russell Smith, Head of Corporate DB, Hymans Robertson, said:

“The pandemic has placed many charities under significant financial strain with fundraising and retail income particularly badly hit and with a need to conserve cash. In many cases there is additional concern as DB pension deficits have also increased. On top of this, there is extra worry for pension schemes in the sector as forthcoming regulatory changes are putting pressure on charities to pay off pension deficits quicker.
“A delicate balancing act is needed between ensuring the sustainability of the charities and funding higher pension deficits. In the short term it may be wise for some charities to use recent regulatory easements to suspend pension contributions for three months to conserve cash.  However, this isn’t a free lunch and longer-term sustainable funding plans are needed for their DB schemes.
“The Pension Regulator’s new funding regime will introduce ‘fast track’ and ‘bespoke’ options for DB funding. The fast track option ensures no regulatory intervention if minimum standards are met but could mean too big an increase in deficit contributions for some charities.  For charities that are asset rich but cash poor, the bespoke route may be a better option. This enables investment returns rather than cash contributions to close the funding gap but needs to be underpinned by charging some of the charity’s assets to the pension scheme.”


Help to pay essential bills will be essential for recovery

Additionally, a recent survey of Kent charities by grant maker Kent Community Foundation has revealed that help to pay core costs is the key to charities coming through the 2020 pandemic.
During May 2020 Kent Community Foundation invited charities and community groups in Kent and Medway to complete a survey about how the coronavirus pandemic has affected them.
Respondents overwhelming said that their future was dependent on receiving financial support to help with their core costs.
The survey asked charities and community groups nineteen questions about the effect of Covid-19 on their operation and the service they were offering to the community. Almost three quarters of respondents were from small organisations with an annual income of under £100k who make up more than 80% of the voluntary sector in Kent and Medway.
When asked “What one thing would most help your organisation to recover and sustain during the coming months, 67.56% identified core funding to pay essential, running costs as the help they needed. A further 7% said, information, advice and guidance would help most, while, networking and collaboration opportunities, more volunteers and flexibility in commissioned projects were each identified by 14 of the 358 survey participants.
Kent Community Foundation has already awarded £940,000 to 268 organisations from its Coronavirus Emergency Fund and following the results of the survey the team will assign £500,000 from the remaining balance to support priority organisations with grants of up to £20,000 to cover core costs such as salaries and regular bills.
Josephine McCartney, Chief Executive, Kent Community Foundation, said:

“Charities have had to survive three months relying on their reserves or emergency grants. Food-related provision has been under enormous pressure since the end of March and as the economic impact of lockdown continues to be felt with redundancies, reduced hours and extended furloughing, food poverty is expected to peak again. Add to this our prediction for a huge surge in demand during September and October for well-being, mental health, debt advice and money management services and we know many charities are now or will find themselves in an extremely difficult position.”