Charity Finance Group: keeping up the good fight

INSIGHTS CHARITY SECTOR SPECIAL
22 May 2020: Roberta Fusco is the Director of Policy and Engagement at the Charity Finance Group (CFG). She says, in the short term, sadly the charity sector is looking at risk of contraction.

It is a tough gig for charity finance professionals at the best of times; under coronavirus conditions, boy is it hard.

“We are thinking about outcomes,” she says. “In the short and medium term, we are looking at a contraction of the sector.” That spells disaster for the beneficiaries and heart-break for charities delivering vital services. There will have to be many instances of reorganisation, restructuring and closure. And, yes, there will be voids in service-delivery that simply will not be filled without fresh funding from central government in addition to the £750m pledged and the other smaller pots of cash now emerging.

CFG is all about championing best practice, nurturing leadership and influencing policymakers. Its raison d’etre is to improve the financial management of the charities it supports, and to ensure the safe-keeping of the funds they manage. The watchwords for CFG are leadership, governance, risk management and strategic decision-making – and this will continue to be the case regardless of COVID-19 or any other crisis.

There are some very real concerns about the outcomes for charities – these are not businesses and assumptions for one sector do not translate for the other. “Potentially there could be more mergers,” says Fusco, “but so much rides on the objects of a charity. Would a merger serve that purpose well?” she says. “Many charities won’t have the time or the funds to go through a merger.”

So what makes a charity most vulnerable under these conditions? Fusco is hesitant. There is no single answer. CFG is a membership organisation with 1,500 members operating nationally and internationally. These members are mostly medium to large charities with revenues in the range of £250k to £100m+. Will the largest prove to be the fittest? “Not, necessarily,” she says. “Larger charities have sizeable staff costs and the furlough scheme does not work well for charities where the demand for services has increased and there is a need to mobilise, not mothball.” Everything is a conundrum.

“It is your operating model that makes a charity either vulnerable or resilient in times of crisis,” says Fusco, “not neccessarily your size.” Very large charities may rely on income streams that may have all have been hit hard – this will force them to cut service-delivery and make them vulnerable to severe financial difficulty or even closure.

Convention has it that prudent charity management relies, to a large extent, on the charity’s senior management team building diversified revenue streams to hedge risk and ensure longevity. Makes sense. But COVID-19 has shown that these entrenched wisdoms do not perform well in extremis.

The harsh reality is that there will be significant fall-out for the charity sector and this is going to be a blow for central government. “It is a structural issue for government to solve,” she says. “The charity sector is not just nice to have; it is essential for the delivery of public services.”

And there is more to come. “The next shock will be the impact on local government, Fusco says, commenting on the significant charity funding derived from local authorities for service delivery. “CFG has lobbied hard for increased local government funding for years and now we will see the impact on that sector as well as ours.” 

The lobbying by Fusco and CFG continues – especially around this particular crisis – and the need for funding and regulatory change is starting to be heard by government, but Fusco continues to be concerned that central government does not truly “get it”.

“Charities have become an essential partner of the State by contracting for services,” she ventures. “And charities are in a special position in that they connect with beneficiaries. But the government does not always understand the multiplicity of operating models of charities – that is the bit that is missing. What unites us is the delivery of public benefit.”

And the government does not truly understand the precarious nature of the charity model. Charities come in all flavours, with many business models, myriad objectives and in all sizes – this is what makes them tick and enables them to both support and form an essential part of the rich social fabric of our communities, providing the safety net for those most likely to experience harm. 

If anything is sure it is that CFG will continue to lobby, and will continuously promote the very best financial management of the charity sector to its membership. This crisis has been an education in many ways for us all. We are still learning.