How are charities being affected by the cost-of-living crisis?

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In December 2023, the Charities Aid Foundation asked 653 charities across the UK how the cost-of-living crisis was affecting their organisations and what actions they have taken/are going to take as a result.

Their answers contributed to the Charity Resilience Index, which indicates how charities are navigating the current climate with regard to income, demand and operating costs.

Across these indicators, the (overall) index remains unchanged at 68%, since it was last measured in September 2023, but what does this really mean?

Demand & capacity

65% of contributing charities said demand for their services has increased over the past 12 months.

32% said demand has increased ‘substantially.’

50% said that their services are at full capacity.

35% said they have no capacity left to help anyone else.

15% said they were forced to turn people away.

Necessity

61% of contributing charities say they are required to do more with decreased resources since this time (December) the previous year.

47% are seeing more people in ‘extreme’ need coming to them.

40% said they are helping more people navigate public services.

Staffing

40% of contributing charities feel confident they can maintain current staffing levels over the next 12 months (falling from 53% in April/May 2023).

12% face making redundancies.

52% said that the cost-of-living crisis has affected employee/volunteer morale.

51% said they are struggling to recruit or retain suitably qualified employees/volunteers.

To summarise…

Neil Heslop OBE, CEO of the Charities Aid Foundation, shared his thoughts on the findings:

Many charities are stuck in a Catch 22 situation. They face higher demand, while struggling with declining income, and significantly higher costs. Despite being the last port of call for the most vulnerable in our society, they are having to make very difficult decisions to introduce waiting lists, charge fees or turn people away who desperately need their help.

So, what can you do?

At Burton Sweet, we encourage our charity clients to actively engage in their organisation’s financial management.

It’s important that all trustees understand what resources their charity has, how they should be used and how this relates to their purpose and duties. Don’t make this the sole responsibility of the treasurer!

Think about:

Income – What opportunities and risks exist? How might you diversify your income streams?

Expenditure – Where could you streamline spend on people and other resources?

Funds – Are you clear about what funds you have and how can you use them in line with any restrictions?

Assets & Liabilities – What property, cash and investments are you stewarding and is it time to structure these in a different way?

Whilst effective management of your charity’s finances is a necessity and you may wish to expand into new areas of activity and funding to optimise them, be careful to ensure that you remain focused on achieving your charity’s purpose. Safeguarding charity resources and good systems of internal control are non-negotiable.

Read our article on getting to grips with financial controls to reduce the chance of fraud and mismanagement.

From the results of the research, it’s clear that charities are currently dealing with greater demand but decreasing resources, which will lead to difficult decision-making. Your beneficiaries may need immediate help, but dipping into your reserves is not a decision to take lightly and needs careful consideration. You must balance the needs of both your current and future beneficiaries.

Need some assistance?

We understand that financial management may be an area where you feel particularly confident.

Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to assist you, so you can deliver effectively for the communities you serve and show the good you do.

If you would like any specific training, or to discuss any of the topics covered in this article, please contact us and we will be happy to help…

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