Covid-19 and the Charity Sector in NI

What is needed to protect the third sector in NI?

Survey Results 30th April 2020

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Introduction

The impact of Covid-19 has served a devastating blow to the charity sector in the UK. With estimated losses of £4.3 billion in the first 12 weeks of coronavirus. The long term impact could be catastrophic for some of our much loved charities. In order to get a closer look at how Covid-19 will impact on NI Charities, CO3, in conjunction with Institute of Fundraising NI launched a survey.

The purpose of this survey was to raise awareness of how Covid-19 has impacted the charity sector here in Northern Ireland.

The evidence will guide conversations with government and to politicians on the need to provide a tailored financial support package in order to protect the sector. Without further Government support, many local charitable organisations will be unable to cover their staff or operational costs in three months. Action is required now. Charities and social enterprises are citing massive losses in revenues while others are already at high risk of closing. There are real concerns for the future of the third sector, staff and most especially, beneficiaries.

Summary

There were 206 responses with 76% stating that Covid-19 has already caused financial difficulties as a direct result of the pandemic. With 27% of respondents citing that they have lost £100,000+ of income to date.

This in turn has impacted on the cash flow position of charities and social enterprises, with 38% stating that their cash flow is in an unstable or very unstable position. Cash flow is a major problem. Worryingly, 32% have stated that their organisation is at risk at closing in the next 12 months.

Many charities and social enterprises have had to cease some of their charitable services, with 39% stating that they have stopped some services, and a further 33% citing that they may have to in the near future. Charities typically hold three months reserves with 24% of respondents citing three months running costs. However, a further 29% shared they have under two months running costs in the bank. Just over a third, 32% of respondents stated that they are at risk of closing due to Covid-19. Given the beneficiaries of charities are often our most vulnerable in society this is extremely concerning.

This comes at a time when there is a rise in demand for services. Demand is rising in a number of areas including domestic violence, mental health and older people who being advised to shield.

The current financial government schemes do not address the potential collapse of the sector. The majority of charities and social enterprises are not in a position to access the business loans and grants set up as the government response to Covid-19, with 92% stating that they were not eligible for the grant scheme. In addition to the challenges around loss of income and rising demand for services. Charity CEOs are deeply concerned about the impact of Covid-19 on the health and well-being of staff with, 74% worried about the poor mental health of staff, 68% stating that their staff are highly anxious due to lack of job security and 54% highly anxious due to increased demand for services.

What is needed to protect the charity sector in NI?

Currently, there are 6,156 registered charities in NI, bringing in over £1.5billion of income into our economy. According to NICVA’s State of the Sector 2020 report, there are over 53,620 staff employed. There is a huge concern that thousands of charities delivering key services in local communities, employing and working with vulnerable people and operating in the most deprived areas do not have access to the financial support that is needed to sustain their services. There Is a real threat that some of our much cherished charities unless the government takes a broader approach. The sector is under significant financial pressures therefore the sense of urgency required to provide financial support immediately is fundamental

Key Asks

1. Open up the business and employers grant schemes to charities and social enterprises. A grant like this would be of significant help to charities and social enterprises. A small change to the criteria would cover many businesses who have fallen outside of the criteria. A small change to the rules could unlock important funding sources.

2. Ensure the £22million allocated to NI charity sector as part of the Treasury financial support is allocated with immediate effect to protect key frontline services. This should be prioritised to charities providing frontline services to the most vulnerable through their own existing funds whilst absorbing the costs. 3. Ensure that additional funding allocated (including a proportion of the Dormant Accounts) is released with immediate effect to protect key frontline services protecting and supporting the most vulnerable. This should be prioritised to charities providing key services through their own existing funds whilst absorbing the costs.

4. The £22 million allocated has to be the start of a wider package of financial support for the sector. A stabilisation fund is needed to enable charities to stay afloat. Amend the furlough scheme changing the volunteering rules to enable charity workers to be redeployed within the charity as a volunteer without undermining eligibility. Enable charities to access 80% immediately rather than paying and claiming back. Enable charities who cannot furlough staff but who have suffered a reduction greater than 30% of income to claim loss of income based on last three years accounts (and budget for current financial year).

5. Set up a third sector resilience fund to support the rebuilding of the charity sector impacted by the Covid-19 crisis.

The impact of Covid-19 on the charity sector’s income has been significant. 76% of charities have stated that they are experiencing financial difficulties. For many charities and social enterprises their income model has dissolved overnight. This comes at a time when they are also experiencing significant increase in demand for their services. An alarming number of charities and social enterprises that provide vital front-line services to support some of the most vulnerable, could end up closing their doors forever as a result of COVID-19.

The impact of Covid-19 on the Charity Sector in NI

Below is a more detailed look at each question and response.

The charity sector is made up of a diverse range of organisations. For the purposes of this survey the majority have an income of £500K+. An often overlooked fact is the key economic role the sector plays. Excluding churches and universities the combined annual income into the sector is over £1.5 billion. (CCNI, 2020).

The income losses due to the direct impact of Covid-19 has been significant. The business model of many charities and social enterprises has dissolved overnight, with charity shops closing, event fundraising ceased, corporate fundraising paused and many trading services stopped including cafes and childcare centres. With 27% of members already experiencing losses of £100,000+ it points to the need to take urgent action to support the financial crisis the sector is experiencing.

Although the cash flow position of many has been described as stable or quite stable. There is also a significant proportion whose cash flow is either unstable or very unstable (38%). As the pandemic causes unprecedented demand on services, the ability to cease key services is not an option for many in order to protect their cash flow. This reinforces the need for urgent financial support to the charity sector. With no end in sight, the cash flow position of charities will also worsen, for those who are currently claiming their cash flow is stable, they are concerned about the longer term impact of Covid-19 on their cash flow position.

The majority of members have three months or less reserves (53%). In addition, reserve values will be further undermined by plummeting investment values. Therefore, charities will need to make decisions about their solvency within weeks, unless financial support is urgently made available to the charity sector. Paying staff and reclaiming funds (through furlough) does not help charities who cannot meet the next salary bill. We could lose some of our most cherished and needed charities. Hospices, Air Ambulance, Cancer charities and Children’s charities are amongst the most vulnerable. Without further Government support, many of the organisations we work with will be unable to cover their staff or operational costs in three to six months – action is needed now.

Services that have been suspended due to furloughing staff will inevitably fall back on the public purse. The majority of the sector is currently not able to access support through the government business loan and grants. A small change to the rules could unlock important funding sources for a range of charities. Crucially, the demand is for grant funding, not repayable finance. Under the current circumstances, taking on additional debt is not an option for those who instead need to focus on their immediate cash flow issues. Without further Government support, many will be unable to cover their staff or operational costs.

In recent years the sector has moved towards a mixed-income model, creating social enterprises in order to support the sustainability of their charities. Already 34% have stopped trading, with a further 13% that may have to. For charities and social enterprises who have pursued a social business model, they are at most risk of closure. This, in turn, compounds their ability to deliver on their social mission. Without further Government support, many of the organisations we work with will be unable to cover their staff or operational costs in three months -action is needed now.

Charities and social enterprises are facing huge challenges as a result of the pandemic. Many are racing to adapt their service delivery and facing an uncertain future. It is deeply concerning that 39% of respondents have already stopped some of their charitable work, with a further 33% that may have to. Charities are set up to serve and support people when they are at their most vulnerable. There are longer term costs to the public purse when we lose these key services.

“Cancer Fund for Children’s unique service delivery of restorative practical and emotional support provided by a specialist services team has helped more than 2,500 families in the past five years. This represents an annual contribution of £2.4million to local healthcare. We are the only charity that provides these services so children, young people and their families will not be able to benefit from this support. There will be a gap in support for these families in terms of individual and peer support, as well as short breaks. This would be a huge loss to cancer services in Northern Ireland and the families we support. This could lead to long-term negative impacts on the mental health and well-being of families living with cancer across Northern Ireland.”

“Last year we supported over 1000 families, if we are not there to help people who are at most risk of escalating to Statutory services, the NHS will be further impacted by demands in hospital, mental health, housing and psychiatric services”

“500+ people with learning disability /autism will not have access to our services to support them to develop confidence and independence and to support them to get and keep paid jobs”.

The real and pressing concerns on the sustainability of the charity sector is alarming. With 31% stating that they may close due to the impact of Covid-19. As time progressing this figure will increase if urgent government action is not taken.

“Around 90% of our income comes from fundraising events. They have all but ceased in past 5 weeks. We have a plan to navigate through the next six months- twelve months however that is dependent on a return to fundraising initiative in the next three months. If this situation goes on longer then we will face considerable pressure. We support 500 of the most vulnerable families across NI who are living with a life limited illness. The service is comprehensive wrap around and supports people individually, through group work by connecting peers and through short breaks for whole family. We are local charity and if closed these families will have limited support outside of hospital setting. Families time and time state that the service provide to them by our charity are a lifeline. They simply couldn’t have faced cancer alone. We have been supporting families for 30 years.”

In addition to addressing significant reductions in income and increasing demands for services, many also have expressed key concerns about the health and wellbeing of staff and volunteers. Poor mental health of staff and high anxiety due to lack of job security and increased demand for services.

What are the key concerns you have in relation to the health and well-being of staff and volunteers through Covid-19?

Conclusions

We have seen the Government take swift and unprecedented steps to address the economic impacts of the Covid-19 pandemic for the private sector. With the economy effectively on lockdown for the foreseeable future, the state has intervened in ways that were unthinkable: from providing cash grants directly to affected businesses, to covering 80% of the wages of employees.

The same spirit of clarity and speed is needed in order to support the charity sector. The Chancellor’s announcement of a £750m package to keep struggling charities afloat during the coronavirus pandemic of which NI has received £22million has to be the start of a wider package of support. Given the financial dire straits of many charities and social enterprises, the sense of urgency to get this money released into the sector is urgently needed. Many within the sector cannot afford to wait any longer to receive financial support.

Government support must go further in supporting the charity sector. Our key asks below, can be part of the answer to what organisations need to survive these difficult times; and to help charities and social enterprises thrive again afterwards, when their work will be more crucial than ever.

Key Asks

1. Open up the business and employers grant schemes to charities and social enterprises. A grant like this would be of significant help to charities and social enterprises. A small change to the criteria would cover many businesses who have fallen outside of the criteria. A small change to the rules could unlock important funding sources.

2. Ensure the £22million allocated to NI charity sector as part of the Treasury financial support is allocated with immediate effect to protect key frontline services. This should be prioritised to charities providing frontline services to the most vulnerable through their own existing funds whilst absorbing the costs.

3. Ensure that additional funding allocated (including a proportion of the Dormant Accounts) is released with immediate effect to protect key frontline services protecting and supporting the most vulnerable. This should be prioritised to charities providing key services through their own existing funds whilst absorbing the costs.

4. The £22million allocated has to be the start of a wider package of financial support for the sector. A stabilisation fund is needed to enable charities to stay afloat. Amend the furlough scheme changing the volunteering rules to enable charity workers to be redeployed within the charity as a volunteer without undermining eligibility. Enable charities to access 80% immediately rather than paying and claiming back. Enable charities who cannot furlough staff but who have suffered a reduction greater than 30% of income to claim loss of income based on last three years accounts (and budget for current financial year).

5. Set up a third sector resilience fund to support the rebuilding of the charity sector impacted by the Covid-19 crisis.

To discuss any of the points within this report please contact:Nora Smith, CO3 Chief Executive, nora@co3.bz | 078 2543 2333Nadine Campbell, Institute of Fundraising, Nadine.Campbell@ageni.org | 078 4184 3454.

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