Charity finances stagnate following huge Spring losses

The latest Charity Health Check findings indicate the financial environment for charities was unchanged compared to May. As the financial situation stagnates following huge Spring losses, there isn’t yet sign of the financial recovery needed to restore financial health to pre-Covid levels.

Read about last month’s results here

For the third consecutive month ACEVO, the membership body for charity chief executives, and researchers at the Centre for Mental Health asked charities across England and Wales about financial changes across the previous month. 88 charities across the country were asked if conditions had improved, deteriorated or stayed the same in five key categories. These were:

• New business and donations
• Cashflow
• Number of employees (FTE)
• Reserves
• Spending on front line service delivery (n=84)

The score for June was 48 out of a maximum 100. This is close to 50, which would suggest an unchanging environment compared to May. It is higher than the previous month’s score of 42.8 and higher than April’s score of just 30.8.

Because this is a ‘rolling survey’ comparing this month to last, the overall trend data shows a marked decline in May followed by conditions staying approximately constant at this new, lower level.

And while collectively the decline appears to be stabilising, it is clear that some charities are still struggling more than others with 33% reporting a decrease in donations or new business, 35% reporting worsening reserves and 25% saying cashflow was worse than the previous month.

Kristiana Wrixon, head of policy at ACEVO said: “It is positive that the charities we have surveyed are reporting a less acute financial health challenges this month. However, talking to our members, and looking at data from the previous two months, I am deeply aware that an unchanged picture in June, is still a much poorer, less resilient and more vulnerable outlook than four months ago.

“Some key questions now include how long can charities sustain themselves at unchanged financial levels? And will we see growth or a further dip in coming months? The chancellor’s July statement focused on protecting and supporting jobs, and it is clear that this support is still much needed in the charity sector.”

• Data was collected between 26 June and 3 July 2020 and findings relate to the previous 4 weeks. · Data covering the month of May can be found here.
• All respondents were members of ACEVO and registered charities headquartered in England or Wales.
• 88 respondents, of which 84 provide front line services.
• Analysis conducted by Nick O’Shea, chief economist at the Centre for Mental Health
• Questions to be directed to Kristiana Wrixon, head of policy, ACEVO – Kristiana.wrixon@acevo.org.uk, 07894 668508.

Specific results are: 

New business and donations are the same for 40% of charities, and worse than last month for 33% of charities surveyed 

Cashflow – a key measure of an organisations’ health and ability to pay wages and bills – stayed the same for 40% of organisations, better for 35% 

Full-time staff remained the same for 69% of organisations 

Reserves are worse for 35% of charities and the same as last month, for half. 

Spending on frontline services is the same as last month for 65% of charitable organisations. 

Detail : The surveys ask five short questions requiring short answers – better, worse, same.  The PMI score averages those scores and is calculated as: 

PMI Score = 

(percentage of questions that reported an improvement) + 

(1/2 x percentage of answers that reported no change) 

So, if 100% of the questions were answered with an improvement, the score would be 100. 

If 100% of the questions were answered with no change, the score would be 50. 

This means that a score above 50 is good.  A score below 50 is a deterioration. 50 means no change.