5 Challenges facing Charities in 2019

The charity sector has been experiencing turbulence in recent years, with controversies over financial mismanagement and sexual misconduct making headlines. To respond properly, such problems need to be identified and discussed with clear, critical minds. That, however, starts with knowing the issues first. 

Here are five of the greatest challenges charities must address this year:

1. Trust and Transparency

Fewer people are directly donating to charity and the past three years has seen a drop from 61% in 2016 to 60% in 2017 and down to 57% in 2018. Although 52% of UK citizens say they trust charities, the Fundraising Around the World report revealed that only 47% believe they are managed properly.

It is quite understandable why public trust in the charity sector has been on a downward trend. Given all the biggest news stories about charities mishandling funds and abusing power, the sector needs a PR rehabilitation.

It is not just the masses that have a trust issue with charities. There is a good majority of the wealthiest donors sharing opinions on what makes them support charities. In an Nfp Synergy report, 87% of donors say sound business and operational practices factor into their decision on who to support, while 62% want complete financial transparency.

People expect to know how charities work, where the money goes, and how it gets to the beneficiaries. Legal compliance cannot be overstated.

2. Digital Adoption

As part of the larger conversation regarding transparency, technology plays a vital role in how charities can rise to the needs of the public and their donors. 

The implementation of the General Data Protection Regulation (GDPR) in 2018 requires greater cyber security measures in handling private information. Such sensitive data is entrusted to charities on a regular basis, so there is a bigger responsibility to secure this information, especially since cyber crime costs charities £9,470 on average.

Private, for-profit companies have been quickly pivoting to meet the demands of consumers who are always connected and expect virtually instant responses and results. With this 24/7, on-demand mindset dominating culture, the charity sector has to keep up and integrate digital technologies into its solutions.

Risk-taking through innovation must then be a top priority for charity leaders. However, according to the Charities Aid Foundation, “only 29% [of charity leaders] agree that charities are using new technology to increase giving.”

This shows a massive gap between what needs to be done and what the realities are for the charity sector. More actions need to be taken to bridge that gap.

3. Trustees Taking Action

Dovetailing with the growing need for risk-taking is the growing expectation for charity board members to have a more active role in shaping their organisation’s future today. 

Pilotlight chief executive Gillian Murray stated that three out of five small to medium charities feel they are facing a skills shortage. In such dire circumstances, trustees can provide their unique skills, experience, and connections to course correct. 

The charity sector has long been risk-averse, and the spectre of a budget deficit post-Brexit can turn leaders down to even more fiscally conservative paths. However, this is underselling the capabilities of board trustees, which can be leveraged to mitigate risk. 

It is not uncommon for charities to gradually prioritise searching for solutions to problems that do not even align with their core goals. Instead of concentrating on the minute details of everyday operations, charities ought to collaborate with their board members to review their overall structure and strategy. 

A top-down approach to analysing the organisation can reveal the true weak points, which means resources can be diverted to address such flaws. 

4. Brexit Impact

There is simply no denying how the process of separating the UK from the EU will inevitably affect charities across the country. There is the potential sidelining of the charity sector once Brexit comes into full effect. The Directory of Social Change estimates that charities could potentially lose over £250 million in EU funds.

With the government already preparing for a no-deal Brexit, the future is even murkier than before for public funding of charities. This is all the more concerning, as the consequences of a no-deal Brexit, such as food shortages and more expensive medicine, will hit those in need of charity aid the worst.

Volunteer sources will shrink, as acquiring labour from the EU will be a much more difficult process. 

There are also the unquantifiable results of the cultural clash within the nation—highlighted and magnified by Brexit. Charities will have to deal with major social ramifications long after the UK leaves the EU.

5. Income Generation

The perennial problem of generating income remains a challenge for charities in 2019. It has been exacerbated by all the previously mentioned issues, from loss of public trust to Brexit. 

As detailed in the 2019 CAF Charity Landscape Report, “Over four in five charity leaders state that demand on their organisation’s services had increased over the last 12 months.” This puts even more pressure on charities to secure funding.

With government funding becoming less reliable, income diversification is even more crucial in these trying times. Charities must take full advantage of the benefactors available to them. Trusts, foundations, social investments, private companies, and major donors can all be sources of income. 

Building relationships with multiple parties helps prevent financial emergencies that come with depending on only one or two income generators. A wide-reaching support network ensures long-term sustainability. 

As the charity sector faces uncertainty in 2019, it must find the right balance between grounded consistency and bold innovation. 

To help you tide these issues this year and beyond, get in touch with us today and we’ll have one of our professional accountants specialising in not-for-profit organisations assist you.