Edith Yembra FCCA, director of finance and IT at YMCA North London

Covid-19 has had a devastating effect on the charities sector, with many smaller organisations being left financially crippled and without an immediate plan for an exit strategy.

The only survival options available to some charities are to merge with others that have similar values, aims and objectives, or to close.

This was the underlying theme of the discussions at a recent virtual roundtable discussion in ACCA’s ‘Talking …’ series, between members, charity trustees and board directors.

Insights from the panel centred around the following key issues.

Ethical concerns

A number of issues are in play that call upon finance professional’s to exercise their ethical judgment. For example, as the third sector struggles to find stable and regular funding, it is open to exploitation from commercial companies. Big organisations such as Amazon offer money in return for service users’ medical information and purchase histories; charities have for some time tried to resist this pressure but they may have no choice if they otherwise face closure.

The concern around data protection of service-user information is a real one. Funders need to know what assistance the charity has provided as a result of their investment, and confidentiality and concern for service users’ welfare is paramount.

In addition, some charities have had to consider investing their reserves in unethical shares to remain afloat.

The penalties arising from GDPR and reputational damage will be costly for small charities.

As the third sector struggles to find stable and regular funding, it is open to exploitation from commercial companies such as Amazon

Sustainability challenges

Development trusts are finding it difficult to plan the regeneration of local areas, as businesses often see them as competition. Although the developments are community-led, the reality is that they may make money at the expense of other local businesses. Here, consultants can help with planning, bringing an external point of view.

Funders also need to be aware of cost pressures: redeveloping community assets in a sustainable way often means additional costs, and take more time to implement.

Participants in the discussion suggested that a valuable support service to help charities balance the challenges of people, planet and surplus would be a series of remote workshops. These could also help start-ups and social enterprises understand how they could recover and be sustainable.

Trustees may have to make some financial decisions that are not without risk, and in the knowledge that their decisions may not always yield the expected market returns, even if they contribute directly to furthering the charity’s aims and align with its vision.

Role of the finance professional

Participants at the event agreed that as businesses consider how to improve their approach to ethical and sustainability issues, they should consider linking up with charities.

However, this needs to be for mutual benefit – charities must be able to maintain their ethical standards and practices, and not sacrifice them in their efforts to work with commercial organisations.

Business in the Community is an organisation that brings together companies and charities ‘to mobilise that collective strength as a force for good in society’.

Further information

Listen to ACCA’s webinar on GDPR in the third sector.

See ACCA’s sustainability hub, which includes resources and reports.