2020 has been a hugely difficult year for many, particularly in respect of concerns about health, wellbeing and financial security. The Office for National Statistics estimated in September that the UK economy was around 20% smaller than at the end of 2019, bringing unprecedented headwinds for the UK’s businesses. The pressures on Public Sector bodies and third sector organisations have varied; needs have been considerable, combined with “lockdown” making delivery challenging, whilst funding from usual sources has declined significantly.
Looking back to the First Minister’s Programme for Government 2019-20 speech to the Scottish Parliament in September 2019, the ambitions were centred around environmental investment, poverty alleviation and school infrastructure. “Climate” was mentioned 16 times and “Brexit” mentioned 11 times.
Fast forward to September 2020 and the Programme for Government 2021-21 focus had clearly changed. “Climate” was said five times, “Brexit” only four times, but “COVID” was uttered on 39 occasions. This observation is in no way a comment about Scottish Government’s delivery on its 2019-20 ambitions or its intentions for the next year, it is to highlight the fundamental impact that COVID has had on the business of Government.
In preparing for a presentation on the topic of Charities: Financial Sustainability we were struck by a statistic from the Office of the Scottish Charity Regulator from a survey conducted in May 2020. 85% of charities had identified a threat to their financial viability. It is a sobering thought that, as early as May, 85% of charities had such a concern, before the duration of the pandemic was really known.
The effects of COVID on the sector
Public Sector bodies have been under significant pressure to respond to the needs arising from the pandemic as well as those that were pre-existing. Local authorities have needed to continue providing core services, whilst keeping employees and constituents safe, and in addition to administering vast COVID support schemes. This has often accelerated some digital transformation to be able to interact with service users remotely, although rushed digital transformation brings its own challenges.
Similarly, health boards and private medical practices have moved many appointments and services online, enabling care to be given throughout lockdown. However, the backlog of health appointments is well documented, over and above the many losses suffered from COVID and other causes.
For many charities, the needs of service users has increased, combined with a fall in funding and income. We have seen Charity shops and cafes needing to shut in response to national or regional restrictions, cutting off vital income sources overnight. The £110 million support provided to charities, such as from the Third Sector Resilience Fund, has been critical to the survival of such organisations.
What stands out?
In discussions with board members, trustees and senior management it is rare to not hear of examples where employees have gone the extra mile to maintain services. We work with several care service organisations where there have been no cases of COVID within the facilities; a result of robust procedures and the dedication of care staff. Discussions centre on how to recognise and reward those staff members in a challenging trading environment.
Rapid decision making has also become more commonplace, with boards streamlining governance structures to be flexible and quickly respond. We have seen charities change the business model almost instantly, going from property-centred delivery to community-centred support. Moving from a reliance on shop sales and donations to eye-catching social media fundraising campaigns and proactive engagement with local businesses to generate support.
We have also heard a board members say “we would never have achieved so much change without the pandemic forcing us to”. This change often includes investing in a real-time finance system, re-engaging with the workforce and having a firmer grasp of risks and results at board level.
There is beginning to be a greater appreciation that customers, funders and donors need to see the outcomes being achieved from their contributions to an organisation. Demonstrating the value of each £ is important in securing a financial future given the constraints on liquidity for many.
As a firm we have been particularly busy supporting our clients with upgrading to cloud-based finance systems, property portfolio planning and thinking about the agile workforce of the future. My colleague, Elaine Parr recently wrote an article for ACVO newsletter that details how we have worked with the charity sector throughout 2020. You can read this here.
It is clear that there will be restrictions on how we live our lives for some time into 2021, maybe even into Autumn. The sustainability challenges will remain, on top of the pain that has been felt in 2020.
Many of the actions that were taken by Public Sector and Third Sector organisations in 2020 will yield returns in 2021, such as digital investment, rethinking workforce engagement and streamlining operations. However, we are also conscious of the foundations which have not been able to be laid, for example fundraising which was not possible given the necessity of furloughing staff to manage working capital during 2020.
The resilience of the public sector and third sector has been remarkable, as have the funding actions of the UK Government and Scottish Government, giving us optimism for the next year. AAB remains dedicated in its support of the sector and will continue to think innovatively to help all of our clients.
You can find out how AAB work with organisations in the Public and Third Sector here