Recommendation 5

The Department cannot yet demonstrate that it fully understands the financial health and resilience of the charity sector or whether further government financial support will be necessary. The funding covers the period up until the end of March 2021 and any unspent funding will be returned to HM Treasury. The Department is unable to guarantee that the funding that has been provided will have met all increased demand across the sector. The Department asserts that fundraising activity has increased over the last year with rapid growth in private philanthropy and fundraising. The Charity Commission, however, reports that financial resilience within the sector is worsening, with more charities experiencing financial difficulties or at risk of insolvency. For example, the number of charities with incomes over £500,000 which have negative or no free reserves has more than tripled over the last year from 9% in April 2020 to 28% in March 2021. In addition, the number of auditor reports relating to matters of material significance within the sector has risen by 25%. Recommendation: The Department should, within three months, set out the triggers that would prompt it to consider further government financial support to the charity sector. 8 COVID-19: Government Support for Charities 1 Transparency over how decisions about how to allocate the funds were made