Recommendation 19

We asked about the impact of the pandemic on the financial health of the sector as a whole. The Charity Commission told us that a range of indicators suggest that charities’ finances were worsening. It explained that the number of auditor reports on matters of material significance, that highlight a number of charities are either experiencing financial difficulties or are at risk of insolvency, had risen by about 25%. It similarly explained that the number of charities with income over £500,000 which have negative or no free reserves 53 Q 52 54 Q5 55 Qq 1, 5; C&AG’s Report para 3.1, 3.4 56 Qq 4–5 57 Q 72 58 GSC0013 Association of Chief Executives of Voluntary Organisations’ submission; GSC0006 Pro Bono Economics, page 2 59 Q 92 16 COVID-19: Government Support for Charities had more than tripled over the last year from 9% in April 2020 to 28% in March 2021.60 In written evidence, the Charity Commission also highlighted that it had received nearly 3,000 Serious Incident Reports since the start of the pandemic. Of those that directly related to the pandemic, the most common reason for the report was a concern about long-term financial sustainability. It noted that so far, it had not seen significant numbers of charities removed from the official register as a result of financial issues, but that there may be delays in the process.61 60 Q 94; for the definition of charity reserves see: www.gov.uk/government/publications/charities-and-reserves- cc19/charities-and-reserves 61 Q 94; GSC0023 The Charity Commission submission, page 2 COVID-19: Government Support for Charities 17