New measure shows massive deterioration in the financial health of charities

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12 May 2020

The first Charity Health Check has shown most charities are facing significant deterioration in their financial health while they fight to protect delivery of front-line services.

ACEVO, the membership body for charity chief executives, and researchers at Centre for Mental Health asked 174 charities across England and Wales about changes seen in April across five key markers of financial health. These five areas were:

  • New business and donation income
  • Cashflow
  • Number of employees (FTE)
  • Reserves
  • Spending on front line service delivery

The result is a worrying set of results for the charity sector with the majority seeing reserves, cash-flow, donations and new business income falling in the last month. Meanwhile employment and front-line services have held firm and will be key indicators of the impact of Covid-19 in next month’s (June) figures.

The Charity Health Check (CHC) is a composite score that measures the financial health of the charity sector each month. A score above 50 means an improvement. A score below 50 is a deterioration. 50 means no change.

The score for May was 30.8 out of a maximum 100.This low score shows charities had an extremely bad April and face an enormous financial squeeze. This is worse than April’s Manufacturing PMI (a parallel measure) that is at a record low of 32.5.

Vicky Browning, chief executive at ACEVO said: “As we navigate the worst impacts of the outbreak, charities and the essential support they provide is never more needed. I have spoken to members doing whatever they can to continue to provide services while income has fallen off the edge of a cliff. The Charity Health Check findings echo this. Charities are experiencing a reduction in cashflow and reserves while maintaining or increasing frontline services. This is not sustainable long-term and demonstrates why further government support is urgently needed if we are to build back better.

Nick O’Shea, chief economist at Centre for Mental Health said: “The Charity Health Check paints a worrying picture of the sector’s position at this time, and its prospects in the near future. Our analysis of the results suggests that charities across the country are continuing to deliver much-needed help to people during the crisis while facing an uncertain future with diminishing resources. From an economic standpoint, this is unsustainable. A rapid financial response is needed to prevent vital support disappearing from people’s lives when they need it the most.

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