As is traditional at the start of a new year, we’ve given some thought to what lies ahead and the likely impact it may have on charities and social purpose organisations. We canvassed the Sayer Vincent team who dusted off their crystal balls and shared the following thoughts.
One certainty for the year ahead is that there’ll be an election here in the UK. What remains uncertain, is when this will be, the colour of the government it will result in, and the impact that it will have on charities – in the most part, we can only speculate.
There are, however, some known impacts. Should they come into power, Labour has already announced its intention to change the tax exemptions on private education, much of which is provided by charitable bodies, and in the coming months, there’ll no doubt be other headline-grabbing policies as each side jostles for column inches in the quest for success. Unfortunately, the charitable sector is likely to simply get caught in the crossfire.
Of course, before the election there’ll be a Budget in March. Ross Palmer, one of our senior tax managers, suspects that any taxation changes will be tweaks targeted at individuals, rather than wholesale changes – but you never know!
The US will also hold an election this year, and for charities in the international development sector, a return to a Trump administration rings alarm bells. Such an outcome – certainly not beyond the realms of possibility – would undoubtedly have an impact on the size of the US aid budget and how its used for ideological purposes.
Election uncertainty could also lead to volatility in the foreign currency markets – a further risk for charities exposed to US dollar income.
Financial pressures leading to closures and mergers
Away from election debate, financial pressures on the sector show no sign of letting up, and while inflationary pressure may be easing, the funding environment continues to be challenging.
Judith Miller, partner and governance expert, notes the potential for more charity closures and the risk that more charities will be forced to shrink services. This risk is heightened by the desperate state of local authority finances, the impact of which we’ve already witnessed in the arts sector.
With these pressures in mind, charities are carefully considering where collaboration may work in their favour and we’ve seen a notable up-tick in the number of enquiries relating to our merger due diligence services. More charity mergers are very much on the cards for 2024.
Our audit technical partner Jo Pittman notes that we should have sight of the revised FRS102 in 2024, before it becomes effective from 1 Jan 2026. In preparation for that, the revised SORP should be out for consultation by the end of the year. Keep your eyes peeled – we’ll no doubt pick up on this again later in the year.
Additionally, changes at Companies House will mean all accounts will soon have to be filed digitally. This will have implications for charitable companies, although what it means in practice, and when these changes will take effect for charities is still unclear. Watch this space!
Our risk and assurance team, meanwhile, is gearing up for a busy year.
2023 saw a return to stories around ethical fundraising, as well as how charities use social media. These are both areas of risk that charities need to have on their radars for 2024 and, as such, there’ll be an on-going need to build confidence amongst trustees that their charity is running as it should.
Charities are, unfortunately, not exempt from fraud and we’ve already this year seen examples of internal fraud, fundraising fraud and cyber frauds hit the headlines. Perhaps now is the time to make sure you’ve done a fraud risk assessment in your charity?
Not wishing to finish with doom and gloom, but instead a more positive note, we must remember – indeed, celebrate – those charities that, through the recent years of uncertainty, have enjoyed success. Undoubtedly, they have been those with a clear focus on the impact they are seeking to make, an ability to clearly demonstrate that, and the confidence to shout about it.
So, while there are many further uncertainties to navigate through in 2024, lets also make it a year of positive impact. The work that charities do has never been more valuable.