Charities in Scotland – Building Back Better

  • Insight

19 August 2020

Nearly every Scottish charity has been adversely affected in some way by the Coronavirus pandemic. In this new landscape, our charities have had to learn how to evolve and adapt quickly to address their immediate and longer term needs.

In this article we’ll consider the ways in which forward-looking trustees are now thinking about the future and how they plan to “build back better”, a term used in the SCVO Report “Coronavirus and its impact on the Scottish Voluntary Sector – what do we know so far?”.

We’ll cover everything you need to know to keep you up to date on charities and the third sector in Scotland. Our article discusses:

  • Where we are now in practical terms
  • The ‘new normal’ – how charities have adapted to continue providing their services during the pandemic
  • Are your charitable purposes and condition still fit for purpose? What you should consider moving forward
  • What you need to clarify to determine if your charity’s constitutional form is still appropriate
  • General issues that your charity might benefit from reviewing
  • Do you need more flexibility on grant conditions? We discuss the benefits of maintaining a solid working relationship with your funders as well as collaborative working options
  • The way forward for charities – how do we begin to “build back better”?

Charities - where are we now?

The top priority at this time for the majority of Scottish charities is seeking to provide financial sustainability and maintaining cash flow.  During lockdown, the sector has experienced a decline in membership numbers and charitable giving, funding cuts and restrictions, significant falls in fundraising income and other revenue and cancelled / postponed meeting and AGM costs. The SCVO Report also identified that 50% of Scottish charities have less than six months funding in reserve, at a time when more charities are finding that they have to dip into reserves. This has adversely affected the ability to deliver services and cover staffing and administrative costs, especially as the demand for frontline services has increased.

With the easing of restrictions and more charities starting to operate again in some form, the full impact of lockdown is now being felt. We’re seeing growing numbers of redundancies as the sector braces itself for the winding down of the furlough scheme, recession and the eventual ending of emergency funding. The sector is now reaching a crunch point. The demand for front line services has never been so high, but the future is uncertain for some charities and others face a long term recovery that could take several years if not more.

The ability to adapt in order to survive is critical. What is becoming increasingly clear however is that the pandemic has speeded up the pace of change that had already started in the more progressive parts of the charity sector. Let’s examine some of these changes in the new normal and how they could help your charity to build back better and stronger.

The new normal of charity service delivery

All charities dealing directly with the public in some way have had to find new ways of carrying out their services and activities. Many face to face services have been replaced with digital platforms such as telephone helplines and virtual meetings to provide support to beneficiaries. The SCVO Report gives the example that 92% of youth work organisations moved their services online during this time.

While digital platforms do not suit the activities of every charity, many will continue to carry out their services in this new and cost effective way of going forward. More fundraising will also be carried out digitally.  And every charity can benefit from it in the day to day running of their operations in some way.  Virtual meetings are green - they are time and cost efficient by saving on travel time for trustees, staff and volunteers and mean that business can be conducted safely and easily from home.  

It is anticipated that the use of virtual meetings and more flexible working for staff and volunteers between home and work will become the accepted norm. Some charities will go further and find that increased home working allows the charity to either dispense with or cut back on office space.  Going forward, the sector should be looking to maximise its digital presence where it can afford to do so. This may mean seeking further guidance and support to securely set up and manage the technology needed to achieve this.

Are your charitable purposes and constitution still fit for use?

We have all been considering whether there is a better way for our charities to carry out their services, activities and day to day administration. This has made us all look at our constitutions with new eyes.

Some charities have realised that parts of their constitution are out of date, or don’t work anymore, or simply don’t reflect the way they would like to operate going forward. Maybe there is no longer a need to hold an AGM, which leads to a review of the way trustees are appointed.  Perhaps you wish to update the way trustees are appointed anyway, or adjust the membership base or widen the way supporters can become involved in the charity. Perhaps you want to build in some more flexibility in the way the charity holds its meetings etc.

Many charities have also identified new ways in which they can help their beneficiaries and others, which may mean the charitable purposes need to be updated and widened. Your purposes should also be aligned with your mission and values statements if these also change. If these new activities fall outside the scope of your current purposes, OSCR’s permission is first needed to amend them before the changes can be made, to avoid acting outside the scope of your purposes.

We would suggest that if you haven’t done so already, you take the time to review and update your constitution and purposes if necessary. We can help you with this. Keeping your constitution up to date is the trustees’ responsibility and forms part of the good governance of the charity.

Is your charity’s constitutional form still appropriate?

Your constitutional review may have highlighted the need to make a more fundamental change by updating the legal form of your charity. This is particularly relevant for unincorporated bodies or trusts that are looking to acquire the protection of limited liability status by becoming a charitable company limited by guarantee or a SCIO - a Scottish Charitable Incorporated Organisation. Or perhaps you are already a charitable company limited by guarantee looking to further simplify your operation by converting to a SCIO.

Despite the advantages of changing legal form, it is not appropriate or possible for every charity, so please let us know if you are considering this.

Put your housekeeping in order

Now is also a good time to review your various policies, procedures and reporting structures. These should be reviewed and updated at least once a year to make sure they are up to date and cover what you need. Identify any gaps where a new policy or procedure may be required.

If you are making constitutional changes, then you should ensure that your policies and procedures also reflect any changes made.

Your charity’s relationship with funders

If you haven’t already done so, it may be worth speaking to your funders about more flexibility going forward in your grant conditions. This could be to accommodate any new ways of working that will directly affect specific outcomes or conditions, deadlines and reporting requirements.

Your funder may be prepared to extend the agreed funding period, provide transitional funding or agree a variation so that part of the funding can now be used to cover operational running costs such as salaries.

If in doubt about whether or not you might be acting in breach of your grant conditions, always raise this with your funder at the earliest opportunity.

Collaborative working for charities

We are going to see more collaborative working, joint funding initiatives, partnerships and mergers going forward.  It can be difficult to consider the longer term when your attention is focused on surviving the here and now, but future collaborative working in some form could allow you to deliver your services to a wider range of beneficiaries, in a better, more effective and cost efficient way, and to take advantage of any gaps or opportunities in the market that your charity may not be able to benefit from alone.

If there are concerns about the longer term financial viability of your charity, then looking for a potential merger partner early on, while the charity is still solvent, demonstrates that the trustees are continuing to put the best interests of the charity and its beneficiaries first.  And it’s possible that a good collaborative working arrangement showing a good fit between the charities leads to an eventual merger.

We advise on all forms of collaborative working and mergers, so please contact us for further information on this.

Build back better – the way forward for Scottish charities

The pandemic has accelerated the rate of change that was already starting to occur in parts of the Scottish charities sector. We are now operating in a new landscape that will continue to change. Our charities have to be progressive and flexible enough to evolve and adapt to this new norm. Sadly it is inevitable that some charities will simply not be able to survive this period. But there are still opportunities and lessons to be learnt that will enable others to build back better and be in a stronger place than before.  

For more information on this topic, contact