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Helen Stephenson's yesterday reflected on the role of finance professionals and ‘finance trustees’ in the charity sector.

Good morning, I’m delighted to be here with you today.

The ICAEW’s annual charity conference is a firm, reassuring fixture in the charity calendar, ushering in a new year, bringing together finance professionals from across this diverse and vital sector to reflect on what has been, and look ahead to what may come.

That mood of reflection and anticipation chimes with my own state of mind: 2024 will mark important new beginnings for the Commission, and it will involve some endings – including for me personally, as my seven years as the Commission’s chief executive come to a close this summer.

There is much I intend to achieve before I leave. I’m not taking my foot of the gas any time soon. 

But I do find myself taking stock, not just of my own work, but of all that has unfolded for the charitable sector, and for the Commission as regulator, since I first walked through the Commission’s doors in 2017.

And I’d like to reflect on that theme here this morning, as well as looking forward to some of what is to come from the Commission in the months ahead.

Reflections on enduring role of sector & Commission

And as I look back, I want to start with the observation that, while much has changed over the past 7 years, some important fundamentals remain unchanged.

Charities, which you serve, and we regulate, remain vital to every community, and to our society as a whole.

For centuries, charities have saved, improved, and enriched lives. Their role in our national life is truly ancient – the oldest charity on our register, a charitable school, was founded as far back as the 6th century.

And yet, if anything, the importance of charities to our collective wellbeing has only come into sharper relief over recent years, against the backdrop of a global pandemic, and the cost-of-living crisis which has put so many households under significant strain.

Charities also remain reliant on the dedication and commitment of an army of volunteers – including the seven hundred thousand or so people who give up their time, and share of their experience and expertise, in serving as charity trustees.

Many of them, of course, are finance professionals, and many of whom I know are here in the room today. More on your contribution, and the role of accountants within the sector, in a moment.

The Commission as regulator remains steadfast in our core purpose – to protect the role and work of charities, by upholding the bond of trust between the sector, government, and the public on whom all charities ultimately rely, and who in turn benefit so much from the work of charities.

The Commission as an institution is one of the oldest – possibly the oldest – regulatory bodies in the world, having been established formally in 1853. Legislation protecting and promoting charities is far older still.

Viewed in that historical context, the past 7 years is but a blink of an eye – and I have always been aware that my role as CEO has been, in large part, to steward a precious legacy into the future.

But stewarding is not an act of standing still and hoping nothing will change.

Quite the reverse.

In the Commission’s case, it’s about adapting to changing times, precisely in order to safeguard what is special about charity.

And in the context of change, we have certainly seen some seismic, and transformative events and trends since 2017.

Reflections on financial health of sector post Covid and cost of living crisis

As you will know better than I, the Covid pandemic required many charities to fundamentally review and re-shape their services, and overhaul their governance and operational arrangements.

But nearly four years on from the beginning of that momentous period in all our lives, I am heartened by the resilience of the sector when faced with such adversity.

I do not underestimate the lived experience of those working in charities during the pandemic, and it’s clear that both in terms of finances and human energy, the pandemic left many charities depleted. Many ate into their reserves, and I know also that many charities required a super-human effort from their staff and volunteers just to keep the show on the road. But the sector over all is no less impactful, and no less relevant and vibrant, than it was in January 2020, before the pandemic broke.

Similarly, in the context of the current cost of living crisis, our data so far – which always looks back a year or so, due to the nature of the reporting cycle – offers some encouragement as to the financial clout of the sector as a whole.  Later this year, as part of our new quarterly data releases – the first of which was published in November – we intend to offer an analysis of the 2022 annual return data. We expect this will show that the overall size of the sector’s income has been relatively stable year-on-year.

That is not to say all charities are faring well, clearly, quite the reverse is true. Many charities, especially smaller charities, face a precarious financial outlook, and many are experiencing existential threats.  

So I do not mean to downplay the difficulties confronting many charities when I say that, over all, and even in the face of grave and long-lasting challenges, the charity sector in this country has time and again risen to the challenges of recent years and though perhaps bruised, is in a strong position to regroup and ready itself for whatever comes next.

I have no doubt that this resilience is in no small part thanks to the ingenuity, wisdom, and skill of the finance professionals who work in, and serve on the boards of charities, ensuring charities invest strategically, spend wisely, and adjust their financial plans as circumstances require.

Our new annual return questionnaire, which I imagine you will all be familiar with, should share new light on the state of the sector, but due to reporting cycles we are someway off f being able to share insights from this.

With January being our busiest month for filing due dates, many of you will have by now guided organisations you advise or support through their new obligations.

You will have also encountered the new digital front door for our online services – the My Charity Commission Account portal. I’m pleased that before Christmas we were able to issue better guidance to support third parties like yourselves access the system on behalf of the charities you represent. I realise that users have had difficulty, but I’m sure you can appreciate that migrating nearly one hundred and seventy thousand charities was no mean feat. We have also been clear in our commitment that no charity will be disadvantaged if they seek to file on time but are held up by being unable to access their account.

Our contact centre team has grown to meet unprecedented demand for assistance and our online guidance has been improved to support users before they feel obliged to call us. Thank you for your patience if you have sought help from the team. I know that wait times are high but registration onto the new system is good, as is compliance across those who filed their AR22 on the new system, and those who have already done so for AR23.

Charity reporting data is of course a key source of information about the sector but so too is our routine public and trustee research that consistently informs our work.

Public trust and confidence research review / summary

Later today  we will publish a review of years of research, both into public trust and confidence in charities, and into the experience of charity trustees.

That review helps us, and others, gain a more longitudinal perspective on both levels of public trust in charities, and into the key factors that drive trust.

For the Commission, these insights are helping us better support trustees in their role and responsibilities.

In summary, what we see is a tentatively encouraging picture.

Public trust in charities dipped significantly in 2016-18 – a drop that was a cause of genuine concern for the Commission as regulator, and I think, also for many in the sector.

Our research shows that some highly publicised problematic practices in some charities – notably around fundraising, and also around their ability to keep people safe from harm – contributed to this trend.

Since then, however, we have seen that public trust in charities has been recovering and stabilising.

And this has happened at a time in which trust in other social institutions such as police and government have fallen further. In our research, trust in charitable organisations now ranks second, trailing only doctors and medical professionals, whereas for a time it ranked below trusting a stranger in the street.

There’s no denying that these changes reflect wider societal attitudes shifting. We live in increasingly less deferential times – we do not have the same, automatic trust in authorities and institutions as previous generations did.

And yet, perhaps in defiance of this trend, people’s allegiance to the concept of charity has recovered. Again, I think this points to something enduring and resilient in the role of charity in our society.

We cannot take this recovery for granted, of course, nor should the general picture obscure some important nuances, notably that trust in charities is dependent on people’s personal circumstances, and, for example, those working in blue collar jobs in the countryside or market towns are much less likely to trust charities than professionals living in cosmopolitan areas. That is a cause for concern – we need all parts of society to value, trust and support charities. 

An important way of addressing those differences is by paying  heed to the factors that influence and drive trust, because these are consistent across the population. Charities  and the Commission as regulator, can and must be respectful and mindful of what matters to people.

And the three most consistent factors driving trust are that charities:

• use funds responsibly – something that you as finance professionals have a particular interest in and responsibility for
• that they make a positive difference (have an impact) through their work
• and that charities’ values and principles are reflected in every aspect of their work

These are enduring expectations of charities, and they are shared among people who otherwise have little in common in their attitudes towards, and trust in, charities.

This means of course that these expectations are not just held by potential donors or funders, but by the people charities were set up to serve or support.

And they are reflected also in the legal framework against which we hold charities to account.

So we need to take them very seriously. Trustees must be able to explain their decisions through the prism of these core drivers of trust. And you as finance professionals play a crucial role in supporting them to do this.

I’m mindful of course, that how each of these principles play out will vary enormously from charity to charity.

Their meaning will also change over time. What it means to be prudent, or principled, changes, and can be impacted by rapidly changing environmental factors.

And indeed, as I reflect on what has shaped, and marked, the past 7 years for the sector, and the Commission, what I notice are not just the big, tangible events that we can point to.

Pace of societal change, and implications for charities

To me as a leader, and in thinking about the challenges facing those leading charities, what strikes me most about the past seven years are the more amorphous trends - hard fully to pin-point, but no less real or felt for all that. And no less relevant as we reflect on the future of the sector.

First, it’s the sense that the pace of change is increasing, fuelled, and facilitated by the growing speed at which new, transformative technologies are developed, adopted, and then superseded.

The tools we use to achieve our aims are changing rapidly and with them the opportunities to do things very differently, and the risk of problems or harms.

Leaders of charities, and those advising charities professionally, including, not least, finance professionals, are called upon to live in an ongoing attitude of learning, adapting, growing.

But the pace of change is growing, and it means that there is little opportunity for us to stand still, to rest on our laurels, to feel that we’ve learnt what we need to learn and can from now simply apply that learning effectively.

Closely linked to this is enormous change around societal  expectations on issues such as identity, fairness, community and so on.

Some feel left behind, and indeed often devalued and ignored by those changes, and, in my mind, the so called ‘culture wars’ are essentially about different levels of comfort with the nature and pace of those changes.

These divergences are playing out across society, but they impact on many charities very acutely, in part, I think because they are so often fuelled by a sense of mission, a desire to right a wrong or serve a certain community – whether that be a community of place or interest.

There is no way for charities to immunise themselves against change – whether that be technological, cultural, or economic.

The question is how best to respond.

And I believe strongly, that the challenge for charities is how to retain a laser-sharp focus on your core purpose – on what you are ultimately set up to achieve – while being open, and flexible, about the best ways of achieving that aim.  

And this challenge applies not just to charities, but also to the Commission as regulator.

Strategy launch

Next month, we will be launching our new 5-year strategy.

I can’t give too much away, but I can tell you that our new strategy will be led by principles, purpose, and values, setting out not so much what we will do, but why we matter, and the difference we need to make.

The contents of the strategy will not amount to a significant course correction.

Our chair Orlando Fraser has spoken extensively about his ambition to lead an expert Commission that is fair, balanced and independent – principles that we already work to, and which will also be at the core of the new strategy.

These watch words are all the more important in the years ahead, precisely because the cultural fissures within our society risk undermining a collective understanding of what it means to run an organisation well.

For the Commission this means demonstrating that we are an honest broker, led by the law alone in making regulatory decisions, free from bias or improper influence from any quarter, including politicians, the media or powerful interests within the sector itself. And it means being aware all the time that the public we serve is not monolithic in its expectations of charity – there are many views, many voices, and many attitudes towards charity within our nation, and we regulate on behalf of them all.  

The new strategy will also be rooted in the understanding that in doing their work, charities remain reliant on the dedication and commitment of an army of volunteers, including those who give their time, experience, and expertise in serving as charity trustees. 

Support for trustees and the role of finance professionals

Like you as professional advisers, we as regulator must continue to support these trustees to run their charities well, and in line with their legal duties. Effective support from us all will ensure not only that charities are run well today, but will help prepare a pipeline of able and passionate people, willing to take on the mantle of trusteeship, ensuring the good work of charities is sustainable.

And we must not take that for granted - we know from our research that many charities are already carrying vacancies, with some struggling to fill gaps.

It is important that the sector collectively works to widen the pool of trustees, so that people of all backgrounds come forward and volunteer their time.

As alluded to earlier, we know that charities welcome and need, in particular, the skills, experience, and strategic insight that finance professionals offer. Orlando reported back from a recent event he undertook with armed forces charities that they were struggling to appoint those with professional experience in finance to boards. And I too have heard from charity visits that there are often vacancies for those with these skills.

Now I know many ICAEW members already volunteer on the boards of charities, and I want to take this opportunity to thank those who do.  All trustees matter, and the sector needs people from a wide range of backgrounds to serve on trustee boards. But many charities simply would not be able to operate without those with accounting qualifications serving as treasurers, or in other board functions. Thank you for your time and expertise.

I would like to also to encourage those who are not yet trustees to consider giving of your time in this way.

It is, I promise you, a hugely rewarding experience, offering an opportunity to bring your skills and knowledge to bear in setting the strategic direction of an organisation. And it is an opportunity to put your professional experience at the service of a personal passion. Trusteeship is one of the most effective ways available to us, in modern times, of demonstrating good citizenship, and personal sacrifice in service of a higher good.

In that vein, please also return to your organisations and encourage those newer to the profession to volunteer any time and expertise they have. I know many charities would jump at the chance to draw on the valuable input you and your colleagues can offer, and without needing to pay an invoice at the end of it!

Outside of the boardroom, financial skills, I know, are in short supply in the sector, and I want to acknowledge that here.

We are aware that some charities that are required to have their financial accounts fully audited, are struggling to secure available auditors. I understand that this reflects a wider shortage of auditors.

Please be assured that we are aware of this problem, and talking to professional bodies about it.

So far, we have no evidence that this issue is preventing charities from being able to submit their financial information in time, but we will continue to monitor the situation, and, if needed, will communicate further on our response.

Finally, I would like to thank those of you who work in-house in charities, dedicating your expertise to an individual cause or issue. Accountants working within charities are a vital part of the machine that keeps the sector afloat. Many in-house accountants choose to work in the charities because they believe in the cause, and want to make a difference, knowing full well that they could earn bigger salaries, and lead more comfortable lives, were they to work in the private sector.

Conclusion

It is this unifying mission that remains at the heart of our sector, that I see in the commitment of colleagues at the Commission and that I know exists around every charity board and every charity staff meeting in the country. There’s a common purpose in the work we do.

This sentiment has remained a constant not just in the seven years of my tenure as Chief Executive but for the decades, even centuries of charitable work that came before.

Through adversity, be it brought about by the pace of change, by the challenges we face bringing others forward to share in our mission or by things totally beyond our control, I know the sector will continue to grow and evolve to meet the needs of those we serve.

Thank you for all you do in support of that and thank you for inviting me to speak with you today.