In her valedictory speech to the charity sector, the outgoing chair of the Charity Commission, Dame Suzi Leather, yesterday acknowledged that financial concerns represent the biggest challenge currently facing charities in England and Wales.

Speaking at the Almshouse Association’s Annual General Meeting in London, Dame Suzi warned that the charity sector could look very different in a few years’ time, as a result of the economic downturn and public funding cuts, saying that this would "bring pain – for many charities and for many beneficiaries."

Dame Suzi said that a recent project for the Commission had revealed how concerned charities are about financial matters: "A recent charity review project the Commission launched last year with the Institute of Chartered Accountants in England and Wales (ICAEW) confirmed that money is on charities’ minds.

"The project is part of our commitment to working more closely with the sector and professionals advising the sector to raise governance standards – more on that a little later. It saw 25 small charities team up with 25 accountants.

"The accountants reviewed the charities’ systems of financial governance, including their strategy, their internal controls, their risk awareness, their fraud prevention measures.

"The idea was to help charities assess and improve their financial governance – and to help the Commission and the wider sector get a sense of the risks facing charities at the moment. The reviews did not focus on funding issues – but those conducting them came away with an unmistakable sense of the funding risks impacting charities.

"They found that future income is a major preoccupation and concern for the charities they worked with."

Dame Suzi also pointed to less tangible concerns facing charities, including maintaining the “charity brand” despite a "perceived blurring of boundaries" between charities and other types of organisations, such as community interest companies and social enterprises.

But she stressed that the requirement to provide public benefit distinguishes charities:

"Public benefit is quite simply the legal raison d'être for charity. A charity can only, and must wholly be for public benefit. Its their public benefit which makes the world a better place, whatever their charitable mission or object may be.And there is no question that the public expects charities to show public benefit.

"That was one of the most unambiguous findings of the trust and confidence research I have already mentioned. The survey published in 2010 found that 94% of people agree strongly or very strongly that ‘it is crucial that charities demonstrate how they benefit the public’.

"The Commission has always said that the vast majority of charities would have absolutely no difficulty explaining exactly how they do that."

Dame Suzi also spoke of her pride at the Commission’s response to recent budget cuts: "I am proud of the way in which we have handled the strategic review and I believe that our new approach is the right one.

"It is right that we are now focused on our core regulatory duties, and on promoting charities’ compliance and accountability.

"As a regulator, we are here to protect the public’s interest in charities and that means ensuring charities comply with the law, and explain what they do with the money the public donates."

She added that: "The Commission will not be able to absorb any further cuts if it is to continue performing all the functions the public expects of us and legislation sets out for us.

"Including registering charities, providing online guidance, ensuring charities’ accountability through the online register, investigating the most serious concerns around maladministration in charities, providing charities’ with legal consents and permissions as required by law.

"Something would have to give. We, like you, must be realistic.”

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