Charity Commission CEO David Holdsworth delivers keynote speech to ICAEW Charity Conference

Charity Commission Chief Executive David Holdsworth discusses key challenges and opportunities facing the charity sector and reflects on his first months in post.

"Good morning,

I'm delighted to be speaking to you today.

I'd like to begin by acknowledging the invaluable contribution that the accountancy profession makes to Britain's charitable sector.

If charities are the ships, you're the skilled navigators charting a course through challenging waters, helping steer ships to safety, ensuring they fulfil their purpose of delivering their passengers safely to their destination.

The skills you offer don't just steward your charity's resources, but provide strategic insight and leadership that also helps charities anticipate and adapt to tides of change.

Year after year, ICAEW members provide thousands of hours of support to charities large and small, helping them maintain the highest standards of accountability.

The UK's charitable sector is underpinned by one of the most robust regulatory frameworks in the world, within which both the ICAEW and the Commission play their part. The system of charity accounting and reporting, overseen by the Commission as regulator, helps maintain public trust and confidence in the sector.

Trust is particularly important when you consider the fact that charities in England and Wales rely on public donations of £31 billion and public funds through grants of £6 billion; in total managing over £80 billion in annual income.

Our research tells us, consistently, that what matters to people is information about how money is spent by a charity, knowing a charity achieves its purpose, makes a real difference and operates to high ethical standards.

We know from our annual research over many years that to the public, the most important factor contributing to their trust and willingness to donate is that most of the money raised is spent directly on the causes the charity supports.

So your work on transparent financial information on helping charities translate money into impact and how the money has delivered the charity's purpose has never been more important.

You should never underestimate its importance to enabling your charity to achieve its purpose. Nor should you shy away in Board discussions, in asking – how will this spend contribute to achieving our purpose?

Reflections

But before I get ahead of myself, as January draws to a close, it's easy to charge forward without taking time to look back.

I have reflected on my first five, almost six months in office. A lot has happened in this time. We welcomed in a new Government and gained the country's first female Chancellor. And the Government committed to strengthening relations with the charity sector through the launch of a Covenant. Overseas, Syria and Gaza have been devastated by conflict to which millions have responded with aid efforts.

We also see the horrendous invasion of Ukraine continuing and the huge outpouring of support from the British public to the Ukrainian people with the DEC appeal alone raising £445 million. In response to the worst of humanity, we yet again see the generosity of the British public and the work of our amazing charities showing the best of humanity.

As the Dalai Lama said, “Love and compassion are necessities, not luxuries. Without them, humanity cannot survive.”

Closer to home, we witnessed a tidal wave of generosity following the devastating attack in Southport. And we saw again the awesome positive power of charities as the sector stepped up in response to divisive rhetoric and rioting over the summer – doing what it does best, reminding us of our common goals and bringing communities together where others sought to divide.

This again shows that despite the undoubted challenges, despite the stormy weather charities remain a powerful force for good, bringing communities together, supporting our nation's most vulnerable – changing lives for the better. None of which could be done without the generous British public, philanthropists, amazing charity people and – essentially – the work you all do to ensure good financial stewardship.  

At the Commission we have also been doing a lot to enable and support the sector and maintain public trust and confidence in charities. Since joining the Commission, we've concluded 39 inquiries. This includes our inquiry into the Captain Tom Foundation. Captain Sir Tom inspired a nation and reminded us what service to others can achieve even in the most challenging of times. It was unsurprisingly one of the most high-profile inquiries the Commission has faced in recent years and its conclusion has brought answers for many who questioned what happened after the Foundation was set up.

Since I've joined, we've also reviewed and rewritten six pieces of guidance and have others scheduled for 2025. I'll provide more detail on this in a moment.

2024 saw our Revitalising Trusts programme in Wales hit a £10 million pound milestone. For those of you who don't know, the Revitalising Trusts programme ensures charitable funds that are lying dormant are spent and make a difference as originally intended. We identify inactive charities and reach out to help trustees who find it hard to spend their income, recruit new trustees, identify beneficiaries, or find time to run the charity.  

Reaching this milestone means over £10 million has now been recovered for good causes, community foundations and charities across Wales and crucially, 72 charities that were inactive are now operating again.

I was delighted to see first-hand the value and impact of this programme when I visited Dinas Powys Voluntary Concern in November. The charity helps the elderly and people with limited mobility. This includes transport to appointments and providing a soup lunch once a week where people can have a hot meal and socialise. Funding they received has allowed them to expand on a wellbeing garden for the community.

I'm confident this year we can make even more of a positive difference to people and communities across England and Wales.

Navigating tricky waters

So much has been done and achieved but it is clear we are also in tricky waters. Towards the close of 2024, it seemed as though barely a week went by without news of the demise of a charity due to unsustainable pressures on its finances.  In October, Getting on Board, which for twenty years played a crucial role in encouraging new talent into trusteeship, announced it could no longer continue to operate. And in November, the central organisation of Relate, a charity that provides vital counselling services, announced it had entered administration before later being saved by Family Action.

I was also especially saddened over the summer to hear that one in five hospices in the UK have cut or closed their services in the last year or are planning to do so. These are vital services the public rely on, and I know closure is the very last decision trustees take when they can see no way to stay afloat.

Extending the analogy I drew earlier, like ships navigating through stormy seas, charities are facing challenging times. The economic headwinds are strong - with inflation pressures, rising operational costs, and increased demand for services creating a perfect storm for many organisations. Some charities are having to dig deep into their reserves, while others are finding themselves in uncharted waters.

We can't change the weather but just as a lighthouse keeper guides vessels safely around hazards, you the charity accounting experts working hand in glove with trustees and Boards can help charities navigate and avoid the rocky outcrops that could hole and sink the ship. We at the charity Commission also stand ready with advice and guidance to support the sector as it navigates these turbulent conditions.

As someone who's led several organisations in differing states of fitness and across different sectors, I'm a big believer that every challenge presents an opportunity. An organisation's charitable purpose is its north star it should guide everything a charity does – but the route it takes, like any good ship should adapt to the changing hazards in its path. The bigger the challenge the bigger the opportunity, ideas previously rejected as too radical, innovation that feels too big, conversations which feel too challenging to have when the waters are calm and still can suddenly feel a necessity.

And it's important to note that we've seen the sector respond to these pressures in agile and innovative ways. For example, late last year Zoe's Place, a hospice in Liverpool which provides care to children, faced an uncertain future. Politicians, local business leaders, local people as well as a fellow charity the Institute of our Lady of Mercy, fellow hospice Claire's place and media collectively rallied to save Zoe's Place, with the Commission playing a vital facilitating role.  

The charity may in future be located in a different but not far location, it may have a different structure, but it will still be there delivering its vital services for its beneficiaries – its place in the heart of community and its mission for beneficiaries re-vitalised.  

And despite challenges, large sections of the public are committed more than ever to do good for others.

Last year, we received over 9,000 applications to register a charity, a record high – around half of which were registered. That's around four and a half thousand charities, with at least as many people committing to standing at the helm of the ship - becoming trustees.

Staying on course

Trusteeship however doesn't just require a desire to do good. It needs integrity and a strong understanding of the responsibilities that come with the role.

I want all new trustees to see getting familiar with our guidance as a priority at the start of their journey.

Our guidance, support, and regulatory oversight aims to provide a steady beacon for trustees and finance professionals alike. It's admirable to want to charge full speed ahead but ensuring you're seaworthy before you go out on the water is crucial.

Our guidance aims to improve trustees' knowledge and their management of charities, so that you can focus on those areas that need your specific expertise. For those of you who are both trustee and trusted expert, you will need to ensure you are familiar with our guides, beyond the areas that require your specialist knowledge.

I stated earlier that over the last few months, we have undertaken a complete refresh of six pieces of guidance.

I'd like to take a moment to highlight one of our most pertinent updates from last year - our guidance on improving your charity's finances. We have restructured the guidance into three smaller guides allowing trustees to consult the guide they need for their situation.

The first sets out actions trustees can take to mitigate the risks of financial difficulties, such as active monitoring and review of their charity's financial position. As difficulties mount, it offers advice on steps to take including launching a fundraising appeal or changing how the charity operates.

Where the situation cannot be remedied or the charity is at risk of insolvency, the remaining two guides focus on insolvency, one for companies and one for CIOs. We urge trustees to engage early with a relevant professional advisor to help trustees review the situation their charity is in and the options they as trustees have.

You will know that once a charity is insolvent, or cannot avoid insolvency, certain legal steps apply. We have made guidance about this topic easier for trustees to understand, so that they - supported by your advice - are better placed to navigate that process effectively.

I have no doubt that the burden of responding to the current pressures falls especially heavily upon your shoulders as finance professionals. Our guides are there so that trustees can help avoid situations that might require us to step in more formally.

Even in the choppiest waters, strong financial management and transparent reporting act as a sturdy anchor, helping charities maintain stability and public trust. This is where your role as chartered accountants becomes crucial - you help ensure charities' financial systems are watertight.

We've also produced bespoke guidance to help trustees and anyone working with a charity to help protect their organisation from cyber crime. And published a new shorter guide on fraud. We know protecting against fraud and cyber crime can understandably seem daunting but there are many small, inexpensive steps people can take.

We received 603 cases relating to fraud and a further 99 cases relating to cyber crime issues in the last year. As pressures rise, its important more than ever that every penny reaches those in need and is not in the hands of fraudsters.

Trustees are all collectively responsible for their charity and no individual trustee should be considered ‘in charge' of certain aspects of governance, even if they bring a particular skill or professional experience to the table. It is of course sensible for members of a trustee board to play to their strengths, but if you are a trustee it does not mean  you should carry the burden alone. And that can be said of all trustee duties. So, if you sit on a trustee board or advise a trustee, get to know our core suite of guides.

Good financial governance also requires, as a bare minimum, a working bank account. You can expect us to continue to place a spotlight on the challenges, particularly smaller charities, face in this area. I know there's a session later this morning on this subject that should prove informative.

And you can expect us to continue to support you in 2025.

In spring of this year, we will be publishing revised guidance on trustee payments and benefits to make this clearer for all.

And, we are refreshing our guidance on finding new trustees. We hope this will help charities to recruit trustees to their boards. The new guide will provide updated advice around the recruitment process and how to recruit further afield. We're hopeful that by following our revised guidance, trustees stand a better chance at strengthening their boards with a diverse range of skills and experiences.

On the horizon

The best way for us to be a supportive and robust regulator, is for us to be data and insight-led. In turn we can help the sector to maintain and grow public trust. A lot of the work we have on the horizon aims to strengthen our commitment to gaining better insights.

We have been collating data from our Annual Return 2023 to better understand how we can effectively support the sector moving forward. 

I look forward to sharing the valuable insights – particularly from our new questions - later in the year. 

Now a moment on SORP as it will be relevant to many of you. The Commission, in its role as the joint SORP-making body, will soon be launching a consultation seeking views on proposed changes to the Charities SORP. The SORP ensures consistency and transparency across the sector, making charity accounts comparable and understandable for donors, beneficiaries, and the public alike. It represents a gold standard in charitable financial reporting that many other countries seek to emulate.  

The SORP is being updated to reflect the changes to Financial Reporting Standard 102 and the two key areas of change concern changes to lease accounting and revenue recognition.  

I encourage you to plan ahead as I anticipate many charities will look to your professional skills for help when any changes are introduced. It is positive to see that the institute is helping members get geared up for the changes. 

The Commission values your professional standpoint. The matters of material significance reports that you provide us with help us to identify when we may need to engage with charities in a timely manner, so thank you for your continued support in this area.

Growing the trustee community

As mentioned earlier, despite the demands asked of the sector, the public desire to do good persists.

Our latest research shows trust in charities is at a ten-year high. Over half of those surveyed had “high” trust in charities, placing it among the most trusted groups in society, second only after doctors.

This plays a huge part in public desire to not only financially support charities they care about but take the step to become a trustee.

In our strategy which sets our direction and priorities until 2029, we committed to using our voice and position to promote trusteeship.

To do this effectively, we have been working with Pro Bono Economics on an in-depth research project.

This project will help us to better understand who our trustees are, what skills they bring to the role and importantly, where the sector needs more people to lend their professional skills. It will also help us better understand the barriers to trusteeship.

We have some early insights from this data – and they're reassuring.  We now know that despite its challenges, 8 in 10 trustees are likely to recommend the role to others. And, two thirds of trustees say a major benefit to being a trustee is the chance to use existing skills in a new context.

You can expect our full research findings to be published in the next couple of months.

There is a whole wealth of benefits to becoming a trustee and I'm pleased that most trustees have experienced this in some way. It is not a one-way relationship. And I, as Chief Executive, pledge this year to championing trusteeship so that we can grow this fantastic community.

Many who have joined in today are already a part of that community whether that be through providing professional advice, as trustee or volunteering but as January is a time for resolutions, I'd like to call on every one of you to consider becoming a trustee.  If you are already – thank you and please do recommend it to others.

Conclusions

As I draw to a close, I want to emphasise just how crucial your professional expertise is to charities across England and Wales. You help ensure the effective stewardship of charitable funds that benefit millions of people across our country.  

Looking ahead, your role will become even more vital as charities continue to face new challenges and opportunities. I ask you to bring your expertise and learning to your charity boards – your insights can enrich discussions. Many of you will provide services across multiple organisations – you therefore have a unique ability to bring added value and cross sector learning.

Ensure, as the finance experts and navigators, that you are looking out at the horizon – helping trustee boards spot the rocks before the ship hits them. This might mean leading uncomfortable conversations, and advising they shift course to achieve their charitable purposes and protect their beneficiaries.

Finally, charities do the impossible and achieve the amazing everyday. I ask that you help charities translate income into outcomes and demonstrate the  impact they have in delivering their charitable purpose. Supporting this agenda will be a key objective for the Commission in the coming years and I look forward to working with the sector to make its impact more visible to wider society.

The ICAEW and the Commission are both some of the oldest institutions of their kind, with the ICAEW 145 years old this year and the Commission existing in some form for the last 170 years. We both have a long history of upholding the highest standards and serving the public.

As the ship navigators, supported by our guidance, you ensure the some 170,000 ships that make up our charity sector hold strong and do what they can to stay on track – and weather any storm."