Charities fear £1bn of statutory funding could disappear over the next year

16th December 2010

The fourth report in the Managing in a Downturn series, produced by the Charity Finance Directors’ Group (CFDG), the Institute of Fundraising (IoF) and PwC shows that charities with statutory funding are anticipating significant reductions in their income over the coming year, expecting cuts on average of 8%. This comes after an already difficult year for these charities, with almost all (93%) experiencing a reduction in real income levels over the past 12 months. However, a reduction in charities’ anxiety levels and an increase in their investment in fundraising signals that certain areas of the sector are beginning to show signs of recovery.

The recession is still having a deep impact on charities - income levels remain uncertain but 39% of respondents have seen an increase in demand for services. Almost half (44%) of all respondents intend to call on their reserves in the coming year.This has worrying sustainability implications given that 68% of charities have less than six months’ worth of reserves.

The research was conducted prior to the Comprehensive Spending Review amongst CFDG and IoF members and showed that most charities (78%) expect to be affected by the cuts in some way. Since the last survey the number of charities receiving income from statutory sources who expect cuts of between 10 and 30% had doubled, to 18.4%.

Fear regarding statutory income continues to be a growing area of concern. But it is not all entirely gloomy, with cautious optimism about other funding streams emerging as the sector starts to feel the benefits of an upturn in the private sector. Anxiety about all non-statutory income sources, such as corporate donations and trading income, is falling. However, the impact of the spending cuts appear likely to impact negatively on the capacity of individual donors.

Charities are looking to fundraising to compensate for the shortfall in public spending, with 83% of respondents planning to increase activity in this area. Of those with statutory income, 33% also said they were looking at collaborative working to address the gap. While cutting services appears inevitable for some (40%), the majority will be focusing on fundraising and collaboration, showing the sector is being proactive in its response to the continuing financial pressures.

Throughout the Managing in a Downturn series, charities have been urged to look strategically at all areas of their operations to ensure that they are running as efficiently as possible. Having the right skills, resources and support in place to cope with the downturn’s ongoing effects will be critical. Any gaps which existed before will be highlighted by the financial pressures facing the sector and new cracks are likely to appear. It is essential that charities have a strong management team and skilled board of trustees in place, who are not afraid to take tough decisions.

Caron Bradshaw, Chief Executive, CFDG, comments:

“It is clear that times are going to be very tough for charities and therefore it is essential that the sector does what it does best and adapts to a new funding environment. It is important that the sector pulls together to support those who need to change rapidly, to adapt to new expectations or to capitalise on opportunities. Within charities the finance professionals will have a key role to play, by helping to fundamentally re-think their charity’s strategy.

“This survey supports the notion that charities will need to think creatively and innovatively about ways to secure other sources of income – harnessing and utilising the private sector’s upturn to charities’ benefit. Charities should not shy away from challenging the private sector to step up and should be bold in their approaches to funding in 2011.”

Amanda McLean, Chief Executive, Institute of Fundraising, comments:

“This report shows that whilst society is showing signs of recovery, it remains a time of mixed fortunes for charities. The recession is providing opportunities, around new relationships and expanding fundraising activity, as well as threats, such as potential staffing cuts and the use of charities’ reserves.

“Charities still need to be canny in their investments, including considering how to maximise on staff and fundraising resources. They also need to remain open minded about the role of trustees, and the possibility of joint ventures and mergers.”

Ian Oakley-Smith, Director, PwC, comments:

”Some charities have recognised that the impact of the recession on their income has yet to be felt fully and have planned accordingly. This survey, however, serves as a reminder to many charities that significant pressures remain and the need to be decisive and well informed as to their financial position is as important as ever. Those charities that are robust and well managed will be able to take advantage of opportunities arising from increases in demand for their services.”

 - Ends -

A full copy of the earlier research reports, published 2008-2010, are available from CFDG, IoF and PwC websites.

For further information please contact:
Diana Mackie                                        Tel.     020 7840 1027 / 07793 802 852
Institute of Fundraising                    email: press@institute-of-fundraising.org.uk
Melora Jezierska                                     Tel.     020 7250 8348
Charity Finance Directors' Group      email: melora.jezierska@cfdg.org.uk.

Katherine Howbrook                               Tel.    020 7212 2711
PricewaterhouseCoopers LLP             email: katherine.j.howbrook@pwc.co.uk
Notes to Editors

1.  Institute of Fundraising

The Institute of Fundraising’s (www.institute-of-fundraising.org.uk) mission is to support fundraisers, through leadership, representation, standards setting and education, to deliver excellent fundraising.  Members are supported through training, networking, the dissemination of best practice and representation on issues that affecting the fundraising community.  The Institute of Fundraising is the largest individual representative body in the voluntary sector with 5000 Individual members and 300 Organisational members.

The Institute is a charity registered in England and Wales (No 1079573) and Scotland (No SC038971), and a company limited by guarantee (No 3870883). VAT registration number 547 8930 96.

2. Charity Finance Directors' Group

The Charity Finance Directors' Group was set up in 1987 and is an umbrella group that specialises in helping charities to manage their finance-related functions.  CFDG’s circa 1650 members are responsible for the finances of charities with a wide variety of income levels. Between them our members manage some £17.53 billion in charity income per year.

3. PricewaterhouseCoopers LLP

PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders.  More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the PricewaterhouseCoopers global network or other member firms in the network, each of which is a separate and independent legal entity.

 

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