77% of charities feeling the impact of recession, but mood of optimism prevails

29th September 2010

It has been a difficult and challenging time for charities over the last two years with 41% needing to make cost savings, 28% drawing on reserves and 71% anticipating a fall in at least one of their main sources of income over the next year, highlights a new report published by the Charity Finance Directors' Group (CFDG) and PKF Accountants & business advisers.

The 2010 report entitled Managing Risk – moving towards the vision, which will be released on 5th October 2010, also reveals that the sector has illustrated its ability to adapt and self review and many are feeling positive about the future as a result. Many have adapted their strategy and in 16% of cases there has been a significant change. In addition, most of those that did not have strategic plans previously have been prompted to develop them.

While 23% of charities have had to make significant reductions in the work they carry out, another 23% do not feel that the recession had has a significant bearing upon them. 89% also intend to emerge from the recession stronger than when they went into it, many seeking opportunities to expand and others seeking to improve collaboration with others.

For those charities receiving public sector income either as grants or through contracts, the future does look particularly challenging. The Comprehensive Spending Review to be announced on 20 October will outline significant cuts to public sector expenditure which puts the future of such charities in a difficult financial position.

Caron Bradshaw, Chief Executive of CFDG added: “Whilst the recession has had and continues to have a significant impact, it is clear from these results that many charities are thinking creatively about sources of funding, adapting, diversifying and taking the opportunity to be more strategic. Quality of service remains the backbone of the approach of CFDG members, with almost three quarters still meeting their targets, despite the hugely difficult operating environment.

“The forthcoming CSR and its implementation will be of critical importance to charities - not just to those key deliverers of public services but to the whole sector. As the sector engages with the most vulnerable and disenfranchised of society, the after shocks of major cuts are felt much wider than just the direct victims of them. The survey shows that we are justifiably concerned, that on a local level, communication regarding public sector funding cuts needs to drastically improve. Only 17% of respondents felt that public bodies were clear about the future of their contracts.

“Good communication between charities, central and local government will be vital if the Big Society is to be realised. This Risk Survey is an excellent example of the empirical evidence needed to demonstrate the impact of the current economic climate on charities and CFDG intends to fully use these findings in pressing Government for an equitable approach to the sector.”

Richard Weighell, head of PKF’s business risk services team and author of the report, said: “Responses to the survey indicate that if the changes in funding / activity required are more than 20%, many will struggle to make the adjustment – particularly if there is less than six months’ notice of the changes. For the charities contracting with public service, it is important that they continue to be driven by their own objectives and do not become just servants to their funders.

“We know the Big Society agenda will provide some opportunities for the sector and for existing charities within it, but the extent of these opportunities is unknown. It is expected that the voluntary sector will take on an increased role in a number of areas and it appears that this is aimed at existing charities as well as bringing more people into service provision.

“On the whole, most charities are going to need to make some changes in order to protect themselves and to maximise their ability to take advantage of emerging opportunities. There needs to be clear and considered decision making and strong project management backed up by reliable information, excellent communications and good advice.”

Copies of Managing Risk – moving towards the vision can be obtained from 5th October onwards by contacting Katie Garrett on 020 7065 0177 or emailing katie.garrett@uk.pkf.com.

-    Ends -

Notes to Editor:

1. The survey was carried out jointly between PKF (UK) LLP and the CFDG in June and July 2010. A total of 380 responses were received in total –the second largest since the survey began. Responses were received from the full spectrum of different sized charities across England, Wales, Scotland and Northern Ireland

2. CFDG is the charity that promotes best practice in charity finance management, supporting finance managers with conferences, training and a wealth of web-based information.  CFDG’s circa 1600 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. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk

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