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Charities improve risk management despite anxiety over finances

Governance | Vibeka Mair | 29 Sep 2010

Over 70 per cent of charities anticipate a fall in at least one of their main sources of income over the next year, according to a new report from PKF and CFDG on managing risk.

The report, Managing risk – moving towards the vision, quizzed 380 charities on their finances and attitude to risk.

It found that over the last year, 41 per cent of charities have needed to make cost savings and 28 per cent have drawn on reserves.  Some 71 per cent of charities anticipate a fall in at least one of their main sources of income over the next year and 60 per cent have needed to make financial adjustments during the recession.

Despite this, 89 per cent of respondents 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. Nearly all respondents (87 per cent) have reviewed their strategy in light of the recession or plan to do so.

On risk management, 48 per cent of managers and 25 per cent of trustees review risks and controls quarterly.
The proportion of charities considering their risk management to be fully embedded and working effectively is at its highest to date at 34 per cent. In 2009 this was 26 per cent.

The survey also found that 62 per cent of charities quizzed received income from public sector contracts. Over the last year more charities have experienced an increase in income from these contracts than a decrease.

However, going forward 73 per cent anticipate a reduction in income from these contracts, with 38 per cent expecting it to be more than 10 per cent. 
 
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 per cent, 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."
 
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.
 
But, she added: “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 per cent of respondents felt that public bodies were clear about the future of their contracts."

The full report will be released on 5 October.

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Directory: Charity Finance Directors' Group (CFDG) | PKF (UK) LLP
Who's Who: Caron Bradshaw