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Large service delivery charities suffer slow growth

05 Apr 2018 News

The biggest public service delivery charities at the start of the decade have grown more slowly than the wider sector, and have declined in real terms, according to data published by Charity Finance magazine.

In 2009/10 Charity Finance looked at the largest charities which relied on public income - 28 UK charities with an income exceeding £30m and a statutory income proportion of over 70 per cent - and has revisited them to track their progress in the latest issue.

The overall income for these charities rose from £1.86bn in 2009/10 to £2.13bn in 2016/17, a little over half as fast as inflation.

NCVO’s latest data for the wider voluntary sector shows that charity income as a whole increased at a higher rate than inflation between 2009/10 and 2014/15.

New sources of income

Meanwhile, the public service delivery charities became a little less reliant on statutory income – the percentage of overall income from statutory sources has decreased to 88 per cent in 2016/17, lower than 91 per cent in 2012/13 and 90 per cent in 2009/10.

This suggests that charities are gradually finding alternative sources of income in order to supplement the increasingly limited pots of money available from local and central government.

One charity, Groundwork UK, saw the amount it receives from statutory sources drop significantly, from £28m in 2013/14 to just £1.8m in 2016/17. However, its overall income is at a similar level, £34.4m, compared to £35.3m in 2012/13.

Groundwork UK previously received a large core funding grant from the Department for Communities and Local Government, which finished in 2014.

But it now gets the majority of its income from a three-year contract to run Tesco’s Bags of Help grant scheme, through which it managed about £28m in 2016/17.

Commissioning frustrations

Public service delivery charities expressed increasing frustrations with the process of bidding for and delivering contracts.

The most common of these concerns were that contracts are now too short for charities to deliver effectively and that councils had combined contracts in recent years, which favoured larger bidders.

Kathy Evans of Children England said: “Previously, you might have had different charities providing children’s centres, sexual health support for teenagers and family support where there are parents with mental health problems.

“These are the different specialisms. In the councils they may have previously had different budgets aligned to that. But councils have now said ‘hold on a minute, let’s roll it all together into one contract, then we’ve got one contract to manage. That reduces our overheads and we’ve only got to deal with one provider’.

“What that leaves underneath is the possibility of smaller and local organisations not being able to compete.”

Beth Murray, director of communications and engagement at Catch22, said the environment for charities overall has got tougher in recent years.

She said: “What we’ve seen across central government, across local government, across all major streams of funding, is there has been a reduction. For an organisation to be sustainable they need to have a really strong mixed economy of funding to make sure they continue delivering services.

Murray said charities have had to develop strong negotiation skills to avoid being unfairly squeezed by local government commissioners.

She said: “If you think about why local authorities outsource contracts, often it is because they want to save money. The charity will take on the staff that run those contracts within a TUPE so pension liabilities come off the balance sheet of the local authority.

“Also, they just think it can be done cheaper. It is really important that the charity is able to be businesslike about it at that point and have a really strong idea of how much it is going to take to mobilise and run.”

Charity Finance magazine is the only magazine for charity finance professionals. Find out what's in the latest issue here.