Smaller charities ‘underfunded and overlooked’ by commissioners, says report

28 May 2024 News

Two people negotiating a contract.


Grassroots charities are routinely overlooked for public contracts and grants despite being better placed than their larger counterparts to deliver them, according to a think tank’s new report.

The Centre for Social Justice (CSJ) reported that commissioners tend to award contracts to larger, national charities that have the resources to secure funding and raise their profile but lack the knowledge and expertise of delivery in local areas. 

Most UK adults responding to a poll commissioned by CSJ agreed that small, local charities appear to be often overlooked and under-resourced.

Grassroots charities left in ‘precarious position’

CSJ analysed data from the Charity Commission and government departments, talked to smaller charities and surveyed 2,082 UK adults to determine what the British public thinks of the charity sector. 

Its report says that grassroots charities with a proven track record of impact are losing public contracts and grants to larger charities, leaving them in a “precarious position”.

Smaller charities are “consistently unseen, underfunded, and their impact unrecognised” due to their size and focus on delivery, the report reads.

“Large charities dominate public contracts where we see an over-reliance on charities with a national reach, who can consistently franchise into new communities and are first in line for public funding regardless of track record of local impact.

“When you look at the relationship between large charities and government for delivering frontline services, there seems little difference between this engagement and how the government uses professional outsourcing firms like Serco or G4S. 

“The government issues high-value contracts for services to the same few big charities, who have increasingly distant links to the people the contracts are designed to help.”

Organisations that are part of CSJ’s alliance of over 700 UK grassroots charities and social enterprises said they often feel they cannot compete fairly with bigger charities.

“The situation faced by small charities today is perilous. Many are at risk of closure, too many have already been forced to close,” the report says.

“The system in which they operate – the charity sector – no longer serves their interests. Change is needed. Without which the future of the sector will be dominated by a few mega charities with no room for the small, innovative, grassroot.”

British adults share grassroots charities’ concerns

According to CSJ’s poll, many British adults share smaller charities’ frustration that they are under-resourced and overlooked.

Half of the 2,082 UK surveyed adults said that small, local charities should be favoured over large national charities when awarding government contracts and grants. 

Some 79% said that small, local, charities seem to be often overlooked and under-resourced while 20% said they trusted larger national charities more.

Nearly six in 10 agreed that national government policies would be more effective if they were more informed by small, grassroots charities.

Meanwhile, 76% said that small, grassroots charities know their communities better than larger, national ones. 

Larger charities ‘don’t have the knowledge of the community’

One CSJ alliance charity said: “National charities apply for local contracts, thinking they’ve spotted the golden egg and a chance to get more income.

“They often end up getting the contract, putting local organisations at risk or even forcing the closure of small local organisations and then hand their contracts back, as they discover they cannot deliver the contract after all. 

“They simply don’t have the knowledge of the community or the knowledge of the constraints of local delivery. Then, to maintain services local charities are asked by the local authority to step into the gap the national charity has left; but at what cost?”

Another charity commented: “Recently a large government contract came out, which we were perfectly placed to deliver for. However, the procurement criteria clearly favoured larger charities (organisations with an income over £25m), and so we were unable to compete on a level playing field. 

“This meant despite us having a clear proven track record in supporting young people with this style of programme, we were unable to gain the contract which would allow us to further increase our impact.”

Commenting on the report, Paul Streets, chief executive of Lloyds Bank Foundation, said: “Small charities see first-hand the challenges people face and have specialist knowledge of how to tackle complex issues.

“The 700 small and local organisations we help each year demonstrate the crucial and unique role grassroots charities play in communities. Small charities are trusted, connected and best placed to support those they serve, this is especially true among racially minoritised, disabled, or faith communities.
“Any future government must prioritise small and local charities, involve them in decision making, improve contracting and procurement terms and adequately fund public services and local government.

“To help small and local charities thrive, philanthropic giving must be trust based, flexible, unrestricted, and include organisational development support. Only by investing in the specialist knowledge of small charities, can we truly tackle complex issues and create lasting change.”

Claire Stanley, director of policy and communications at the Chartered Institute of Fundraising, added: “Funders have had to make difficult choices on how to respond to surges in applications – brought on by years of economic and social uncertainty. 

“We have seen many make great strides in this by developing more transparent and accessible application processes, which allow organisations to bring their work to life and showcase their impact – and we hope to see this become the norm to create an equitable funding landscape.

“This is, however, only one step in the process, and more work must be done to generate sustainable and diversified income streams for local and grassroots organisations by mobilising the power of philanthropy and community spirit. 

“It’s a whole systems approach that will require coordination between charities, funders, and government to fully understand regional needs and identify innovative solutions that will guarantee the financial security and longevity of small charities, which have such a big impact on their communities.”

The CSJ was founded by former Conservative leader Iain Duncan Smith in 2004 as a think tank looking at poverty and social issues.

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