Department cuts in the latest spending round will likely trickle through to charities receiving statutory funding. Jenny North uses a real-life case study to demonstrate how organisations can adapt and survive.
Charities were some of the most vocal critics of last week’s spending review, pointing out the effects that changes to welfare in particular would have on their beneficiaries. But they could be forgiven for sparing a thought for themselves too. The further 10 per cent of cuts – coming on top of the previous spending round’s 33 per cent - are sure to be passed on, to some extent, to voluntary sector organisations working under local contracts, or in receipt of grants.
A new report from Impetus - the Private Equity Foundation, Beating the Cuts, is aimed at charities expecting a drop in income over the next couple of years, or even coming to terms with one now. Based on Impetus’s experience of supporting 29 charities over the last decade, and on case studies of two in particular, we draw out nine lessons for any charity or social enterprises needing to respond to cuts in a way which protects the organisation – but most importantly protects the difference they make for their beneficiaries.
In 2009, Teens & Toddlers, led by Diana Whitmore, derived 60 per cent of their income from local authority contracts. Their well-evidenced intervention which provides work experience in nurseries and classroom sessions to young people at risk of poor outcomes, was expanding under the national Teenage Pregnancy Prevention Strategy. However, this ended in 2010, and the coalition government did not see teen pregnancy as a priority area. The ‘value proposition’ that Teens & Toddlers had to offer was no longer relevant to local authority commissioners, and they were facing a 35 per cent drop in income.
With support from Impetus, the organisation reviewed its pricing and sales model. This work confirmed that their offer represented good value for money, in terms of the outcomes achieved for young people. They also reviewed these outcomes as widely as possible, and refined their sales approach to emphasise that these were wider than teenage pregnancy prevention, and included neet prevention and achieving re-engagement with education.
Creating a fundraising and finance role
While developing a new approach to securing contracts, Teens & Toddlers simultaneously turned its attention to diversifying its income. It made the bold decision to recruit a fundraising director who would focus on securing grants from trusts and foundations, and a finance director. The latter built the financial capacity the organisation needed to plan ahead and spend wisely, while the former raised grants of £1m, or 74 per cent of income in 2012/13. Teens & Toddlers are now looking to rebalance this again, recognising that in today’s voluntary sector, no organisation can rely on the same funders year after year.
Teens & Toddlers now delivers services directly to schools, as well as via local authority contracts, and is expanding its operations to different regions of the UK. Its unremitting focus on measuring and managing its impact despite financial pressures – even participating in a randomised controlled trial in 2012 – meant it has been in an excellent position to take advantage of new social investment opportunities, and are being funded under the DWP’s Innovation Fund. During this period, Impetus provided extensive support to the management team, and brought in pro bono expertise.
Teens & Toddlers’ income is up, but the most important numbers are these: 485 young people participated in their programmes in 2009/10; 846 did so in 2012/13.
Putting beneficiaries first
Beating the Cuts has more on Teens & Toddlers’ story, as well as the other featured organisation, Street League. The overarching message is that ‘business as usual’ will not stop innovative, ambitious organisations going under. The case studies demonstrate how charities and social enterprises can focus on which outcomes they’re really good at delivering, focus on who will fund it, and focus on delivering their services as efficiently as possible. The report gives details on how organisations can do these things – fast.
‘Business as usual’ isn’t an option for commissioners either, who are also facing months of headaches as they try to decide which valuable services to prioritise. Beating the Cuts highlights the need for commissioners to redouble their efforts to move towards outcome-based commissioning, and away from salami-slicing of existing services.
Beating the Cuts does not gloss over the damage that spending cuts can do to communities, organisations, and individuals. It starts from the position that charities want to – and have to – respond to cuts in ways which put the interests of their beneficiaries first. We hope that organisations beyond our portfolio can benefit from our experience, and put in place changes which mean they’ll be around, and making a difference, for years to come.
To read the full report click here.
(As of 4th July, Impetus merged with the Private Equity Foundation, to form Impetus – The Private Equity Foundation.)
Jenny North is director of policy & strategy at Impetus – The Private Equity Foundation
