Policy and National Programmes Manager, Caroline Howe reflects on the findings of our recent survey and explores what this means for the sector over the coming months.
When we surveyed our grantees for our new Expert Yet Undervalued and On the Front Line report, we expected to hear that charities are working in tough times – our grant managers on the ground see it day in day out. What was sobering though was the scale of the challenges charities face, including the number of challenges that arise simultaneously. Hearing these messages in charities’ own words drives home the pressures, frustration and determination that characterises so many of the charities we fund.
For many this starts with the change in demand they’re experiencing, expressed by nine out of ten respondents – for most, this includes an increase in client numbers whilst also working with clients for longer due to their more complex needs. Dealing with this at the best of times would be a challenge but at the same time charities are finding it ever harder to attract funding together with a raft of other challenges. As one charity put it:
The biggest challenge is that we are now facing all of these challenges simultaneously”
In this scenario, it’s not surprising that a worrying number of charities are not sure how they will secure income over the next two years – 63% think it will become more difficult while in Wales, more than a third of charities are concerned that they’ll be unable to balance this income against rising demand. Many of these organisations are delivering services to individuals who are most at risk and who cannot access support through other means. Government mustn’t overlook the important role that these organisations are fulfilling in communities right across England and Wales if it is going to meet its objective of delivering effective services.
It’s clear that the small and medium sized social welfare charities that we support are particularly vulnerable. Smaller, local charities are renowned for their resilience and they are working hard to be able to respond to increased pressures. 99% of respondents are taking steps to diversify their income, but finding new funding streams is not as simple as you might hope. Despite government drives to increase use of social investment, only 5% of charities report attempting this as for many charities it will never be a viable option – their services are too complex and cannot work to a payment by results model. Earning income can be particularly difficult when working with those facing the greatest difficulties too:
We cannot charge our clients. We deal only with the poorest and most vulnerable who are already in financial difficulties. They cannot pay for services”.
Even where new funding streams could be sought, they come at a considerable cost to organisations with limited resources that may be struggling to meet front line demands –these options can “require significant initial investment and present financial and operational risks to the charity”. Where charities can make the initial investment, there is some evidence that they have reaped wider benefits than increased income, including raising awareness of their organisation and learning from other organisations in consortia. This offers some hope to many organisations but sadly does not help those who do not have the capacity to reach this position.
The survey also highlighted the intense pressure on resources brought about by the commissioning process. The NCVO Civil Society Almanac shows that 83% of government income to the sector is through contracts or fees yet half of our survey respondents who bid for contracts report the process to be impossible or difficult.
half of our survey respondents who bid for contracts report the process to be impossible or difficult.”
The commissioning system allows larger organisations to dominate, “branching out into different areas where they see a funding opportunity” even where they lack the local knowledge and expertise needed to reach those most at risk. Operating in a system which “does not put a high enough value on quality of practice”, larger organisations “put in whatever bid is necessary to win the contract and then deal with the consequences later if they not meet the targets set”. In many cases, smaller charities do not have the resources to undercut valuable services in this way. “This leaves organisations….with the expertise and local knowledge vulnerable” and they can find themselves forced out of the marketplace. Such practice is worrying for smaller charities themselves – but what is more worrying is the risk it poses to the people they serve and that has to cause concern for all of us.
It’s a concern despite government claims that it has protected spending on front line services as this isn’t reflected in the experiences of the charities we heard from on the front line. The charities we fund are feeling the full brunt of the cuts – the recent Financial Sustainability Review highlighted this, with charities under £1m losing 34-38% of their income from government sources since 2010/11. Securing their future and ensuring those individuals most at risk can access the support they need demands a fairer commissioning process; one where smaller organisations are not placed at an unfair disadvantage. For government, this also means acknowledging the wider social value that can be achieved when commissioning smaller organisations, recognising that working with these organisations can bring the greatest value overall. And government can do this – by adopting a more flexible funding mix that enables a greater proportion of grants to be awarded, government can ensure that the processes reflect the needs of the service and not the other way around.
If this isn’t done, the results will be catastrophic.”
If this isn’t done, the results will be catastrophic. Already we are seeing the impact of the cuts on the people charities serve. They are driving more people, with more complex needs to charities’ services as other, largely statutory, services close down and the thresholds to access statutory support are pushed up. This will only worsen as the government rolls out the impending Spending Review which projects a further 25-40% of cuts. If government are going to achieve more with less, it makes sense that small and medium sized charities are part of the plan. These organisations can deliver the wider social value that can bring real value for money, provided that government reassesses how it works with the sector. This has to include a fair commissioning process and more grants to ensure the organisations with the knowledge and experience to reach those most in need are not placed at a disadvantage.
Independent funders have their own part to play in this too. We, and others, need to support small and medium sized charities with core, long term funding whilst helping to build their capacity so that they have the freedom and ability to deliver solutions that will work. We also need to push for the structural changes that will secure an effective environment for charities to operate in. Our report is a step in building the case for change with its strength resting on being the voices of charities themselves – we’ll be following it up over the coming months with further evidence that we hope will demonstrate to commissioners and government more widely, why and how they should engage and support smaller charities – seeing them as central to being able to deliver their objectives, whether that be preventing and resolving homelessness or domestic abuse, or helping those with mental health issues or long-term unemployment . As one respondent put it:
Responding to this new landscape requires the vision and commitment not just of charities but of all players.”
Now more than ever is the time for these players to come together, so we can ensure the needs of the most at risk continue to be met despite the phenomenal pressures on resources and this cannot be achieved without supporting small and medium sized charities – “we are normally in the best position to be able to work most effectively with the people who need our help and this mustn’t be taken for granted”.
Caroline Howe is Policy and National Programmes Manager at Lloyds Bank Foundation. Read more about the Foundation’s National Programmes.