Taking the Pulse of the Small Charity Sector

Transcription

1 Growth is never by mere chance; it is the result of forces working together. James Cash Penney Taking the Pulse of the Small Charity Sector December 2016 to February th Edition

2 Background of Respondents Geographical spread East London 27% Scotland Midlands(E&W) 10% North(NE & Y&H) 1 North West 1 Scotland South East 18% South West 1 North ( Inc. NE & Y&H) Wales North West Wales Midlands East (Inc. East Midlands & East) London South West South East Cause type Where services are delivered Local 5 Regional 1 National 19% International 1 2 Children & Young People 17% Health 16% Education 16% Community 1 Disability Arts & Culture Environment Homelessness Sport Animals Religion

3 Regional Data Summary Results from December 2016 to February 2017

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6 National Data Summary: December to Feburary 2017

7 Contents Foreword 1 Income Generation 2 Service Delivery 4 Workforce 6 Governance 9 Conclusion 11 Perceptions Survey: Collaborations 12 Brexit Temperature Check 14 Methodology 16 Pauline Broomhead Olivia Lam

8 Foreword Pauline Broomhead, Chief Executive, FSI Governance: no easy task! For some months now I have been contributing to a group looking at what support is needed to ensure that trustees, who govern our organisations, are able to undertake their responsibilities and ensure that the governance they deliver is of a high standard. It has never been more important for small and local charities and community groups to be resilient and sustainable. Resilience and sustainability are crucial for the beneficiaries that rely on the support of small and local charities and community groups, as reliance on them to deliver services increases. At a time when it is reported that local authorities will have to cut back on filling potholes, collecting waste, maintaining parks and running children s centres and libraries in order to plug growing funding gaps. And when social care faces a funding gap of at least 2.6 billion by 2020, it is clear to both government and local authorities that they won t be in a position to fill this gap. Both government and local authorities across the UK are striving to become more self-sufficient, for instance, when they are looking to increase taxes to meet some of the demands. Yet it is clear from the Small Charity Index that small and local charities and community groups will be called upon to fill the gaps in local services, shown by the 9 increase in demand for services since June Thousands of people give up their free time to sit on charity boards as they want to make a difference to the communities and causes that they are passionate about. But now, more than ever before, trustees of small and local charities and community groups need to ensure that their organisations are being run efficiently and effectively. This may mean looking at how we deliver our services: can we make better use of new technologies? Are we looking outwards to other organisations in the same field seeking to work in partnership or at potential mergers? Are we investing the time and resources to develop the skills of the volunteers and staff who deliver our services? All of these questions are important. But as important, as we look forward, is are we investing in the development of the right skills within trustee boards to ensure that we are ready to face the challenges of the future? Trustees of small and local charities and community groups must be aware of the skills needed on their boards to run their charities as effectively as possible, and if skills are lacking, ensure that they gain those skills either through recruitment of new trustees or through training. Trustees must ensure that they are communicating with both volunteers and staff to ensure that the charities run smoothly and that there is transparency so that everyone is singing from the same song sheet. Governing, especially for small and local charities and community groups is not as easy as one may believe. It will not get easier in the future. 1

9 Index Results: December 2016, January and February 2017 Income Generation Quick Analysis Statutory Income (1) We asked in the three months December 2016, January and February 2017 has your statutory income increased, decreased or remained unchanged? 0% 8 Voluntary Income (2) We asked in the three months December 2016, January and February 2017 has your voluntary income increased, decreased or remained unchanged? 5 8 of small charities reported their statutory income levels remained unchanged. 20% of small charities experienced a decrease in voluntary income this quarter. 8% 8% Earned Income (3) We asked in the three months December 2016, January and February 2017 has your earned income increased, decreased or remained unchanged? 2 10% 7 20% of small charities experienced an increase in earned income this quarter. 2 + Decrease 16-2 Decrease 11-1 Decrease 6-10% Decrease 0- Decrease Unchanged 0- Increase 6-10% Increase 11-1 Increase 16-2 Increase 2 + Increase

10 Detailed Analysis Statutory income It is evident that the current commissioning environment continues to pose a major threat to the long-term sustainability of small and local charities and community groups, with the demise of grants and rise of contracts driving these challenges. For the majority of small and local charities and community groups (8), statutory income levels remain unchanged in the current quarter (Graph 1), suggesting that current commissioning processes continue to disadvantage small and local charities and community groups over larger charities. Only 8% reported an increase, while 10% reported a decrease in statutory income over the same period. Statutory income for small and local charities and community groups has decreased overall by 9% since 2013, and is the income stream that consistently experiences the largest drop. A regional perspective Many of the regions experienced a drop in statutory income, including the North, North West and South East, while the East and Midlands reported a increase. Voluntary income The income of small and local charities and community groups has moved from one in which the government and individuals contribute approximately equally to, to one where the majority of income comes from individuals. However in the current quarter, for just half of small and local charities and community groups (5), voluntary income remained static (Graph 2). Only 1 reported increases above 10%, while 20% experienced a decrease. With only a total growth of since June 2013, this suggests that voluntary income does not sufficiently compensate for any losses in statutory income, which leaves small and local charities and community groups extremely vulnerable to the shortfalls. A regional perspective Only the North and the Midlands have seen an increase in voluntary income this quarter, of and respectively. Earned income Small and local charities and community groups are adjusting to these challenging circumstances by diversifying their funding streams to increase their earned income, as a reliance on a single income source would amplify the risk of closure. Over this quarter, 20% of small and local charities and community groups reported an increase in earned income (Graph 3), a small rise from 17% in the last quarter. Overall, the Small Charity Index has reported a total 10% increase in earned income since June A regional perspective The greatest increases were seen in the Midlands and North West, which saw a rise in earned income this quarter. 3

11 Service Delivery Quick Analysis Demand for services (4) We asked in the three months December 2016, January and February 2017 has your charity seen the demand for services increase, decrease or remain unchanged? 0% 0% 0% 3 17% % Decrease 16-2 Decrease 11-1 Decrease 6-10% Decrease 0- Decrease Unchanged 0- Increase 6-10% Increase 11-1 Increase 16-2 Increase 2 + Increase 6 of small charities reported an increase in demand for services this quarter. Confidence in a small charity s ability to meet the demand for services (5) We asked taking everything into account, how confident do you feel about your charity s ability to deliver its planned level of services over the next 12 months? 10 Fully confident 16% % 6 5 7% of respondents reported they are confident to a lesser or greater degree that they will be able to continue to deliver their serivces over the coming 12 months Not at all confident 0% 4

12 Working in collaboration (6) We asked does your charity work in partnership with other charities? Yes 7 No 29% (7) We asked the charities that answered yes, what percentage of your services during the three months December 2016, January and February 2017 were delivered in partnership? 4 2 Only 2 of small charities are collaborating at a meaningful level i.e. undertaking more than 30% of activities in collaboration with others. 1 8% % 11-20% 21-30% 31-40% 41-50% 50 +% Detailed Analysis Demand for services Rooted in their local communities, small and local charities and community groups play a vital role in civil society. Indeed, over half of the respondents (5) to the Small Charity Index would describe their services as being delivered within their local community. With the combined effect of reduced public spending, cut backs on public service provision and lower incomes of poorer households, this places more pressure on small and local charities and community groups to step in and fill the gap in provision. This has resulted in nearly two thirds (6) of small and local charities and community groups reporting an increase in demand for their services in the last quarter (Graph 4). A third (3) reported increases in demand of more than 10%, while only reported a decrease in demand in the same period. These results highlight the continuous rise in demand for small and local charities and community groups services, with total increase in demand in services since June 2013 to be a significant 9. A regional perspective Small and local charities and community groups across all regions experienced an increase in demand for services, with the North West and Midlands reporting increases of 1 and 1. 5

13 Confidence in a small charity s ability to meet the demand for services With this trend not looking to change, it would suggest small and local charities and community groups are pushed to breaking point. Yet a defining characteristic of this sector is resilience, with 8 of small and local charities and community groups stating they feel confident to a lesser or greater degree that they will be able to continue to deliver their services over the next 12 months (Graph 5), an increase from 78% in the last quarter. A regional perspective The confidence of small and local charities and community groups charities working in the East and North West remain the highest at 79% and 77%. Working in collaboration Without any effective policy intervention, current trends look set to continue within the small and local charities and community groups sector. The FSI continues to champion collaboration as the best response to tackling funding cuts and safeguarding their vital services. Results from the Small Charity Index show that 7 of small and local charities and community groups report to be working in partnership with other charities (Graph 6), a decrease from 78% in the last quarter. However, only 2 of small and local charities and community groups are collaborating at a meaningful level, i.e. undertaking more than 30% of activities in collaboration with others (Graph 7). This is a situation that we must rectify if we are to gain the strength needed to meet the increase in demand. Workforce Quick Analysis Staff and volunteer recruitment and retention (8) We asked in the three months December 2016, January and February 2017 have your paid staff numbers risen, fallen or remained unchanged? 6% 6 of small charities report their staff numbers remain unchanged over the current quarter. 2 + Decrease 16-2 Decrease 11-1 Decrease 6 9% % Decrease 0- Decrease Unchanged 0- Increase 6-10% Increase 11-1 Increase 16-2 Increase 2 + Increase 6

14 (9) We asked in the three months December 2016, January and February 2017 have your volunteer numbers risen, fallen or remained unchanged? 0% More than a third of small charities (38%) reported an increase in volunteers this quarter. 2 + Decrease 16-2 Decrease 11-1 Decrease 6-10% Decrease Decrease Unchanged 0- Increase 6-10% Increase 11-1 Increase 16-2 Increase 2 + Increase Challenges (10) We asked in the three months December 2016, January and February 2017 which of these issues has presented the greatest, second greatest and third greatest challenge? Workload continues to be the most pressing concern to small charity leaders this quarter, selected as the greatest challenge by28% of respondents % 27% 19% Greatest Second Greatest Third Greatest 1 16% % 27% % % 6% 6% 8% 8% 9% 9% 0 Workload Training Investment Retention Cashflow Demand Funding Motivation Recruitment 7

15 Staff motivation (11) We asked on a scale of 1 to 10 how would you rate the current motivation/morale of your staff? 1 6% Very Poor Excellent 8 of respondents reported staff motivation as good to excellent over the current quarter. Detailed Analysis Staff and volunteer recruitment and retention One of the greatest risks facing an organisation is losing key members of their team, and when they face financial challenges, they are likely to make cutbacks in staff numbers and pay. However, results from the Small Charity Index demonstrate positive staff and volunteer retention rates. Staff numbers have remained relatively stable, with 6 of small and local charities and community groups reporting no change in numbers, while 2 have indicated an increase (Graph 8), up from 18% last quarter. Many small and local charities and community groups are volunteer-led and do not have any paid staff, so it s encouraging to see 38% of respondents reported an increase in volunteer numbers over the last quarter (Graph 9). The Small Charity Index has seen a steady rise in volunteer numbers, with a total increase of 3 since June A regional perspective The North West saw the largest increase in volunteer numbers, by this quarter. Challenges Many small and local charities and community groups face a capacity crunch as they deliver against a rising demand for their services with static income levels, absorbing any cuts through staff reductions. As a result, workload remains the most pressing concern facing small and local charities and community groups (28%), followed closely by funding (27%) this quarter (Graph 10). In the same period, cash flow (16%) replaced increased demand for services as the third greatest challenge. Staff motivation Morale remains high amongst the workforce, despite the threats to their survival, with 8 of respondents reporting staff motivation as good to excellent over the current quarter (Graph 11). 8

16 Governance Quick Analysis Reserves (12) Does your charity hold reserves? Yes 80% No 20% (13) If charities answered yes to question (12) we asked, how much of your reserves have you used during Base: All the Individual months of Respondents December (n 2016, = 301) January and February 2017? Maintained level of reserve 6 Used 2+ Used 16-20% 6% 6% 38% of those holding reserves have reportedly used reserves over the previous quarter. Used 11-1 Used 6-10% Used less than 1 10% Trustee Confidence (14) Some charities may face exceptional challenges and may have to contemplate closure, we asked how likely is it that your charity will face closure in the following 12 months? 10 Very likely of charities don t feel confident that they can continue to deliver services in 7 the current environment % % 2 1 Not at all likely 1 39% 9

17 Investing in Development (15) We asked how confident are your Trustees to take opportunities for development, outside of your current business plan which carry a financial risk? 10 Fully confident % % 4 9% 1 8% Only of small charity Trustees report to be fully confident to take up opportunities for development. 3 17% Not at all confident 9% Detailed Analysis Reserves However effective, well managed and impactful charities are, in this climate they are not immune to cuts or closure, and an effective trustee board is crucial to a small and local charity and community group s ability to survive. The majority of respondents to the Small Charity Index (80%) report to hold reserves (Graph 12). The other 20% of small and local charities and community groups find themselves in a risky situation operating without reserves. Moreover, 38% of those holding reserves reported to have used reserves over the quarter (Graph 13), a 6% increase from last quarter. This suggests small and local charities and community groups may be struggling to stay afloat with operating costs to maintain their services. Trustee confidence As small and local charities and community groups face exceptional challenges while operating in this environment, when asked to determine how likely it would be that they would face closure in the following 12 months, on a scale of 1 to 10, with 10 being very likely, 2 selected between 5 and 10 (Graph 14). Investing in development Considering all that has been outlined above, it is not surprising then that only of trustees report to be fully confident to take up opportunities for development, outside of their current business plan, that carry a financial risk (Graph 15). 10

18 Conclusion Having just been to the launch of the UK Giving Report 2017 by CAF I m mindful that they, like us, are seeing a flat-lining of income to the sector. I wonder, has a ceiling in giving been reached by givers in the UK? If it has what could we, as small and local charities and community groups, take from that given that the demand for our services has never been greater? I think there are two things that we need to do. Firstly, if the cake isn t getting bigger we need to strive for a larger slice. This means we have to get better at fundraising and better at articulating our message to those who would support us. With small charities only receiving 2 of the overall voluntary income that comes into the sector each year 1, this is one area where we can have our cake and eat it. But it will require trustees to invest in upskilling their staff to ensure that they are at the top of their game when it comes to securing funds through voluntary means. Secondly, we need to be more efficient and effective in the way we deliver our services. That will certainly mean collaborating more with likeminded charities where we can pool our resources to deliver as effectively as possible. This quarter s Small Charity Index Perceptions Survey shows that we have seen a real increase in the number of charities contemplating a merger, 2 in the last 12 months. This will require trustees to look outward to see who they should collaborate with more and to be open to a merger, if it proves to be the right decision for their beneficiaries. Now is the time for trustees of small and local charities and community groups to be brave, to invest in both their skills and the skills of their staff and volunteers, to look sideways to see who they can work with more collaboratively or potentially merge with. Only by investment will we reduce the 6% of trustees who believe it is very likely or certain that their charity will close in the next 12 months. 1 NCVO (2016) UK Civil Society Almanac 2016 [ 11

19 Perceptions Data Small Charity Collaborations (16) Are you part of a strategic alliance? No 1 Yes 8 (17) If yes, what percentage of your time is spent delivering against the objectives of the strategic alliance? 1 Less than 10% 1-20% % More than 30% Of those part of a strategic alliance, 6 spend less than 10% of their time delivering against the objectives of the strategic alliance. (18) Are you part of a formal partnership/consortium? No 30% Yes 70% (19) If yes, what percentage of your overall activities are undertaken through the partnership/ consortium? 1 18% 1 56% Less than 10% 1-20% 2-30% More than 30% Of those part of a formal partnership/consortium, 56% report that less than 10% of their activities are undertaken through the parntership/consortium. 12

20 (20) Are you part of a joint venture? No 9% Yes 9 (21) Have you considered merging with another charity, CIC or social enterprise in the last 12 months? Yes 2 No 78% Each Small Charity Index surveys our members on issues that are currently relevant to the sector under the Perceptions Survey, which focused on small and local charities and community group collaborations this quarter. We launched research on collaborations in June 2016 and we d like to find out if collaborations across our members have increased. Our 2016 research found that strategic alliances were the most common type of collaboration after networking, with 39% of small and local charities and community groups reporting to be part of one. In this Perceptions Survey, this has fallen by more than half to 1 (Graph 16). Of those that are part of one, 6 spend less than 10% of their time delivering against the objectives of the strategic alliance (Graph 17). The number of small and local charities and community groups part of a formal partnership/consortium have remained similar, with 30% reporting to be part of one in this survey (Graph 18), compared to 28% in the 2016 research. Nevertheless, only 1 of small and local charities and community groups report to deliver a significant amount of their services (i.e. more than 30%) through the partnership/consortium (Graph 19). Small and local charities and community groups working as part of a joint venture remain low, 9% compared to 6% in the 2016 research (Graph 20). Greater financial reward is reported to be the top tangible benefit of working in a joint venture in both the 2016 and current results. Mergers were the least common type of collaboration in the 2016 research, with only of small and local charities and community groups considering merging with another organisation. However, this has grown significantly, with 2 now considering a merger with another charity, CIC or social enterprise in the last 12 months (Graph 21). This suggests that small and local charities and community groups are recognising the benefits of this type of collaborative working. For instance in the 2016 research, securing additional funding and increased sustainability was cited as a key driver to merge. 13

21 Brexit Temperature Check (22) On the day after the Brexit result, how positive/negative did you feel? 10 Fully confident A third (3) of small charity leaders stated they were not at all confident about the future on the day after the Brexit result Not at all confident 3 (23) How positive/negative do you feel now about the decision to Brexit? 10 Fully confident % 17% 6% Over the three months since, the proportion of those who continued to be not at all confident fell to % Not at all confident 2 (24) What percentage of EU nationals are part of your current workforce? 6% 8 Less than 10% 1-20% 2-30% More than 30% 8 of small charities report that EU nationals make up less than 10% of their current workforce. 14

22 In June 2016, the UK voted to leave the European Union. Through the quarterly Small Charity Index, we are keeping a general overview of how small and local charities and community groups are feeling and dealing with the post-brexit vote, this data will be included in our research, to be released in June 2017, Brexit: Small and Local Charities and Community Groups. A third of small and local charities and community groups (3) stated they were not at all confident about the future on the day after the Brexit vote, and only stated they were fully confident (Graph 22). Over the nine months since, the proportion of those who continued to be not at all confident fell to 2 (Graph 23). Those who were fully confident remains low, at, which leaves 7 of small and local charities and community groups uncertain about the future. Just over half of small and local charities and community groups (57%) stated Brexit had no impact on their organisation so far. For those that did, the majority cited impacts on their income (3), in terms of access to funding, financial costs (2), service delivery (1) and their workforce (1). ESF funds and contracts have been limited to months by co-funders (DWP/SFA) compared to 2-3 years pre-brexit, so now there is no stability possible that might come with longer term contracts. Also there is great uncertainty about what will happen when ESF funding ceases as most of our contract work is part ESF funded. We run a charity shop selling local produce and we have seen a noticeable downturn in trade, we are now considering whether to continue with this venture or not. This is a shame because it is an opportunity to generate unrestricted funds for the charity but with economic uncertainty people are not purchasing goods as much. The lower exchange rate has meant that donations received in pounds are not equal to funds disbursed in our country program (Ethiopia), we lost money on this. However, regular donations received from Europe and the US are now worth more, it s not clear if that has offset the cost of the losses in our programme country. As we deal internationally the cost of everything we do has increased by 30% or more due to unfavourable exchange rates. Donations have decreased significantly since Brexit and we are finding it increasingly difficult to plan beyond the short to medium terms. Demand has increased from EEA nationals who are not British citizens who are unclear and worried about their current and future status in the UK. This has resulted in increased demand for immigration and benefits advice Uncertainty over the economy is leading to a lack of confidence. Predicted long-term austerities, if they materialise, will affect funding, and as social care needs continue to increase and local government funding decreases, we just won t have the resources to meet the need. Meanwhile, salaries in the (grass roots) voluntary sector and poor career prospects will not match those of the private sector thus may affect attracting and retaining a skilled workforce. This is a very gloomy assessment but the Brexit narrative has not provided any assurances of prosperity and sustainability for the voluntary sector - the work and value of charities does not seem to be on the radar when policy makers discuss Brexit. As the status of EU nationals within UK remains unknown, we wanted to gauge how much an impact this may have on small and local charities and community groups. The majority of respondents (8) report that EU nationals make up less than 10% of their current workforce, and for 6% of small and local charities and community groups charities, they make up more than 30% of their workforce (Graph 24). Within that, the most common type of skills EU nationals provide for small and local charities and community groups is health care (1). 15

23 Methodology The FSI Small Charity Index is a quarterly State of the Small Charity Sector Report. The Small Charity Index reports across four key areas: Income Generation, Service Delivery, Workforce and Governance. The aims of the Small Charity Index are to assess the challenges facing small and local charities and community groups across the UK, identify trends as they emerge and provide a benchmark against which policymakers can make decisions to support the sustainability of the sector. The data gathering and analysis of trends is carried out by the FSI through its membership of over 5,000 distinct small and local charities and community groups. The FSI is able to capture large amounts of qualitative and quantitative data through surveys and consultations, in addition to face-to-face consultations with over 2,200 small and local charities and community groups per annum through its training and advice programmes. The Small Charity Index is compiled using the above analysis together with the biennial Skills Survey and current research projects undertaken by the FSI. With additional reference to relevant research published by other infrastructure membership bodies such as Charities Aid Foundation (CAF), NCVO, Localgiving, Lloyds Bank Foundation and Small Charities Coalition. Examination of other data sources additionally informs the analysis behind the Small Charity Index. Members of the FSI have an annual turnover of under 1.5 million, and respondents from this quarter s Small Charity Index show 5 have an annual turnover under 150,000, 17% between 150,001 and 250,000, 19% between 250,001 and 500,000 and 1 between 500,001 and 1.5 million. Data for the current period was collected between 1st - 31st March 2017, and refers to the period 1 December 2016 to 28 February Comparisons are made with the same questions recorded each quarter since June 2013, giving a total of 45 months of comparative data. 16

24 The Grayston Centre 28 Charles Square London N1 6HT Charity Registration Number