1/ INTRODUCTION CONTENTS 1.1 Foreword... Pg 3 1.2 Acknowledgements... Pg 4 1.3 Introduction... Pg 5-6 1.4 Socio-Economic issues In Kirklees... Pg 6-7 2/ KEY FINDINGS 2.1 Summary of key findings...pg 8-9 2.2 Distribution of organisations and geographic variances...pg 10-19 2.3 Income data, expenditure, assets... Pg 20-23 2.4 The Economic Environment... Pg 23 2.5 Financial Ratios income, reserves and sustainability... Pg 24-25 2.6 Staffing and volunteers... Pg 26-27 2.7 Volunteering...Pg 28-30 3/ CONCLUSIONS 3.1 Future expectations... Pg 31-33 3.2 Quantifying Cuts...Pg 34 3.3 Conclusion...Pg 35-38 4/ APPENDIX 4.1 Appendix 1 Activities of Third Sector Organisations...Pg 39 4.2 Appendix 2 Legal structures...pg 40 4.3 Sources for data and relevant analysis... Pg 41-42 2 State of the Third Sector Report 2013
PART 1 - INTRODUCTION 1.1 Foreword by Tom Taylor, Chair of Third Sector Leaders Kirklees Third Sector Leaders Kirklees speaks on behalf of not for profit and charity organisations which support individuals and communities across Kirklees. Third Sector Leaders Kirklees commissioned this report for three reasons: To better understand the economic scale and role of the third sector in Kirklees To provide a baseline against which we can track change in the third sector To enable us to compare the Kirklees third sector to other areas This report is clear that the third sector makes a significant contribution to economic life in Kirklees, employing thousands of people and providing opportunities for many more volunteers. The third sector contributes around 200,000,000 a year to the Kirklees economy through employment alone. Hundreds of small third sector organisations are working in our most disadvantaged communities, strengthening relationships and enabling vulnerable and excluded people to deal with difficult times. Third sector organisations bring new income to Kirklees from national sources, including central government and national grant giving bodies. They also generate income from local people and organisations by trading, sponsorship and donations. Income from local government in the form of commissioning or grants is still important to voluntary organisations, making up around 37% of their income. It s not yet clear what the expected cuts in public spending will mean for the third sector. Will the third sector be delivering more public services? What will happen to other income sources? Will the trend of increasing trading income fill the gap? Future state of the third sector reports for Kirklees will help Thjrd Sector Leaders Kirklees understand the sectors impact and our contribution to a sustainable local economy as the economic environment changes. This report provides a baseline which will help us identify trends and opportunities and give an indication of how local and national policy making impacts on the local voluntary and community sector. Tom Taylor, February 2013 Third Sector Leaders Kirklees, c/o Voluntary Action Kirklees, 15 Lord Street, Huddersfield HD1 1QB. Visit www.thirdsectorleaderskirklees.org. Follow @tslkirklees on Twitter 3 State of the Third Sector Report 2013
1.2 Acknowledgements The data in this report is based on research work published in 2010 and 2011 as a result of two major research projects undertaken in Yorkshire and Humber led by Involve Yorkshire and Humber. The first is the Northern Rock Foundation Third Sector Trends Study which is the first substantive region-wide research into the size, composition and scope of the Third Sector in Yorkshire and Humber. This research was supported by Local Development Agencies across the region. This research was published by Involve Yorkshire & Humber and is the most recent robust research available about the size, income, activities and employment in the third sector across Yorkshire and the Humber. This data was commissioned from Southampton University and the research team at the National Council for Voluntary Organisations and undertaken as part of the Northern Rock Foundation Third Sector Trends Study. This survey draws the big picture of the third sector as a whole: social enterprise is a close up of part of that big picture. The data which forms the basis of this report is based on the actual numbers of organisations and on the information contained in their returns to the Charity Commission, Companies House or other regulatory body. This data was captured at the level of individual local authorities and in North Yorkshire at the level of individual district councils. Where actual figures are not available we have used the data to help provide reliable estimates drawn from other government data sources. The second piece of work was an Economic and Social Research Council (ESRC) Third Sector Research Fellowship hosted by the Centre for Regional and Economic Social Research at Sheffield Hallam University and delivered by them and Mark Crowe at Involve. This research sets out the data from the Northern Rock Foundation in the context of the policy developments surrounding Big Society. 4 State of the Third Sector Report 2013
1.3 Introduction The third sector includes a wide range of organisations including social enterprises (companies limited by guarantee, co-operatives and community interest companies), registered charities; faith groups and smaller unregistered groups. Activities of these organisations range from selfhelp and support, community action, delivery of services, campaigning and managing buildings. They are often small businesses - employing staff and training them, they often trade and generate income through enterprising activity. In particular the third sector has a vital role to play in those localities that have suffered from repeated cycles of market failure and are now facing a reduction in public sector employment and the gradual withdrawal of public services. The value of the third sector to the Kirklees area falls into two categories. The quantifiable aspects of the sector: Number of organisations Income and assets of organisations and their economic potential Employment and volunteering created by the sector The impact the sector has on citizens lives through: Locally owned and accountable service delivery to beneficiaries Joining up delivery of different service user needs and different public agencies agendas Savings to public service commissioners across service delivery areas Active participation in organisations contributing to a broader civil society agenda This report focuses on quantifying the third sector whilst acknowledging that although the principles of impact of the sector are commonly understood and agreed their measurement across Kirklees District would need to be the subject of a further piece of research. The third sector comprises a spectrum of organisations in terms of income, numbers of staff and employees, types of activities and industrial sectors of activity. Third sector organisations derive their income from a range of sources: donations, grant funding, trading, assets and interest as well as running to some extent on the time given by volunteers. Nearly all organisations that have the minimum income to require registration and complete a return (currently 10,000) rely on a blend of all these to deliver their mission. Organisations that are registered with the Charity Commission, Companies House, the CIC regulator or the Financial Services Authority figure in the numbers of businesses recorded in the Inter-Departmental Business Register (IDBR) and as such can be described as trading entities, whatever their sources of income and most are also employers as well. 5 State of the Third Sector Report 2013
Organisations that are not registered are also an important part of the equation. Some are new organisations that will grow into registered bodies, others play an important role in local communities or among specific communities of interest. In many cases they will be affiliated to, or members of, the registered bodies identified providing access to specific groups of service users. It is also important to note that organisations registered outside the Kirklees area may well operate within it. The Mapping Report undertaken as part of the Third Sector Trends Study (Mohan and Kane, 2011) identifies a further 775million that comes into Yorkshire and Humber from charities registered elsewhere in England. Whilst there is no comparable research conducted at local authority level, a search for charities on the Charities Aid Foundation website operating in Kirklees identifies a significant number that are not registered in Kirklees (i.e. they are based elsewhere but include Kirklees in their area of benefit ). The findings in this report are significant for the Third Sector Leaders in Kirklees as they show the significant contribution to the economy by the third sector and the employment created by the sector. Also highlighted are elements of the third sector where there is potential to grow and where the current economic conditions are likely to have an adverse impact. 1.4 Socio-Economic Issues in Kirklees The Third Sector in Kirklees is placed in a local economy which is fragile with over reliance on sectors that are declining, nationally. There has been little jobs growth in recent years and a fall in the number of private sector jobs. The public sector is a major employer and some staff have transferred into the third sector as a result of cuts to the public sector (e.g. Kirklees Active Leisure and Locala CIC). Unemployment in Kirklees disproportionately affects particular groups particularly ethnic minorities and young people. A large workless population of 35,135 represents an opportunity cost to Kirklees with a loss in economic productivity of up to 840 million (2010 figures) to the Kirklees economy. Economic and demographic changes in Kirklees are likely to lead to a change in the occupational profile of the district with the expansion of Health, Culture/Media and Sport and Customer Service jobs over the next 15 years. Large disparities exist in income levels in Kirklees a difference in household income of around 31,000 between the most affluent and poorer areas. Also, up to 30% of households in the district live below an acceptable standard of living. Population growth in Kirklees means that the number of people living in the district will increase from 403,000 to 480,600 by 2033 (+19%). Young people make up around a fifth of the population currently and as they reach working age and enter the labour market they will add significant pressure to the demand for jobs. 6 State of the Third Sector Report 2013
The number of older people (aged over 65), is projected to grow by 58% in next two decades putting pressure on social and health care service demand. With one of the highest proportions of BME residents (16.2%) and with the 11th largest Pakistani community in England, Kirklees has an increasing diverse population with residents of south Asian origin set to make up one fifth of the local population by 2031. Kirklees is the 75th most deprived local authority (out of 354) in England and amongst the 50 most deprived areas based on income and employment. Over 50,000 Kirklees residents (12.5% of the population) suffer from some sort of disability 40% of which do not have a job. Unemployment amongst the disabled is twice the average. A high degree of correlation exists between areas with high concentrations of claimants for disability allowances and deprived areas 23% of children in Kirklees are affected by child poverty i.e. around 21,800 in August 2007 (the national equivalent was 21.6%). Priorities for Kirklees residents varied, according to the Place Survey (2008). Economic factors (such as job prospects) appear to be particularly important for the young and BME residents. Source: Kirklees Council Economic Assessment Summary 2010/11 7 State of the Third Sector Report 2013
PART 2 KEY FINDINGS 2.1 Summary of Key Findings There are over 1,089 registered third sector organisations and nearly 1,128 unregistered organisations in Kirklees. This is just over 8% of all third sector organisations in Yorkshire and Humber and a higher proportion than across the city region. Total income for the sector in Kirklees is in the order of 171million per annum and the sector has assets of 127.6million valuing the sector at just under 350million. The third sector employs 4,220 staff (fte) in Kirklees. This equates to 2.5% of the total workforce in Kirklees. There are two major social enterprise organisations in Kirklees: Locala (supplying communitybased healthcare services for the NHS) and Kirklees Active Leisure which delivers leisure and sports facilities on behalf of Kirklees Council. Information relating to KAL is included in the above figures. Locala was established in 2010 and therefore doesn t appear in these figures. Locala s turnover is 47million and Locala employs 1,240 people. Taking Locala into account the headline figures for Kirklees are income for the sector of 218 million and employment of 5,459 staff or 3.6% of the Kirklees workforce. Based on the Gross Value Added figures used by Kirklees Council ( 36,758 per employee) the third sector in Kirklees contributes something over 200million in productivity into the Kirklees economy. There are nearly 25,000 volunteers in registered organisations alone, or at least a quarter of the population giving unpaid help once a month or more. This is worth 10.9million at minimum wage rates. Some data is not available at the local authority level what follows are trends that can be reliably established from sub-regional or regional level data. 8 State of the Third Sector Report 2013
The activities of organisations in the whole of the third sector which are most prevalent across Yorkshire and Humber are: culture and recreation, social services and development. The activities that have the highest proportions of organisations that are not charities (i.e. those that are companies limited by guarantee, CICs and IPSs) are housing (34%), culture and recreation (41%) and employment and training (51%). In numeric terms the highest numbers of organisations that are not charities are in the fields of housing, development and culture and recreation. An average of 35% of all third sector organisations in the Leeds City Region LEP area receives some funding from their local authority in the form of contract or grant. This is very often the keystone of an individual organisation s blend of funding. Based on the information from the Treasury at the time of the 2010 Comprehensive Spending Review cuts in local authority expenditure if passed straight through to the third sector would put at risk over a third (16,500) of all jobs in the sector in the Leeds City Region LEP area. The trend for charities is for an increase in trading activity as earned income rose from 55% ( 855million) in 2006/7 to 68% ( 1.08billion) in 2007/8 across all registered charities in Yorkshire and Humber. 9 State of the Third Sector Report 2013
2.2 Distribution of organisations and geographic variances The Leeds City Region LEP area contains 17,773 third sector organisations of the 28,594 in Yorkshire and Humber. This is comprised of half the unregistered organisations and over a third of all registered organisations (registered charities and other not for profit companies) in Yorkshire and Humber. Over half the not for profit organisations (as opposed to registered charities) in Yorkshire and Humber, including nearly three quarters of all housing associations are located in the Leeds City Region LEP area. The chart below shows the percentages of each category of organisations in the Leeds City Region LEP area. Third sector organisations in the Leeds LEP area (%) Unregistered TSOs, 56.10 General charities, 32.23 Housing associations, 0.45 Companies limited by guarantee, 4.30 Industrial and provident societies, 3.36 Community interest companies, 0.48 Faith groups, 2.15 General charities Housing associations Companies limited by guarantee Industrial and provident societies Community interest companies Faith groups Unregistered TSOs Figure 1 Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study 10 State of the Third Sector Report 2013
The distribution of organisations by type in Kirklees is shown in the diagram below. In terms of comparison with the rest of the City Region, Kirklees has a higher proportion of registered organisations and also a higher proportion of social enterprise type organisations located in the area. Third Sector Organisations in Kirklees General charities, 739, 38% No legal form, 956, 49% Housing associations, 4, 0% General charities Housing associations Companies limited by guarantee Industrial and provident societies Community interest companies Faith groups No legal form Faith groups, 41, 2% Companies limited by guarantee, 104, 5% Industrial and provident societies, 102, 5% Community interest companies, 11, 1% Figure 2 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study 11 State of the Third Sector Report 2013
The distribution of registered TSOs shows that large urban areas tend to have fewer organisations per head of population but a higher proportion of these are medium and large. As to be reasonably expected, the greatest number of organisations is located in Kirklees, Bradford and Leeds as the main centres of population. Craven and Harrogate have high proportions of registered organisations. Areas of greater disadvantage have higher proportions of unregistered organisations in general, reflecting less formal mutual support networks. Registered TSOs in the Leeds City Region LEP area by local authority York 10% Barnsley 6% Wakefield 7% Bradford 15% Selby 4% Calderdale 8% Leeds 21% Craven 5% Kirklees 13% Harrogate 11% Figure 3 Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Kirklees has a higher than the Yorkshire and Humber average (and the Leeds City Region LEP area) of not for profit companies (i.e. companies limited by guarantee, industrial and provident societies and community interest companies). Along with these organisations, registered charities with an income of over 10,000 tend to have a strong trading element to their work. The same is also true of a number of faith organisations, some with a high profile, but also included in this category are places of worship and institutions within the church establishment so it is impossible to separate them without further research. Micro-charities and unregistered organisations are unlikely to trade or employ staff but a proportion of these may grow into larger entities over time. 12 State of the Third Sector Report 2013
Number of organisations by category in the Leeds City Region LEP area General charities Housing associati ons Compa nies limited by guarant ee Industrial and provident societies Commu nity interest compan ies Faith groups Total Registe red TSOs Unregister ed TSOs Total third sector Yorkshire and the Humber 10,914 114 1,462 895 141 692 14,218 14376 28,594 Leeds City Region LEP area 5892 80 765 597 86 382 7802 9971 17,773 Barnsley 338 1 48 70 5 30 492 663 1,155 Bradford 814 16 187 76 11 67 1,171 2234 3,405 Calderdale 453 6 68 55 2 23 607 956 1,563 Craven 334 5 17 17 6 14 393 95 488 Harrogate 733 5 32 23 2 27 822 168 990 Kirklees 739 4 104 102 11 41 1,001 1128 2,129 Leeds 1,170 34 199 128 33 103 1,667 3627 5,294 Selby 273 0 14 8 2 8 305 95 400 Wakefield 383 1 56 89 5 33 567 742 1,309 York 655 8 40 29 9 36 777 263 1,040 Table 1 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study By showing the number as well as the proportion of organisations by type in each local authority area both the scale and relative importance of organisation type is identifiable and the differences in the composition in each district become apparent. Numerically, registered organisations that are not registered charities (and are easiest to class as social enterprises ) make up around 8% of the total number of organisations. 13 State of the Third Sector Report 2013
Organisations by type as a proportion of all TSOs by local authority area (%) All Register ed charities Housin g associa tions Comp anies limited by guara ntee Industrial and provident societies Commu nity interest compa nies Faith groups Total Regis tered TSOs Unregist ered TSOs as a % of all TSOs Table 2 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Yorkshire and the Humber 38.17 0.40 5.11 3.13 0.49 2.42 49.72 50.28 Leeds City Region LEP area 33.15 0.45 4.30 3.36 0.48 2.15 43.90 56.10 Barnsley 29.26 0.09 4.16 6.06 0.43 2.60 42.60 57.40 Bradford 23.91 0.47 5.49 2.23 0.32 1.97 34.39 65.61 Calderdale 28.98 0.38 4.35 3.52 0.13 1.47 38.84 61.16 Craven 68.44 1.02 3.48 3.48 1.23 2.87 80.53 19.47 Harrogate 74.04 0.51 3.23 2.32 0.20 2.73 83.03 16.97 Looking at the composition of each category of third sector organisation we can see that industrial and provident societies figure prominently in Kirklees and Wakefield, as well as Leeds whereas community interest companies currently make a small contribution in Harrogate and Selby 14 State of the Third Sector Report 2013
Contribution to the composition of the Third Sector in the Leeds City Region LEP area by each local authority All Registered charities Housing associations Companies limited by guarantee Industrial and provident societies Community interest companies Faith groups Leeds City Region LEP area (number) 5892 80 765 597 86 382 Barnsley 5.74% 1.25% 6.27% 11.73% 5.81% 7.85% Bradford 13.82% 20.00% 24.44% 12.73% 12.79% 17.54% Calderdale 7.69% 7.50% 8.89% 9.21% 2.33% 6.02% Craven 5.67% 6.25% 2.22% 2.85% 6.98% 3.66% Harrogate 12.44% 6.25% 4.18% 3.85% 2.33% 7.07% Kirklees 12.54% 5.00% 13.59% 17.09% 12.79% 10.73% Leeds 19.86% 42.50% 26.01% 21.44% 38.37% 26.96% Selby 4.63% 0.00% 1.83% 1.34% 2.33% 2.09% Wakefield 6.50% 1.25% 7.32% 14.91% 5.81% 8.64% York 11.12% 10.00% 5.23% 4.86% 10.47% 9.42% Table 3 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Showing aggregated data is helpful but from a Kirklees point of view looking at one type of organisation in more detail helps to identify the organisations of most interest. There is more detailed data available for registered charities than for other types of organisation. As this is also the largest category of organisations trading and employing people it may help model some of the other categories of organisation. 15 State of the Third Sector Report 2013
Proportion of registered Charities in the Leeds LEP area by income as a % of all TSOs Large 1million- 10 million, 0.73 Major over 10 million, 0.04 Medium 100k - 1 million, 3.84 Small 10k-100k, 10.27 Micro - under 10k, 17.35 Micro - under 10k Small 10k-100k Medium 100k - 1 million Large 1million- 10 million Major over 10 million Figure 4 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Number of registered charities by income band as a % of all TSOs in Kirklees Micro - under 10k Small 10k- 100k Medium 100k - 1 million Large 1million - 10 million Major over 10 million Yorkshire and the Humber 20.36 11.69 4.43 0.75 0.06 Leeds City Region LEP area 17.35 10.27 3.84 0.73 0.4 Kirklees 18.88 10.90 3.15 0.47 0 Table 4 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study 16 State of the Third Sector Report 2013
Number of registered charities by income band as a % of all TSOs in Kirklees Medium 100k - 1 million, 3.15 Large 1million- 10 million, 0.47 Major over 10 million, 0 Small 10k-100k, 10.9 Micro - under 10k, 18.88 Micro - under 10k Small 10k-100k Medium 100k - 1 million Large 1million- 10 million Major over 10 million Figure 5 - Source: Source: NCVO, Southampton University, Northern Rock Foundation, GuideStar Data Services The make-up of the registered charity element of the third sector in each district varies considerably. Less than half of all charities (small, medium, large and major) in Kirklees are likely to be trading or employers. The weighting of employment is highest in medium and large charities which are proportionally under-represented in Kirklees. Although the proportion of employment in charities is likely to be lower in Kirklees because of this, the rate of employment in third sector organisations in Kirklees seems to be solidly average. The income of these organisations in Kirklees is as follows: Micro - 0.8million; Small - 8.0million; Medium - 22.7million; Large - 35.5million; Major - nil. The distribution of income is discussed in more detail in the next section. However as the tables below show the distribution of organisations in relation to the population of each authority and the income of the sector in relation to the population of each authority resists following simple rules. The highest value organisations are in York, Harrogate and Leeds but from a support point of view Craven and Calderdale are the areas where the highest proportions of organisations per capita are located. The high proportion of micro organisations in Craven and Harrogate may well be an indicator that people in even the smallest groups see some value in making the commitment to set up small organisations formally in less disadvantaged areas. Of the metropolitan districts, Kirklees has one of the lowest levels of registered charity income per head of population. 17 State of the Third Sector Report 2013
Geographic Distribution of TSOs and Income Based on Population All TSO's per 10,000 populatio n Registered TSO's per 10,000 population Total income of registered charities million) Income of registered charities per head of population Yorkshire and Humber 54.85 27.27 1,599 306.70 Leeds City Region LEP area 60.86 26.71 771 264.13 Barnsley 51.13 21.78 40 174.86 Bradford 67.87 23.34 96 190.35 Calderdale 77.45 30.08 47 233.89 Craven 86.83 69.93 10 179.72 Harrogate 61.68 51.21 59 365.11 Kirklees 52.71 24.78 70 173.31 Leeds 68.68 21.63 268 347.30 Selby 48.78 37.20 10 119.51 Wakefield 40.61 17.59 44 135.59 York 53.22 39.76 129 661.72 Table 5 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study 18 State of the Third Sector Report 2013
Proportions of TSOs per 10,000 population ranked by local authority All TSO's per 10,000 population Registered TSO's per 10,000 population Not for profit companies per 10,000 population Craven 86.83 Craven 69.93 Craven 10.50 Calderdale 77.45 Harrogate 51.21 Calderdale 7.63 Leeds 68.68 York 39.76 Bradford 7.12 Bradford 67.87 Selby 37.20 Barnsley 6.82 Harrogate 61.68 Calderdale 30.08 Leeds City Region LEP area 6.54 Leeds City Region LEP area 60.86 Yorkshire and the Humber 54.85 Yorkshire and the Humber 27.27 Kirklees 6.49 Leeds City Region LEP area 26.71 Leeds 6.45 York 53.22 Kirklees 24.78 Yorkshire and the Humber 6.34 Kirklees 52.71 Bradford 23.34 York 6.24 Barnsley 51.13 Barnsley 21.78 Wakefield 5.71 Selby 48.78 Leeds 21.63 Harrogate 5.55 Wakefield 40.61 Wakefield 17.59 Selby 3.90 Table 6 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study 19 State of the Third Sector Report 2013
2.3 Income data, expenditure, assets The most robust analysis of income comes from Mohan et al Mapping the Third Sector in Yorkshire and Humber (2011), This estimates the income of the sector in Yorkshire and Humber at 2.75billion with assets of 2.71billion making the whole sector worth around 5.5billion. The third sector in the Leeds City Region LEP area accounts for well over half that amount with income of 1.6billion and assets of 1.2billion. The sector in Kirklees is worth 171 million. Registered charities make up the largest proportion of the income and assets of the third sector, over three times the value of the companies limited by guarantee, industrial and provident societies and community interest companies. Housing associations make a significant contribution although much of their value is tied in housing stock. Based on the Gross Value Added figures used by Kirklees Council ( 36,758 per employee) the third sector in Kirklees contributes well over 200million in productivity into the Kirklees economy. The distribution of income by local authority and organisation type follows the patterns established by the numeric distribution of organisations. Typically the large number of micro organisations makes a very small contribution to the overall income figures. The bulk of charity income is generated by the much smaller numbers of medium to major organisations. Income of organisations by type ( million) General charities Housing associati ons [1] Companie s limited by guarantee [1] Industrial and provident societies [1] Community interest companies [1] Faith groups Total Yorkshire and the Humber 1,599 522 423 42 7 156 2,749 Leeds City Region LEP area 863 366 221 28 4 86 1,569 Kirklees 108 18 30 5 1 9 171 Table 7 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study [1] For all third sector organisations (except faith groups and general charities) income, expenditure and assets represent only organisations in the sample identified by Mohan and Kane (2011). As the largest organisations are likely to be within the sample, it is not possible to extrapolate income and expenditure of sample organisations to the population. As such these results are likely to under-estimate the actual finances of these types of organisations. 20 State of the Third Sector Report 2013
Income of registered charities by size ( million) Micro - under 10k Small 10k- 100k Medium 100k - 1 million Large 1milli on- 10 millio n Major over 10 millio n Total income m of registered charities Yorkshire and Humber 12.7 110.3 374.5 590.5 472.3 1,560.4 Leeds City Region LEP area 6 61 211 371 115 765 Kirklees 0.8 8.0 22.7 35.5 0.0 66.9 Table 8 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Income of Registered Charities in Kirklees ( m) Major, 0.0, 0% Micro, 0.8, 1% Small, 8.0, 12% Large, 35.5, 53% Medium, 22.7, 34% Micro Small Medium Large Major Figure 6 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends Study 21 State of the Third Sector Report 2013
The income of the sector is derived from a range of sources. The table below (from Mohan and Kane 2011) shows the proportions of income into general charities across Yorkshire and Humber. Detailed figures are not available for local areas or the Leeds City Region LEP area but, based on the overall income of registered charities, a working estimate for Leeds City Region LEP area would be to halve the figures for Yorkshire and Humber. These figures already show a drop in grants from the statutory sector and an increase in contracts from them. Overall the percentage drop in voluntary income is compensated for by the rise in earned income (a total of 68%) showing that charities have already established themselves financially as trading entities. General Charities in Yorkshire and Humber Income Sources 2006/07 2007/08 million % million % Individuals(donations) 141.2 9% 98.3 6% Statutory sources incl Lottery (grants) 320.4 21% 222.5 14% Voluntary sector ( grants e.g. foundations) 79.7 5% 35.6 2% Private sector (sponsorship) 34.3 2% 31.6 2% Total voluntary income 575.5 37% 388 24% Legacies 30.6 2% 29.9 2% Individuals (service provision) 268.8 17% 292.9 18% Statutory sources (commissioning) 471 30% 584 37% Voluntary sector 51.2 3% 118.9 7% Private sector 64.1 4% 85.4 5% Earned income 855.1 55% 1,081.20 68% Investment income 66.1 4% 81.5 5% Trading subsidiary 33 2% 18.2 1% Total income 1,560.40 1,598.90 Table 9 - Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Mohan and Kane (2011) highlight the importance of income from statutory agencies (c. 806million) to charities in Yorkshire and Humber but point out that this is due to the difficulty in 22 State of the Third Sector Report 2013
obtaining funds from other sources. Of the statutory funds over half comes from central government and the NHS. This area of funding although it had increased at a faster rate than income from local government up to 2010 is now set to decrease. 2.4 The Economic Environment Detailed reliable and comparable information on the impact of cuts is hard to come by without undertaking a large scale survey, even in a single authority area. What follows is taken from information drawn from national and regional sources showing the direction of travel at the moment. Data gathered by NCVO and other support organisations (including Involve) since January 2011 on the website http://www.vcscuts.org.uk shows that 50 organisations in the Leeds City Region LEP area have contributed information about cuts worth over 7million. Following the Local Government Settlement in the 2010 Comprehensive Spending Review, Voluntary Action Leeds has identified 2.3 million or 10% cuts to the third sector in terms of both contracts and grants combined In Leeds. According Kirklees Council s Economic Assessment 2010/11 Potential cuts of up to 25% in public expenditure will have a severe impact upon thekirklees economy, both directly (public sector employment) and also in terms of the private sector jobs and number of businesses. A 25% cut in local procurement would represent a fall of at least 35 million in GVA. Clearly the reduction in local authority expenditure will impact on the sector further as the withdrawal of programmes such as West Yorkshire Grants shows. Other major grant-makers are also facing reductions in the grants they can offer, notably the National Lottery Distributors. Lottery funding makes up over 8% of registered charities income in Yorkshire and Humber twice the national average changes in the distribution as well as reduction of these funds will have a significant impact on the sector. The economic environment is also having an impact on individual giving with overall levels of giving to charities remaining static from 2009 to 2010 according to national research from the Charities Aid Foundation (December 2011). Although more people are giving to charity the amount they are giving has dipped slightly. Larger charities ( 10million) seem to have been most affected by the change in giving which could be accounted for by the following hypotheses (Charities Aid Foundation, August 2011): Were people happy to continue putting money into collecting tins and sponsoring family and friends, but reining back on long-term commitments to charity? If so, this may well have affected larger charities the most. Are we seeing the importance of local to people? Donors may feel they need to support smaller charities, particularly in hard financial times, as they are possibly perceived to need it more. For larger trusts and foundations reliant on investment income, low interest rates will have affected their grant budgets. Whatever the causes are in the changing nature of giving, for many charities the replacement of statutory sources of income by donations and philanthropy will take some time to materialise, if at all. 23 State of the Third Sector Report 2013
2.5 Financial ratios income, reserves and sustainability The resilience of all third sector organisations to the worsening financial climate and the projected increase in need for their services can be roughly calculated by the amount of running costs organisations hold in reserve. Reserves are required for organisations to at the very least meet their statutory obligations as employers and to creditors. At best reserves support organisations through times of change or allow them the freedom to innovate and develop new services. At the present time data has been extrapolated from samples of organisations making assessments of individual, smaller local authorities unreliable. Information has been presented here to explore the trends in Yorkshire and Humber and the Leeds City Region LEP area which we expect to be reflected in Kirklees. The tables below indicate the situation of registered charities as the economy entered the recession. Funds held by charities expressed as years of expenditure, Yorkshire and the Humber 2006/7 Figure 7 - Funds held by charities expressed as years of expenditure, Yorkshire and the Humber 2006/7 Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study (Wells et al A Big Society in Yorkshire and Humber? 2010) As Wells et al (2010) point out The figures provide a crude assessment of the vulnerability of charities in the region. The analysis does not include 'below the radar' organisations or the level of variation within particular places. The chart below from Mohan and Kane (2011) shows that across Yorkshire and Humber for general (i.e. registered) charities almost 60% of organisations have less than one year s running costs in reserve. 24 State of the Third Sector Report 2013
Funds held as years of expenditure, Yorkshire and the Humber 2007/08 (% of general charities) Less than 1 year 1 to 10 years More than 10 years 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Less than 10k 57% 33% 10% 10k- 100k 58% 33% 9% 100k- 1m 64% 27% 8% 1m- 10m 63% 33% 4% Over 10m 71% 29% 0% Total 59% 32% 9% Figure 5 - Funds held as years of expenditure, Yorkshire and the Humber 2007/08 (% of general charities) Source: NCVO, Southampton University, Northern Rock Foundation, GuideStar Data Services. Figures for the Leeds City Region LEP area suggest that the amount held in reserves averages about 18 months worth of expenditure across all registered charities. These estimates are based on returns to the Charity Commission for the financial year 2007/8 - before the recession began to bite and before the 2010 Comprehensive Spending Review. Anecdotal evidence received by Involve, NCVO and other support bodies suggests that a significant proportion of organisations are already using their reserves to continue their mission until new revenue streams can be established. This is confirmed by national data produced by the Charities Aid Foundation in May 2011 showing that the total reserve levels for all charities in England and Wales had fallen by over half from 2007 to 2009. This suggests a significant weakening of the sector including the loss of organisations. Those organisations that survive will face the double challenge of continuing to do more with less and to adapting to new ways of working, working with new client groups or developing and delivering new services. An average of 35% of all third sector organisations in the Leeds City Region LEP area receives some funding from their local authority in the form of contract or grant. This is very often the keystone of an individual organisation s blend of funding. Based on the information from the Treasury at the time of the 2010 Comprehensive Spending Review cuts in local authority expenditure if passed straight through to the third sector would put at risk over a third (16,500) of all jobs in the sector in the Leeds City Region LEP area. 25 State of the Third Sector Report 2013
2.6 Staffing and volunteers Number of staff in the third sector, by Local Authority Population (2008) Employed by third sector % Employed by third sector Yorkshire and Humber Total 2,386,900 71,832 3.00% Leeds City Region LEP area 1,499,800 49,284 3.28% Kirklees (including Locala) 150,200 5,459 3.6% Table 10 - Source: Northern Rock Foundation Third Sector Trends study: National Survey of Third Sector Organisations (2008), ONS The data produced by Mohan, Rajme, and Kane (2011) Paid work and volunteering in the third sector in Yorkshire and the Humber, is the best estimate of employment in the sector available and forms the basis of the tables and charts below. Third sector organisations in the Leeds City Region LEP area account for almost 50,000 employees or 3.3% of all employees. In Kirklees this proportion is slightly higher att 3.6 % or 5,459 employees (including Locala). The National Council for Voluntary Organisations Workforce Almanac shows that nationally: The third sector workforce is highly qualified: 37% have a degree, 73% have A-levels, only 3% have no qualifications. 68% of the workforce are women. 32% are men 62% work full time, 38% work part time 56% have a training plan in place and 64% have a training budget in place 26 State of the Third Sector Report 2013
Third sector employment as a proportion of total employment by local authority 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% North Yorkshire 4.7% York 4.2% Doncaster Barnsley Calderdale Bradford Leeds Kingston upon Hull, City of Sheffield Rotherham Kirklees 3.5% 3.5% 3.3% 3.1% 3.0% 2.9% 2.8% 2.6% 2.5% Wakefield 1.9% North East Lincolnshire 1.9% East Riding of Yorkshire North Lincolnshire 1.1% 1.9% Regional average: 3.0% Figure 5 Source: GuideStar Data Services/ Northern Rock Foundation Third Sector Trends study Number of staff in third sector, by organisation type Registe red Charitie s Comm unity Interes t Comp any Com pany Limit ed by Guar antee Industri al and Provid ent Society Total Yorkshire and Humber Total 47,673 810 14,383 8,960 71,832 LEEDS LEP 33,081 278 9651 6271 49,284 Kirklees (inc Locala) 2,320 1,253 1,689 197 5,459 Table 11 - Source: National Survey of Third Sector Organisations (2008), ONS/ Northern Rock Foundation Third Sector Trends study 27 State of the Third Sector Report 2013
2.7 Volunteering There are two main measures of volunteering: the Labour Force Survey (LFS) and the National Survey of Third Sector Organisations/ National Survey of Charities and Social Enterprises (NSTSO). The LFS asks individuals whether they have given unpaid help in the last month/ 12 months. The NSTSO asks organisations how many volunteers they use. Data from both surveys suggests that between 200,000 and 250,000 people volunteer in third sector organisations in the Leeds City Region LEP area. Taking an average of 6 hours volunteering per month per person (following Mohan, Raime and Kane, 2011) at a minimum wage rate of 6.08 per hour this equates to around 1billion of voluntary effort in the Leeds City Region LEP area. Using the same formula, in Kirklees there are around 25,000 people who volunteer, contributing 11million to the local economy. This does not include the benefits to volunteers and communities of the value of the work undertaken or the value of volunteering as entry to employment. Much of the work of the smaller and unregistered organisations is done entirely on voluntary effort and highlights the value of those segments of the third sector to the Leeds City Region LEP area in a wider economic sense. Lower levels of volunteering prevail in areas of greater disadvantage and these are also the areas that have higher proportions of unregistered organisations. Bradford is the largest local authority to buck this trend but the positions of Wakefield and Barnsley tell the story of large numbers of relatively small organisations without the infrastructure to support large numbers of formal volunteers. 28 State of the Third Sector Report 2013
% who have given unpaid help at least once per month over the last 12 months 0.0 5.0 10.0 15.0 20.0 25.0 30.0 North Yorkshire 29.5 Bradford Calderdale Kirklees 25.6 26.4 27.1 East Riding of Yorkshire York Yorkshire and the Humber Sheffield North Lincolnshire Rotherham Doncaster Leeds North East Lincolnshire 24.0 23.0 22.3 21.1 20.7 20.0 19.6 19.6 19.0 Barnsley 18.3 Wakefield Kingston upon Hull, City of 14.0 18.1 Average for England: 23.2 29 State of the Third Sector Report 2013
Volunteering, by Local Authority % who have given unpaid help at least once per month over the last 12 months (Place Survey 2008) Number of volunteers (National Survey of Third Sector Organisations 2008) Yorkshire and Humber Total 22.3 337,173 LEEDS LEP 23.45 15,925 Kirklees 25.6 28,525 Table 12 - Source: Place Survey (2008), National Survey of Third Sector Organisations (2008) / Northern Rock Foundation Third Sector Trends study % who have given unpaid help at least once per month over the last 12 months (Place Survey 2008) Number of volunteers (National Survey of Third Sector Organisations 2008) Value of volunteering (at an average of 6 hrs per month per person, using minimum wage rate of 6.08 p/ hour) Yorkshire and Humber 22.3 337,173 98.4million LEEDS LEP 23.45 224,424 65,5million Kirklees 25.6 24,825 10.87million Table 10 - Source: Northern Rock Foundation Third Sector Trends study: National Survey of Third Sector Organisations (2008), Place Survey, 2008; ONS 30 State of the Third Sector Report 2013
PART 3 - CONCLUSIONS 3.1 Future expectations Involve Yorkshire and Humber carries out a Quarterly Confidence Survey. 65% of respondents to Involve s September 2011 are based/ work in the Leeds City Region LEP area. The survey covers financial, employment and the general situation of organisations. The table below summarises the responses from organisations based in the Leeds City Region LEP area. Over the next 12 months, do you think economic conditions within the voluntary sector will improve, remain stable or deteriorate? Improve 0.0% Remain stable 13.9% Deteriorate 86.1% Organisations that see the situation as remaining stable tend to be based in York or North Yorkshire. In other local authority districts the mood is more pessimistic. During the next 3 months, does your organisation Increase 29.0% have actual plans to increase or decrease the extent of the services that it offers? Decrease 20.3% No change 50.7% Fewer organisations than in previous surveys plan to expand services. 5% more than 6 months ago intend to reduce services, these organisations are across all areas of the third sector activity and location. During the next 3 months, does your organisation Increase 18.6% have actual plans to increase or decrease paid staff numbers? Decrease 22.9% No change 58.6% There has been a steady increase in the proportion of organisations that intend to increase their staffing over the last year. The last 6 months shows a smaller increase in the percentage of organisations that will reduce their staffing. Do you expect the FINANCIAL situation of your Improve 11.8% organisation to improve, remain stable or deteriorate over the next 12 months? Remain stable 42.6% Deteriorate 45.6% The proportions of organisations have held a generally steady state over the last year Do you think the GENERAL situation of your organisation will improve, remain stable or deteriorate over the next 12 months? Improve 20.6% Remain stable 48.5% Deteriorate 30.9% Health and care organisations are most likely to think their general situation will improve over the next year Do you expect your organisation to collaborate more More 68.1% 31 State of the Third Sector Report 2013
or less with other organisations over the next 12 months? Less 5.8% No change 26.1% The expectation of organisations to collaborate more remains high. How do you expect your local authority to influence Positive influence 36.5% your organisation's success over the next 12 months? Negative influence 23.8% No influence 28.6% Not applicable 11.1% Organisations in York, North Yorkshire and Kirklees reported that their local authority was likely to have a positive influence on their success. The overall proportions remain static from the last survey. 32 State of the Third Sector Report 2013
How do you expect your local PCT to influence your organisation's success over the next 12 months? Positive influence 35.9% Negative influence 15.6% No influence 29.7% Not applicable 18.8% Almost all health and social care organisations across the Leeds City Region LEP area see their PCT as a positive influence. The overall proportions remain static from the last survey. How do you expect central government departments Positive influence 17.5% to influence your organisation's success over the next 12 months? Negative influence 36.5% No influence 34.9% Not applicable 11.1% Community, neighbourhood and regeneration/ development organisations in all authorities think that central government departments will have a negative impact on their organisation. Family and youth organisations see them as having a positive impact. Compact Voice has said 'half of all local authorities are making disproportionate cuts to the VCS' In relation to budget cuts for the financial year 2011-12, is your local authority reducing resources to the voluntary sector by: More than to other services 24.5% Less than to other services 18.4% It is not reducing resources at all 4.1% Don't know 53.1% Those organisations who think the cuts are disproportionate are from across the LEP area and from a variety of organisation types. Table 13 Source: Involve Quarterly Confidence Survey September 2011 33 State of the Third Sector Report 2013
3.2 Quantifying Cuts Predicting the impact of cuts on third sector organisations is extremely difficult as organisational factors also have a huge affect on whether any charity or social enterprise succeeds or not. If we look at the financial information alone 52% of charities expenditure is on staffing, with an average of 18,100 per employee. If we apply this average to the whole of the third sector in Leeds City Region LEP it means that the value of the total wages in the third sector is in the region of 350million. Using data from Leeds City Council on the impact of budget cuts in Leeds a 10% reduction in grants and contracts would represent a risk to over 1,200 jobs or take 1.15million out of the economy in lost wages. To take the example of Leeds further the 20 million in grants and contracts is roughly 7.5% of the income of registered charities in Leeds which should be seen as an investment that returns nearly 14 times its own value into the city s economy. Extrapolated to the Leeds City Region LEP area this could be as many as 5,000 posts at risk or 3.5million out of the City Region s economy. This is more than just about money or even jobs. The investment into the third sector provides services to people who wouldn t otherwise receive them, it provides volunteering opportunities that lead people into active participation in the economy and it creates a civil society in areas where market failure and the withdrawal of the state has led to a culture of low aspiration and a steady cycle of decline. 34 State of the Third Sector Report 2013