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Daniel Roche supports environmental organisation Wren's Biodiversity Action Fund
Association of Charitable Foundations, Nuffield Foundation, Joseph Rowntree Charitable Trust
By Radhika Holmstrom, Third Sector, 3 March 2009
Campaign Against Arms Trade: receives funding from the Joseph Rowntree Charitable Trust
Most ACF members say they will not cut grant budgets despite the recession
An Association of Charitable Foundations poll says nearly half of its members will not make cuts to their grant budgets. Many voluntary sector organisations are reporting a decline in certain income streams. Meanwhile, the number of people who use services provided by the sector is expected to increase. Even some of the biggest charities are considering staff or service cuts as they look at ways to survive the recession.
Many trusts and foundations, however, appear to be resisting this trend. In a survey by the Association of Charitable Foundations at the end of last year, 42 per cent of the organisation's members said they planned to cut their budgets in 2009, and 27 per cent were considering changes to their grant-making criteria. However, just under half said they would maintain grant budgets at about the same level as previous years. Eighty per cent predicted that their income would not increase in 2009, but two-thirds said it would rise in the long term.
Some foundations have seen major changes in their circumstances over the past 18 months. "Foundations that rely on a flow of dividend income, especially from UK stocks, may find it quite hard," says James Brooke-Turner, finance director of the Nuffield Foundation. "Unless they have built a sufficient buffer in their income reserves, they may have to reduce spending to keep the income reserve positive."
At the moment, charities don't have to worry about losing existing grants: Statement of Recommended Practice regulations mean any funding that has been promised is by definition already accounted for. But in the medium term, many grant-makers could change the way they make grants. Rather than award one lump sum at the beginning of a project, they could hand out several smaller instalments. This is partly because they might recognise that recipients are having cash-flow problems and would benefit from relatively small, regular sums in order to stay afloat.
There might also be a shift away from the emphasis on innovation and risk-taking. "People are going to want to see that their money is being used effectively and are likely to concentrate their support on the key organisations in their field," says David Emerson, chief executive of the ACF. "They might take a risk on a project, but less so on an organisation."
But Brooke-Turner insists that trusts and foundations are committed to maintaining their funding. "In my experience, funders actually tend to maintain their spending - and rightly so," he says. "Endowments can and should take risks." Only if it looks as if the recession will last a long time might they start to have second thoughts, he adds.
CASE STUDY: JOSEPH ROWNTREE CHARITABLE TRUST
Stephen Pittam, trust secretary at the Joseph Rowntree Charitable Trust, says his organisation will not be cutting spending this year, even though the value of the its endowment has fallen by 40 per cent.
"We've been around for 100 years and we have a long-term perspective," says Pittam. "We have devised a sophisticated sustainable income formula that takes account of several economic factors."
The trust's formula has worked for 20 years, according to Pittam, and he sees no reason to change it.
"Two years ago you might have looked at our endowment and thought we didn't spend a very high proportion of it, because it was more than £200m," he says. "But the reason we weren't spending more was that our formula suggested it wouldn't be sustainable."
The trust is sticking to its budgeted spend this year, which actually represents an increase since 2008. "It is possible that we've got this wrong, and that in six months things could be very different," says Pittam. "But we also think it's not helpful for trusts and foundations to reduce their spending if they don't have to."
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