Charities draw up contingency plans for large falls in income

Some of the UK's biggest charities are drawing up contingency plans for a fall in income of up to 10 per cent during the impending recession.

Birch: expects a fall in growth at Christian Aid
Birch: expects a fall in growth at Christian Aid

Several senior charity finance directors told Third Sector this week that fundraising was still doing well despite the economic turmoil. But they have also started identifying services to cut if revenue does not hit expected levels.

They pointed out that charities with diversified income would be in a better position to weather the storm than those that had to rely upon narrow income bases.

"There's a lot of uncertainty at present," said Richard Gough, finance director of relief and development charity Tearfund. "We're not sure how long or how deep the recession will be. But whenever there's uncertainty, you want to be prepared.

"We're putting in contingency plans in case we have less growth, no growth or a drop in income."

He said the charity's main priority was that any change should have as small an impact as possible on beneficiaries.

"We're looking at deferring new things that we might want to do, rather than making any change in core services," he said.

Charles Nall, corporate services director of the Children's Society and chair of the Charity Finance Directors' Group, said that charities were "looking at a glass that is half-empty, and getting emptier".

He added: "We've already put plans in place in case there's a 5 per cent drop in income. And we're just finishing plans for a 10 per cent drop.

"We need to be prepared for some difficult scenarios. An outlying possibility is that unemployment could rise to three million, for example. That would inevitably hurt charity subscriptions. And there may well be a fall in discretionary spend by government."

Charles Scott, finance director of Help the Aged, said diversified income and intelligent use of reserves would help larger charities make their way through the recession.

"We're conscious that conditions will be tight, but we have a number of income streams, and we're confident that this will protect us," he said.

"Larger charities have a lot of flexibility in their funding, and our reserve levels are enough to help us weather any storm.

"The problems will come for organisations that rely heavily on single income sources."

Martin Birch, finance director of Christian Aid, said his organisation had been growing at 10 per cent a year, and he therefore expected to see only reduced growth, rather than an actual fall in income.

He said the charity could still face some hard choices, but he did not want to simply "batten down the hatches".

- See News, pages 3 and 5, Fundraising News, page 9 and Editorial, page 12.

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