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State of the Sector survey: funding is the sector's main worry

Third Sector, 19 January 2010

State of the Sector survey: funding is the sector's main worry

In part two of our special series, Tristan Donovan examines Third Sector's findings on the internal challenges faced by charities

What are the voluntary sector's priorities for the years ahead and what are the perceived keys to success? More than 700 people working in the sector gave their answers last month in the biennial State of the Sector survey by Third Sector and research agency nfpSynergy.

Looking ahead: Income remains the principal worry

The need to maintain or increase funding was the top priority for the respondents, and many of their other needs were related to this. Joe Saxton, co-founder of nfpSynergy, says the recession might have focused minds on finance, but it is unlikely to be the reason why funding is at the top of the list.

"It reflects the reality for a lot of organisations, particularly smaller organisations whose lives are mostly concerned with getting by," he says. This conclusion is reflected in the difference in view between respondents from small, medium-sized and large charities.

Fifty-six per cent of those from charities with annual turnovers below £1m felt access to funding or maintaining donations was their main priority for the years ahead, compared with 45 per cent from charities with incomes between £1m and £6m and 38 per cent of those with more than £6m.

Skills: Areas where charities feel they lack the right talent

The survey highlighted fundraising as the area with the biggest skills shortage, with 42 per cent of respondents naming it as one of the five areas where skills were in short supply.

The other top five areas where respondents identified skills shortages ranked fairly equally, with each being named by about a third of respondents. There were noticeable differences of opinion between respondents from charities of different sizes.

Forty-seven per cent of people from charities with incomes below £1m a year felt fundraising was the area with the biggest skills shortage, but organisations with annual turnovers between £1m and £6m cited governance as the main problem. Strategic planning topped the list for charities with annual turnovers above £6m, with 38 per cent naming this as the main area where they lacked skills.

What's important? Quality of services, leadership and strength of values are seen as vital to success

Respondents from organisations of all sizes regarded quality of services as the most important attribute of a successful charity. The other attributes they regarded as crucial changed according to the size of their charity.

The ability to work in partnership, financial soundness and strength of values were most important to small charities, but less important to larger ones. Fifty-nine per cent of respondents from charities with incomes of less than £1m a year, for example, said values and vision were important, but that figure fell to 45 per cent of people from organisations with incomes of more than £6m.

Quality of leadership was seen as equally important across organisations of all sizes, and quality of services, quality of leadership and strength of values were the three most important factors for respondents from all charities.

What's the problem? A sustainable funding base is the main challenge, particularly for small charities

Respondents saw sustainable funding as the sector's biggest challenge by far. This was especially true for respondents from smaller organisations, 88 per cent of whom named it as their biggest challenge.

Their next biggest concern - growing voluntary income - was named by only 48 per cent. Communicating the importance of their work was more important to people from large organisations, as was growing voluntary income. Creating an effective trustee board and securing government funding declined in importance as the charity grew in size.

Joe Saxton of nfpSynergy believes this reflects the barriers some small charities face. "Large charities find it easier to get funding, so it is less important to them," he says. "Small organisations don't have robust balance sheets, dedicated staff to do applications or the ability not to worry about losing a per cent or two from the total."

Size matters: The different priorities of those from small, medium-sized and large charities

The State of the Sector survey revealed significant differences between the views of respondents from small, medium-sized and large charities.

Respondents from the largest charities - those with annual incomes of £6m or more - were the most likely to report job losses or downsizing because of the recession and to say Gift Aid had a big impact. They were the most worried about public perception and the most influenced by press coverage of the sector, but they also felt they had better relationships with the media than smaller charities.

On funding, respondents from large charities were the least interested in longer-term funding and the most keen on growing voluntary income.

They were also the most likely to say the Institute of Fundraising, the Fundraising Standards Board and the Charity Finance Directors' Group had a big impact on the sector.

Respondents from charities with incomes of less than £1m were more worried about accessing government funding and improving their governance. They were the most likely to say large charities were having a negative impact on the sector, but the least likely to regard the sector as being conservative and cautious.

Those from small charities were the most interested in finding ways to sustain income. People from organisations with annual turnovers between £1m and £6m were most likely to believe their charities worked well with other charities.

Independence: Is the Government exerting too much control over the sector?

16% - Strongly agree
34% - Agree
22% - Disagree
2% - Strongly disagree

Catch up with part one of our State of the Sector survey results.