Struggling charities should spend less time chasing grants and more time focusing on their organisations’ missions and strategies if they wish to be sustainable in the long run, a survey has said.
A study, Third Sector Trends In The North of England, published today by the think tank IPPR North and Durham University, says that 57 per cent of charities in financially vulnerable situations told researchers their priority was bidding for grants and 56 per cent said it was fundraising.
Only 37 per cent prioritised strategy and 29 per cent were focused on financial management, according to the survey of 3,600 charities in the north of England.
"The evidence suggests that the focus of many organisations may be too closely associated with income generation, while too little attention is paid to other aspects of organisational wellbeing," the report says.
"While the search for new sources of income is understandable, it is apparent that this is sometimes prioritised at the expense of other factors. By trying to sustain current levels of income from the same sources, some in the sector might be distracting themselves from the need for more fundamental change."
To combat this, the report says, funders should consider, where appropriate, making funding conditional on the charity engaging in ongoing strategic management.
The third sector represents a significant part of the northern economy, employing more than 230,000 people in the region, the report says, and has shown resilience in many areas.
However, it says, the impact of the financial climate on charities has been uneven because "many organisations have enjoyed income stability or growth as others have borne the brunt of change". There are some trends, the report says, that are a cause for concern.
For example, the study suggests that third sector organisations might be overly optimistic about their future finances, because more than a quarter of those in the weakest financial situations think they will increase their income in the future.
And, it says, charities in more deprived areas are more likely to have weaker finances: 27 per cent of charities in the poorest areas could be described as financially vulnerable, compared with only 14 per cent in the most affluent areas.
Charities that depend on public sector funding are almost twice as likely to be struggling financially, with 31 per cent in financially vulnerable positions, than those that depend on private funding – 15 per cent of these are in financial difficulties.
Medium-sized charities are more likely to be struggling than small charities, the report says, because they have to compete with larger organisations, and smaller charities also tend to be largely volunteer-run and have fewer employees.
This vulnerability of medium-sized charities could threaten the wellbeing of the communities they provide support to, the report says. It calls on funding bodies to ensure that social action that is valuable to local areas continues to be supported, either through funding organisations directly, or by supporting them to secure alternative sources of funding and engage with local authorities on future public spending.
Instead, funding bodies need to think more carefully about how to invest in poorer areas without leading to unnecessary competition, and encourage complementary working between charities with different skills, the study concludes.
Tony Chapman, a professor at Durham University who worked on the report, said many charities were "locked into patterns of behaviour that are underpinned by a belief that the next grant that comes in will solve all their problems".
He said: "Sadly, this is not true – money can be the cause of problems if a charity does not have the skill, belief or people to do the work."