Rob Wilson, the Minister for Civil Society, has told charities to abandon "outdated operating models" and "simply unsustainable" reliance on public sector grants if the sector is to be successful in the long term.
Speaking at the Charity Finance Group’s annual conference in London today, Wilson said that charities were in "an exciting period of change" and the sector needed to "take a lead in driving forward the changes that are needed".
He said: "As it stands, too many charities are focused on outdated operating models that are dependent on one or two sources of income, and just one cheque away from insolvency. Too many charities are reliant on grants from the public sector, a way of working that is simply unsustainable in the long term.
"It is vital that we prioritise investing in organisational development, building stronger leadership and governance, building more robust strategic plans and implementing more effective business models. If we don’t do these things, we risk failing those who need our help the most."
Wilson accepted that the government had a lot to do to reassure charities worried about recent reforms to the sector, such as the new Fundraising Regulator and the Charities Act, which granted new powers to the Charity Commission, but stressed that the government was supportive of charities.
"I’m not going to stand here and pretend there isn’t a lot of work to do to reassure you about some of the changes we in government are making," he said.
"But I do want to assure you that I personally and the government are on your side. Some of you will feel bruised by the events of the past year, but I am absolutely committed to working with you side by side to get the best out of the inspiring work you undertake."
Wilson said that charities should avoid missing out on an "important opportunity" to get involved in the apprenticeship levy, which will force all employers with payrolls of £3m and over to pay 0.5 per cent of their overall payroll.
When asked about the performance of the Charity Commission, Wilson said: "There is still an issue over whether it has enough funding. We as government and you as the sector need to look together at how we enable it to receive more funds than it is currently getting."
Opening the conference, Ian Theodoreson, chairman of the CFG, criticised the government for not setting out its vision for the charity sector, adding that it was instead pursuing "piecemeal legislation seemingly more geared to supporting the latest pet projects for ministers than supporting a coherent vision for the sector".
Theodoreson called on charities to have "far more confidence in speaking up for what we know from past experience is the best way to deliver services".
He told the audience that the sector could either "hide our heads under the blanket and hope that the storm will pass" or "argue the case for stronger financial leadership and better governance".