Recently, I ran a workshop for the Centre for Social Justice. I was struck by the number of attendees at my session on finance and strategy who signed up because they were struggling to keep pace with the changes in their funding environments. Impressively, one delegate had increased a charity's earned income by more than 50 per cent over an incredibly short period, but this had simply replaced the reductions in other funding. There was a palpable sense of weariness at running just to stand still.
Although I left energised by the determination and willingness to keep searching for a way to serve beneficiaries, the undertone of fatigue is concerning. There are so many challenges. Funding continues to be squeezed and those who regulate and legislate us seem to be focused almost entirely on eradicating poor practice.
Of course, we should not tolerate malpractice. I am part of several initiatives to root out fraud, economic crime and terrorist abuse. But if we don't respond carefully to the challenges we face, there is a significant risk that our work will be undermined – particularly among the small and micro charities that make up the majority of our sector.
The findings of the Financial Sustainability Review, a piece of work undertaken by a number of sector bodies including the Charity Finance Group, back me up. Government grants are at an all-time low. The sector's funding has stagnated over the past five years and we have seen a significant redistribution of the sector's spending power from the bottom towards the top. Smaller charities face a capacity crunch that limits their ability to adapt and sometimes even prevents them engaging with the sustainability programmes designed to assist them.
How can we address these challenges? The starting point has to be a recognition that high-quality charity services are not free: efficient, well-run organisations come at a price. At the same time, not every charity can simply earn its way out of its financial challenges: not everything we do can be sold, and bidding for contracts isn't feasible for all charities – especially for smaller organisations. If the sector is to deliver change effectively, all parts, along with government and funders, need to look for sustainable solutions.
For example, government needs to work with the sector to ensure that appropriate funding mechanisms, including grants, are used by commissioners. The scale and pace of the current spending cuts should be revised against long-term demands on voluntary services. Charitable foundations and other voluntary sector funders need to consider how they can adjust their funding priorities in a way that can attempt to compensate for the loss of government income and help ensure a more sustainable financial future.
We all want a financially healthy sector in which charities are better able to plan for the long term, and it is crucial that we work together to try to achieve this.
Caron Bradshaw is chief executive of the Charity Finance Group