Changes to commissioning leave charities at risk of closure, report says

New Philanthropy Capital's report says that many charities have had to dip into reserves and cut staff numbers to survive

New Philanthropy Capital's report
New Philanthropy Capital's report

Nine per cent of the country’s largest charities that earn money from contracting are at risk of closure because of changes in the financial environment, according to a new report from the think tank New Philanthropy Capital.

When the Going Gets Tough, a report published today into changes in the commissioning environment for charities, is based on replies from 101 of the largest 750 charities that earned at least part of their income from contracting.

It found that 62 per cent of charities surveyed expected to dip into reserves to survive or had already done so, while 73 per cent either planned to make staff redundant in the next 12 months or had already done so. Sixty-five per cent had cut or planned to cut front-line services.

So far, 36 per cent of charities have seen cuts to income from government sources and 12 per cent have seen cuts of more than 20 per cent, according to the report. About half have seen income stay the same, while the rest have seen an increase.

Charities said the type of income they received from government was also likely to affect them negatively.

Of the charities that responded to the survey, 55 per cent said they believed an increase in payment-by-results contracts would have a negative impact on their finances, although only 30 per cent said this mechanism would be bad for beneficiaries.

"There is scepticism about whether new funding mechanisms will result in better outcomes for beneficiaries, compared to more traditional forms of funding," the report says. "Charities say that block contracts and grants will produce better results for the people they help, compared to payment-by-results and tariff-based contracts."

Of the charities surveyed, 92 per cent received income from government, with 67 per cent earning more than half of their income from government and 45 per cent earning at least 76 per cent of their income from government.

Charities responding to the survey had incomes of between £800,000 and £500m a year.

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