Three in five charities have seen income fall and half have seen costs rise as a result of changes in government policy, according to a report from the Charity Finance Directors’ Group and the accountants PKF, published today.
Managing Risk: Operating in the New World, based on a survey of 288 charities carried out in May and June, asked participants how they had been affected by changes in public policy over the past year, such as the VAT increase and policies announced in the Comprehensive Spending Review.
Sixty per cent of respondents said the changes had "reduced the funding available to them", the report says, and 50 per cent said the changes had "increased the cost of operation".
The survey found that that 73 per cent of respondents considered a fall in income to be their biggest risk.
Twenty-four per cent of them specified that a fall in public sector income was their biggest risk.
In addition, 49 per cent of charities said they had had to dip into their reserves in the past year, up from 28 per cent in last year’s survey. A third of all those polled said those their reserves were not as high as needed.
Only 7 per cent of charities polled said they understood the concept of the big society.
Fifty-six per cent said the level of uncertainty for planning activity had increased in the past year.
Richard Weighell, risk management partner at PKF and one of the authors of the report, said: "The report shows that there is a fundamental imbalance between supply and demand in the not-for-profit sector: charities are seeing growing demand for their services but are unable to invest enough to provide these services effectively.
"There is little sign of the situation improving in the foreseeable future, which means that many charities are faced with a business model that no longer works in the longer term."