Small charities 'struggle to demonstrate impact to funders', says report

A study by the Lloyds Bank Foundation says such charities deliver great value to local communities, but are often in no position to assess their impact

The report
The report

Small charities deliver significant value to their local communities, the economy and local authorities, but many struggle to measure and demonstrate their impact to funders, a report by the Lloyds Bank Foundation says.

The report, The Value of Small, published today, is based on an examination of 16 charities in a range of income brackets from four areas across England and Wales: Bassetlaw in Nottinghamshire, Ealing in west London, Salford in Greater Manchester and Wrexham, north Wales.

The report says that the ability of small charities to create value stemmed from their distinctive offer of person-centred, inclusive support that was embedded in the community, and small charities were able to act as "first responders" to emerging need.

This enabled them to offer individual value, improving the lives of the people they supported and economic value for local public services and the wider economy, the report says,

They also provided added value through volunteering, the report says. Small charities had 5.62 volunteers for every £10,000 of income received, whereas the largest charities had only 0.02 volunteers for every £10,000, researchers found.

Despite previous reports suggesting it was beneficial to have a healthy population of small and local charities, the report says, "there is very little robust evidence about what is distinctive and valuable about them relative to larger charities and public sector bodies".

It says: "Addressing that gap is important now, more than ever, as small and medium charities are more likely to be adversely affected by cuts to public sector budgets and approaches to commissioning and procurement that favour economies of scale over more tailored and responsive approaches."

Acton Homeless Concern was one of the charities examined for the report. It had an income of £251,000 in the year to 31 March 2017 and runs two centres providing food, day respite facilities and other resources for homeless people.

Anne Gray, the charity’s chair, told Third Sector that small charities such as AHC did not always have the resources to publicise the work they did or the challenges they faced.

"In real monetary terms, the services we deliver should cost just short of half a million pounds," she said.

The report says the charity’s volunteers provided an estimated 250 hours of time a week, worth an estimated £97,500 each year, meaning that for every £1 of public sector funding received an additional £3.25 of volunteering resource was provided.

"It’s hard to demonstrate that kind of value for money, particularly with local government," Gray said. "Local authorities almost take it for granted that if you are a voluntary organisation you will be able to come up with an awful lot more value than the finance you’re receiving, sometimes up to 100 per cent more – if you say you need £50,000, they’ll assume you can manage on £25,000."

Gray said that many charities were not in a position to audit their work and assess its value and impact.

Smaller organisations, the report says, "often had limited resources through which to measure social value in such a formal and systematic way", and although commissioners and funders favoured formal approaches to social value measurement, much formalisation could erode small organisations’ distinctive approaches, forcing them to prioritise outcome targets over service user needs and priorities.

Smaller charities received 16 per cent of local government funding that went to the voluntary sector, the report says, while organisations with incomes over £10m received 55 per cent of it.

And the report warns that collaborating with other organisations to attract funding, as they are encouraged to do, "can prove problematic".

For example, Gray said, it often cost more to administer such partnerships than the value of the contract they were being offered.

To deal with the issue, the report says, funders need to offer grants of different sizes to fund core costs and one-off innovation projects, and contracts that are flexible, accessible and proportionate.

It also calls for public sector bodies to be required to formally account for social value in their commissioning and service delivery, and to take a broader definition of social value that reflected what was offered by small charities.

Mandy Johnson, chief executive of the Small Charities Coalition, said the research recognised why small charities were crucial to the broader ecosystem of charities.

"It shows the distinctive contribution they make to our communities and why it is so important they are properly supported," she said.

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