Public Services Reform, Retrenchment and Charity Finance
Executive Summary The political and wider public debates over the impact on charitable/ voluntary organisations and social enterprises of the far-reaching costreduction programmes unleashed by public sector organisations continue to intensify. There remains uncertainty as to future contract and grant funding and historically under-fundedareas outside Councils’ and PCTs’ fields of statutory responsibility are subject to particular pressure. This Board Paper argues that the leaders of charities, voluntary organisations and social enterprises need to equip their organisations – in terms of skills, financial planning and control systems, strategic self-awareness and good data on costs, financial and non-financial performance – for achanged financial ecosystem and risk universe. This involves strategic conversations and hard decisions, not about doing only what can be done with diminished funds from existing sources, but rather about how to identify, measure, fund and deliver what will be important in a rapidly-changing operating environment.
With the advance of Big Society policymaking and public services reform acceleratingacross the whole of Government, the Government’s intention to devolve a greatly increased share of responsibility for the delivery of services to charitable and voluntary sector organisations and social enterprises is becoming clearer by the day. Despite recent pledges to extend financial support during the transition to the new, more open and entrepreneurial system, it is clear that there is notthe political will or the ideological inclination at the centre to bring sufficient pressure to bear on the local public sector to ensure that civil society organisations have
access to the resources they will need to shoulder the burden, in a context of fitful and uneven voluntary giving by both corporate and individual donors and dramatically reduced investment income. On the heels ofwidespread contract renegotiation by statutory organisations last year will follow severe reductions in discretionary expenditure by Councils, and tough new service delivery contracts in areas of statutory responsibility. Even the larger, well-branded organisations, with strong track records of service delivery, and significant reserves have suffered; the Charity Commission reported1 in 2007 that athird of all
Stand and Deliver: The Future for Charities Providing Public Services: http://www.charity-commission.gov.uk/Library/guidance/RS15text.pdf
charities delivering services under contract to public sector organisations (PSOs) were reliant on those contracts for at least 80% of their income, rising to two-thirds for the largest charities. This income stream is looking increasinglyfragile; even in the year that report was published – before the recession, and long before the current deficit reduction programme’s chilling effect on grant and contract funding – two-thirds of funding agreements had a lifetime of a year or less. Uncertainty persists in many areas of public service, where statutory organisations are still working headline budget cuts through their financialplanning machinery, accentuating the financial insecurity on the ground. In the good times, a significant proportion of service delivery contracts don’t permit charities to secure full cost recovery. In the absence of a revolution in local commissioning – such as that envisaged in the Government’s Green Paper, Modernising Commissioning at the end of last year – the majority of commissioners will continueto let contracts on the basis of cost, rather than price, missing the opportunity to use funding relationships to leverage more social value and more innovative, productive services at the very moment when demand for many services is increasing.
the training of community organisers, the importance of volunteering and community ownership, and the availability of new forms of micro- and loan...
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