The latest Third Sector Trends Study 2016 provides a picture of the state of the voluntary sector in North East England and Cumbria over 10 years.
Whilst it is encouraging that the majority of organisations have demonstrated a relatively stable income over the last two years we also see evidence of extremes: 14% of organisations reported substantially rising income and 18% reported their income fell significantly.
Professor Tony Chapman, author of the report, claims the study suggests a vibrant, resilient voluntary sector. Whilst I would agree the evidence suggests a resilient sector, and I would argue that resilience is a key feature of the sector, I worry that this message paints an overly healthy picture of the state of the sector in the North East.
Having to run faster to stand still is a common theme among respondents which supports what we heard from other surveys such as our Surviving or Thriving Survey 2016 and Newcastle CVS’s Doing Good in Gateshead 2017 and Taking the Temperature 2016. Organisations report they are having to chase more sources of funding to keep the ship afloat and Third Sector Trends indicates that larger organisations are increasingly moving into the charitable grant funding space given the decline in contract income since 2010. The report also found that 25% of organisations have used their reserves for essential costs, the majority being medium size organisations.
Given the impact of austerity it is perhaps not surprising that organisations mainly funded by the public sector are more likely to be in a vulnerable financial situation; but it is worrying that organisations operating in the poorest areas are most likely to be in this position given that there is likely to be greatest need for their services in those areas.
A key factor that the report does not reflect is the impact on organisations of increasing demand for services and numbers of beneficiaries, including an increase in those with multiple needs which has been identified by other surveys in the region. This needs to be taken into account when considering the average number of Full Time Equivalent staff (FTE’s) per organisation has fallen slightly since 2010, indicating that organisations are meeting increased demand without additional staff resource. The number of volunteers has risen from 143,000 in 2008 to 150,000 in 2016.
Of concern is that few organisations, particularly smaller and medium organisations, are changing their working practices to prepare for the future and adapting to the world ahead – one that will inevitably see traditional public sector funding routes shrink further and greater competition for grant funding. The appetite for loan finance has also remained very low with fewer than 3% of organisations stating that borrowed money is important to them.
Awareness of contracts has risen by 10% since 2010 but unwillingness to bid for contracts has remained at a similar level with about 18% of organisations perceiving barriers to undertaking contracts. Earned income (trading) is on the up (slightly) for smaller and medium sized organisations which is encouraging in terms of diversifying income streams.
It is more encouraging that 88% of those bidding to local grant makers in the last two years were successful in securing a grant. However levels of application and success rates to national funders are lower, with only 30% of smaller organisations considering applying to national funders. Our work with the NE Funders Network and Local Infrastructure Organisations to encourage national funders to fund more in the North East is attempting to tackle this issue.
Looking ahead, medium sized organisations are most likely to prioritise building their capability around bidding for grants, fundraising and marketing but place a lower priority on financial, strategic and personnel management. This is perhaps why it appears medium sized organisations are more likely to have drawn on their reserves for essential costs and are potentially those at greatest risk of being left behind in the changing funding climate.
NCVO research A Financial Sustainability Review (NCVO 2015) corroborates this and found that many charities were facing a ‘capacity crunch’ and were prioritising frontline services, absorbing cuts through staff and infrastructure reductions and therefore lacked time and resources to diversify their income. Facing Forward Lloyds Bank Foundation 2016 refers to a Charity Commission study (Sept 2016) on charities identifying that they may be in financial difficulty which suggested that the biggest difference between those that recovered and those that didn’t was their ability to plan ahead.
Successful partnership bidding has risen from 10% in 2010 to 17% in 2016 but small and medium size organisations are less likely to consider partnership bidding than larger organisations. There are examples of good practice around partnerships across the region and we may need to share the learning from these examples as many smaller organisations are sceptical about the benefits of partnership working based on evidence of past experiences of initiatives such as the Work Programme.
To conclude, whilst I agree with Professor Chapman that sending messages that the sector is in perpetual crisis is not only wrong but potentially dangerous, I believe that it is also important to acknowledge the challenges the North East sector is facing in order to demonstrate its strength and resilience in broadly surviving, and in some cases thriving, in challenging times.