Sourcing new funding streams to compensate for reductions in government support is the biggest challenge for charity executives, but competition for funds is getting more intense, according to the latest survey by accountancy firm Baker Tilly.

Almost half (47%) of the charities taking part in Baker Tilly’s Funding Challenge survey said that government funding had decreased over the last 12 months reflecting the prolonged period of austerity, and almost two thirds (63%) said that sourcing new funding streams was their biggest challenge.

Over a third of those surveyed (35%) said that they are not seeing any recovery, and 46% said they may struggle to meet their charitable objectives.

Respondents also reported that increased competition for funds was the biggest change they had experienced in relation to funding in the last 12 months.

The biennial survey of charity chief executives and finance directors found that contrary to the pessimism expressed in previous surveys, levels of income in the sector had remained fairly static over the last 12 months.

While corporate giving had declined, individual donations remained stable, and investment income showed a positive increase, reflecting the stronger performance of the financial markets over the last year.

However, the survey found that charities have adopted tighter working capital models and implemented significant cost cutting measures over the last year.

Almost 90% of respondents said they had reviewed staff costs, with a third (32%) reducing or freezing salaries and one in five (22%) making redundancies. Some 29% said they had increased the use of volunteers.

Despite concerns raised in the last survey, over half (54%) of respondents said they had increased the amount of money held in reserve, while only 30% said their reserves had decreased.

This suggests that charities are being more prudent or selective in their projects and holding money back.

The survey found that many charities continue to face onerous staff pension commitments.

A surprising 15% of respondents with a pension scheme still have defined benefit schemes which are largely extinct in the private sector, and many of which have substantial deficits.

Forty per cent of those who responded to the survey expect their pension contributions to increase in the next 12 months, probably as a result of the introduction of the new pensions auto-enrolment regime.

Looking ahead to next year, three fifths predicted relative stability in overall funding, however, three quarters of the remainder believed they would face a further decrease in government funding. Forty-five per cent said they expect reserves to decrease next year.

Karen Spears, head of Baker Tilly’s National Charities and Not-for-Profit Restructuring and Recovery Group, said: "While the UK economy is showing early signs of growth, our survey suggests that the recovery cycle for some charities is yet to begin.

"The sector remains resilient, but trying to secure income in a period of prolonged austerity while having to do more remains a difficult balancing act.

"However, there are encouraging signs that some in the sector are responding well, keeping a tight rein on costs, being innovative and demonstrating their value to existing and potential funders.’

Share Story: