By Claire Racine
New research shows that more charities are now feeling
the effects of the recession, and that 56% of charities
expect a decline in their income going forward.
The research by the Charity Finance Directors' Group, the
Institute of Fundraising and PricewaterhouseCoopers highlights
that 80% of charities are expecting income to remain flat
or to decline.
Charities have seen a greater than expected decline in
almost every income stream. The exceptions are statutory
income, where 83% of respondents indicated no change, although
some 70% expect a decline or no change going forwards.
This anxiety is likely to be well-founded, as high levels
of Government borrowing (around £175bn over each of
the next two years) are expected to be repaid through efficiency
savings and cost reductions in the public sector.
Likewise, the legacy pipeline means that respondents expect
the impact of the recession on legacies to be felt in the
coming 12–24 months, with volume holding up but the
reduction in investment and property values reducing their
On the positive side, more charities are now using the
recession as a management opportunity, with 78% of respondents
taking action as a result of the recession, up from 71%
in November 08.
But there has been little change in the number of respondents
who felt they had adequate financial planning systems in
place. In particular, since ‘cash is king’ in
a recession, we are concerned that only 56% of respondents
(a 1% drop from November 08) felt they had adequate cash
flow monitoring systems in place.
In terms of the effect on operations, there has been a
small drop in the number of charities expecting to see a
reduction in their activity, along with those expecting
to make redundancies.
However, 20% are still expecting to see cuts in services,
despite the fact that 36% expect to see an increase in demand
for their services.
There has been a reduction in planned investment in every
area of fundraising, which we take to indicate that some
charities have already made investment in fundraising since
December 08 and are not investing further.
The December 08 report suggested that the use of reserves
would be a key consideration for trustees, and 44% of respondents
reported in May 09 that they intended to utilise their reserves
to fund services during the recession.
Respondents indicated that reserves would be used to fund
ongoing activity whilst assessing the reductions in funding,
to “pump prime” investments in new opportunities
and to fund the costs of restructuring.
In the December 08 survey, 34% of respondents indicated
that they would consider merger or collaboration with another
charity as part of their planning process, or outsourcing.
This view has remained consistent, with 26% of respondents
now saying that they would consider merger or collaboration,
and 10% considering outsourcing.
Keith Hickey, chief executive of the Charity Finance Directors'
Group, said: “Good financial planning, cash flow forecasting
and liquidity are essential tools for charities to maximise
their position in the current climate.
"It must be remembered that reserves are there to
help manage risks and to fund opportunities and now is the
time for charities that have built up reserves to use them
to maintain services for beneficiaries. Finance Directors
need to show leadership, and they need to work closely with
fundraising directors to plan for the coming year.”
Lindsay Boswell, chief executive of the Institute of Fundraising,
commented: “By bringing together fundraisers and finance
directors and using the wider perspective of PricewaterhouseCoopers
this report provides a unique insight into attitudes and
experiences of charities currently in the grip of recession.
"It’s important that all charities pause to
take a sense-check of thinking and attitudes to ensure a
sound strategy to manage in the current climate. At the
same time, fundraisers need to continue to plan for the
future – building partnerships with donors and supporters,
and continuing to establish meaningful and long-lasting
relationships with them.”
Ian Oakley-Smith, director, PricewaterhouseCoopers, added:
“Many Boards of Trustees of charities will need to
demonstrate not only strong leadership skills, but also
to think strategically and to challenge perceived wisdom.
"In particular, they need to think about whether collaboration
with other charities or even mergers might provide a more
robust environment in which to operate. This may not be
popular, but in some cases may help charities to maintain
services to beneficiaries.”
The research was conducted in May 2009 amongst members
of CFDG and the IoF, and it provides an update on the first
“Managing in a Downturn” survey, conducted in