Charities proving resilient in these uncertain times

Although the majority of charities have proved their resilience and maintained a stable income over the past 12 months, they still need to review their business basics and take proactive action if they are to survive long-term, according to a major new survey from accountancy firm Baker Tilly.

‘Managing charity finances through uncertain times’ reveals that charities are anticipating another tough 12 months and many face hard decisions in respect of rationalisation, joining forces, selling assets and securing funding. One in ten has made reductions in staff salaries and almost a third have deferred projects.

The report’s authors suggest that these cutbacks, made in order to weather the expected falls in public spending coupled with fears over levels of donations and investment returns, could have a potentially devastating knock-on effect for society. Initiatives in areas including social welfare, research and education, relied upon by many people, could all suffer.

Other key findings from over 170 charities surveyed, in the main with an annual income and assets of £1 million or above, include:

• 36 per cent have seen a drop in government income with 65 per cent anticipating a further drop
• 61 per cent are currently or have been seeking new sources of finance
• 36 per cent are considering a merger with another charity
• 15 per cent are considering a merger with a commercial organisation
• Nearly a quarter are seeing a fall in full cost recovery on services provided

The survey also says that although individual charitable donations have remained relatively unscathed, the increase in unemployment levels has caused concern over future donations and the membership of charities. Furthermore, of those charities with high-street shop chains, while many have reported an increase in footfall this has been tempered by a marked reduction in the amount and quality of goods being donated for sale.

Karen Spears, Head of Charities at Baker Tilly Restructuring and Recovery LLP, said:
 "With 90 per cent of respondents not currently seeing any significant improvement in the economy for their charity, and 45 per cent not expecting any positive change until the last quarter of 2010, charities will need to constantly review the position and take steps to control their finances while ensuring that the charity’s objectives are met. 
“Some have not used the good advice available to them. Hiding their heads in the sand is not an option. Charities need to regard this as opportunity to examine their objectives, and revisit core activities and projects."
Responding to the survey, Andrew Hind, Chief Executive of the Charity Commission, commented:
“While charities have no control over this funding environment, it’s the steps they take now that can even the odds when meeting the challenges ahead. I’m particularly encouraged that over a third of respondents are considering methods of joint working or merger – a potential solution the Commission has been urging boards to consider since the downturn began.”

As a result of the survey findings, Baker Tilly has compiled a series of practical tips for charitable organisations to help weather the current economic crisis, including:

• Review funding mix to ensure not overly reliant on one income stream
• Ensure you are getting a fair price for service provision
• Make sure you are fully aware of all liabilities
• Maintain strict controls over restricted funds
• Be realistic when forecasting and monitor regularly
• Plan for the medium to long term
• Review your charity’s risk register
• Consider alliances, mergers and partnerships
• Utilise all  tools and guidance available

Baker Tilly is the number one auditor in the charities sector, acting for some 1,000 charitable bodies from local charities to top 250 charities. For a copy of the full report visit www.bakertilly.co.uk/charities