A funding gap
The government’s Giving Green Paper was published on 29 December along with eight papers from various leaders and thinkers in the sector.
Addressing the challenge of how to increase giving levels and achieve a culture change that makes ‘social action a social norm’.1 The document briefly describes the government’s plans to decentralise, empower communities, open up public services and to encourage social action to increase levels of giving by individuals or companies, either by financial contributions or other forms of contribution such as assets or expertise.
It calls for funding opportunities outside of government to be explored. Charitable foundations, which are already a major income source to the charitable sector, are highlighted, along with a suggestion that they should make minimum payouts as they do in, for example, the US. The latest data from Charity Financials suggests that the foundations, heavily dependent on the investment markets for their annual income, have been affected by the adverse economic climate. So the sector is staring at a double whammy following government funding cuts and reduced trust and foundation funding.
The analysis shows that the top 500 foundations made grants to the value of £2,107.8m in 2009, a decrease of 2.1 per cent from 2008. Of the top 500, 246 of them decreased levels of funding compared to the previous year; a drop of almost £300m from £894m to £598m. This reduction in sector funding makes the government’s £100m transition fund look like a drop in the ocean. However, the gap is partly offset by the foundations which were able to increase funding; so the net year-on-year shortfall is £44.1m.
Of the top 500 foundations, 60.6 per cent (303) spent more than they earned during the latest financial year, compared to 250 the year before, showing that charitable foundations are finding it increasingly difficult to live up to their current obligations. This is illustrated by the fact that the financial surplus for the top 500 (total income minus total expenditure) was a negative £604.4m in 2009, compared to a positive surplus of £342.9m in 2008.
A recommendation that foundations should make a minimum payout indicates a mis-apprehension that they are holding back on giving. The largest organisations analysed here are in many cases eating into their assets to ensure the delivery of their obligations. The numbers suggest that an attempt to forcibly extract further funding may be like getting blood from a stone – quite apart from the costs and complexity of how it would work as one size does not fit all.
1. www.cabinetoffice.gov.uk/resource-library/ giving-green-paper
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