Killing the golden goose?
Capacity for future public service delivery was one of the more stark findings in the latest PKF/CFDG report: Managing Risk – moving towards the vision.
It highlights signficant risk facing 62 per cent of the 380 charity respondents receiving income from public sector contracts.
This follows the Measuring Outcomes for Public Service Users (MOPSU) analysis (see Caritas, issue 33, August 2010, page 20) which tracked the increase in standing funding into the sector from £9.1bn in 2004/05 to £11.9bn by 2007/08.
Key findings include:
- 73 per cent of charities anticipate a decrease in their public sector contract income as a result of spending cuts.
- Of those charities with public sector contracts, 67 per cent of them have fewer than 10 contracts, 25 per cent have one or two and 22 per cent had more than 25.
- There is a visible communication gap between charities and the public bodies they contract with. Only 17 per cent felt their commissioners were clear about the future of their contracts and 26 per cent felt there was no steer at all.
- 76 per cent of charities expect to get less than six months’ notice of changes to their contract activity. While 61 per cent felt that they could adjust their cost and delivery structure to a 10 per cent change in contracted activity inside three months and 36 per cent thought they could adjust within 12 months this was hardly the basis of a sustainable ‘big society’.
- Although 39 per cent of charities were able to achieve full cost recovery on public sector contracts, 61 per cent were unable to recover their full costs and 18 per cent could not even get their direct costs back.
PKF’s Richard Weighell who wrote the report told Caritas: “So many charities have got such a high proportion of fixed cost (such as headcount) that if the contract volumes go down, they are going to be stuck in the short term – for example with redundancy costs – as they make the adjustment to downscale.” He added that the sudden closure costs had to be funded from reserves – levels of which are at an all-time low.
CFDG’s chief executive, Caron Bradshaw points out that part of the problem lies in “charities being put under pressure to chase contracts that leave them no safety margin.” She calls for commissioners to allow the sector’s innovative behaviour to come through and build in time to acquire the economies of learning. Weighell thinks public sector bodies need to be much clearer about longer-term capacity needs when making short-term decisions. “If these charities have shut because there is no work for them in the short term, they are not going to be there when the state needs them later. They can’t be turned on and off.”
Copies of the report can be obtained by emailing: kate.garrett@uk.pkf.com
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