'Stability' and ' resilience' in the non profit sector
April 2008
The backdrop of a deteriorating global outlook and weaker economic growth -‘stability’ was mentioned 23 times and ‘resilience’ five times in his speech – does suggest that the sector should not allow the tax tail to wag the income dog. As Stuart Porteous, head of group economics at RBS puts it ‘more challenging economic conditions are bad news for the public finances. Weaker growth means higher spending – on social security, for example – while tax receipts grow more slowly. That is why the Treasury expects the current budget to remain in the red until 2010, two years longer than anticipated in 2007’.
This colder economic climate raises fears of how the various sources of sector income could be affected and what risk management measures are going to be necessary. Charles Nall, director of resources at the Children’s Society makes the point in CFDG’s The Role of the Charity Finance Director that ‘the very distance of trustees from investment matters gives them the advantage of asking the simple questions. How much money might we need and when? How much risk and how much return is reasonable to expect in our investments over those time periods?’ The briefing tools from the investment management houses and specialist charity investment courses are all crucial opportunities for charities to get on top of these basics.
Gaynor Humphries observes that recent trends in the sector have left some organisations ‘unable to imagine a different way of surviving except through grant support’ (
see Gaynor's article,
When worlds collide) and that ‘foundations long to see real answers about sustainability’. With predictable tightening of the rules on fee charging and fundraising methods charities have to get much more inventive about income generation and collaborative working arrangements (
see Stephen Lloyd's article,
Getting together). Ed Miliband’s recognition of the ‘important role social enterprises can play in the Government’s approach to enterprise’ and that three-year funding will be the norm for third sector organisations delivering public services promises that new doors will continue to open. However, the balance between maintaining independence from government, yet remaining on the preferred supplier list has not quite been found yet.
At present there are no reasons to believe that total income coming into the general charity sector will level off or, at worse, decline. Indeed there is no evidence that the sector’s income growth even tracks the vagaries of the wider UK economy. However, the diversity of the sector’s income streams means that charities cannot be complacent. They would do well to use this Budget to review what ‘stability’ and ‘resilience’ mean for their beneficiaries and their organisations.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from Cass Business School. She has been one of the judges for the non-profit category of the Chartered Institute of Marketing's Excellence in Marketing Awards for the second year running.
She has also acted as clerk to the trustees of a small almshouses charity and as a member nominated trustee to a pension scheme of a multinational publishing company.
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