Survival of the fittest
January 2008
The plan by the Arts Council, which distributes around £1bn per annum, to scrap funding for almost 200 arts bodies is yet another example of how the third sector’s economic environment seems little more than a shadow of what’s going on in the private sector.
The stronger and better performing you are (by some basic performance indicators) , the better chance you have of retaining your funding or even getting above-average inflation increases. If you don’t make the grade, you can be in for a nasty surprise.
This cannot be good for the sector. Is there really greater public benefit from fewer, apparently higher-performing charities? Surely the sector’s very diversity fulfils a function that is unique and irreplaceable? These questions will continue to attract debate, but in the meantime, the 200 affected arts bodies have until 16 January to persuade their grant maker to change its mind. And if they don’t succeed, most will face closure or significant difficulties in remaining operational.
Most of the larger charities are getting their house in order when it comes to sustainable funding planning. The last Charity Commission Survey revealed that 40 per cent of them now state they have a reserves policy – up from 27 per cent in 2002 (
see Ernese Skinner's article 'No need for modesty' in this issue). However, the balancing act of managing reserves remains a sensitive point for many non profits. Too much tucked away for a rainy day attracts the oft-repeated accusation of hoarding despite clear statements on expenditure and objectives met; too little can result in beneficiaries being let down when times are hard. You only have to look at our data analysis on page 18 to see the complexity and extent of some of the assets out there.
Even small and medium-sized charities need a proactive and structured approach to reserves management and sustainable funding to survive in these uncertain times. Trustees cannot afford to pay lip service to annual trustee report templates or just leave them for their advisers to complete (which happens in far too many small charities). The annual reporting requirements are opportunities to review the whole operation with their advisors and make provision for sudden shocks such as a major funding cut. For this reason we have included articles on general risk management (see
Pesh Framjee's article on 'Value protection and value creation' ) and
Phil Smith on 'Reserves management' in this second issue of
Caritas magazine
The funding climate has seen something of a winter chill for some time, and the challenge for 2008 is to make sure that short and long term plans are ongoing working tools rather than dusted down once a year at the last minute.
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.
Click here for other articles written by Clarissa Dann
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