The NPC research found that the majority of charities with public sector contracts cross subsidise those contracts with other funds, such as donations from the public.
54% of the charities NPC surveyed delivered public sector contracts and 59% of these said they are cross subsidising that contract with money from other sources such as fundraising. And, it found, as fundraising, trading, or investment income fall – with NCVO reporting charities are set to lose more than £4bn over 12 weeks as a result of the coronavirus outbreak – charities will not be able to afford to cross subsidise these contracts.
This, the research suggests, may mean they are unable to deliver them, and vital services fail, or government funding is placed under more pressure as it has to find a short notice new provider.
The early headline results come from NPC’s State of the Sector 2020 report and have been released to help funders and charities understand the underlying challenges in the charity sector, and help shape how government and funders target their support to charities.
Other findings include:
- Charity leaders reported doing more in almost every area than 2017 and so may have been spread thinly when the crisis hit. For example, in 2017 83% of charities said they were delivering services or products. In 2019/20 this rose to 89%
- Less than half (47%) of charities believed that independent funders offered the flexible core funding which NPC expects will be vital to keeping them afloat in the crisis
- Charities’ confidence on their ability to use digital technology has dropped by 11 percentage points to 59% from 70% since 2017. This may leave them struggling to shift services online to reach isolated people during quarantine and social isolation
NPC CEO Dan Corry said:
“Charities are mobilising to help thousands of people across the country but they are also crying out for more help and support. Their income is collapsing just as people’s need to use them starts to grow. Our research reveals some underlying problems in the sector, which the crisis will undoubtedly exacerbate. The response both from policymakers and the sector to the crisis needs to take this pre-existing weaknesses into account, and make sure issues like the lack of core funding, the weaknesses on using digital technology and the cross subsidy of contracts are not overlooked, or we could see charities fail and thousands of vulnerable people put at risk.”
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