Financial sustainability Coronavirus

The boy who cried wolf

Caron Bradshaw, CFG's CEO, challenges the notion that charities are overstating the financial crises they now face.

You’ve heard the story, I’m sure: A small boy claims that a wolf is coming over and again without it materialising, only for the other villagers to become hardened to his protests and finally ignoring the real danger when it comes.

I was talking to someone the other day which brought this fable to mind. The gist of the conversation with them was that because they had spoken to charities that were doing okay, sharing an experience of the contrary was at worst false and at best not giving the full picture. The suggestion being that the sector’s repeated warnings over the impact of Covid were tantamount to crying wolf.

We’ve been warning of around 60,000 potential job losses and c£10bn less income.

Several of my infrastructure colleagues are turning their organisations around, other frontline charities are adapting and extending their services, and some aren’t laying off staff or taking financial support.

So are things really as bad for charities as ‘we’ve been making out’? Let’s tackle this matter head-on and share with you some of the findings of our data analysis.

Repeated surveys and intelligence gathering reinforce and corroborate our warnings regarding the scale of lost income and that redundancies are starting to bite. On behalf of the coalition of infrastructure bodies behind the #NeverMoreNeeded campaign, CFG pulled together multiple data sources (from statistically robust to anecdotal) to form a picture of the health of the sector.

Sector health check

It has been said multiple times but needs saying again – this thing we call the charity ‘sector’ is a diverse group of organisations crossing a plethora of causes, operating all across the UK and operating with very different business models.

The vast majority are tiny, and a relatively small number of organisations account for the lion’s share of income. We are loosely a ‘sector’. More accurately we are described as many sectors united by a desire to change the world for the better.

I congratulate and celebrate the successes of my colleagues who are creating really positive change and recognise that some have indeed being able to turn their financial situations around. But their successes don’t render the horror stories less horrific.

The effects of this pandemic have not impacted the sector smoothly and different organisations have fared differently. Those early warnings, regarding what was at risk for social change organisations, were anything but crying wolf.

In examining different areas and drawing on lived experience and expertise, we’ve formed a picture of the state of the sector that not only stands up to scrutiny, but has been corroborated over and again by different stakeholders.

We approached this from a sub-sector perspective at the request of government, but stress that a charity’s financial resilience has less to do with their sub sector, size and annual turnover than with their business model, funding mix and ability to make robust financial plans based on reasonable assumptions.

As with most such analysis we divided different sub-sectors into categories indicating their relative health; critical, struggling or depleted. Those in the most serious category, ‘critical’, are experiencing a massive impact on their public benefit delivery beyond their own sector, widespread job cuts, and are vulnerable to financial collapse.

‘Struggling’ sub-sectors were those where the impact on public benefit delivery has been significant, with some knock-on impact beyond their sector and where they are likely to be vulnerable to job cuts. For those we categorised as ‘depleted’ there was some likely impact to their public benefit delivery and some potential for job loss.

We found across all sub-sectors, organisations had experienced a strategically destructive reduction in their reserves level, meaning that their money had been depleted to such an extent that the impact would undermine the charity’s ability to deliver pre-Covid strategies, investments or planned expenditure.

That means activities to address poverty, hunger, medical research, mental health, rehabilitation, housing – the list goes on – won’t go ahead or will be radically amended. This isn’t nice-to-have stuff, this is essential to society.

Slow recovery

The impact of the 2008 crash took ten years to recover from. Its impact on reserves, jobs and delivery pales into insignificance when thinking about the current pandemic. And before someone says everyone is in the same boat, please know that we absolutely are not. I’ve heard it described perfectly as ‘we are in the same sea in different boats’.

There will always be exceptions, but the general picture is bleak. Nearly all social sub-sectors are either ‘critical’ or ‘struggling’. Those that have secured funding, and in some cases an increase in funding, aren’t experiencing a windfall or boom times. They are responding to increased need!

For CFG we predicted a £750k spending gap in March. To date, we’ve managed to get it down to around £250k. That doesn’t mean that we were overstating it. It tells you how hard my team have worked, how many sacrifices have been made and how many supporters have come to our rescue.

If it were not for the tireless efforts of staff, volunteers and supporters, philanthropists and grant makers and, yes, government emergency funding, the warnings we gave in March would have come true.

The minority of charities who have not suffered shouldn’t be held up as reasons why genuine concerns about the vast majority should be ignored.

The wolf was kept at bay, but make no mistake – it continues to threaten the future of the communities we serve every day and only substantial action now will save us from savage loss.

This post was last reviewed on 9 November 2020 at 16:54
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