Maximising statutory funding in the downturn

Just as the public finances go from bad to dire, the third sector finds itself more dependent on statutory funding than ever before. According to the latest NCVO Civil Society Almanac the majority of charity income is now ‘earned’, with half of this portion generated through statutory contracts. George Grayson of Action Planning considers the effect the economic downturn is having on statutory funding and what action charities should take in response.   

The third sector has been highly effective in positioning itself as a cost-effective deliverer of public services, from health and social care to housing, but as the recession deepens, it faces intensified competition both from both a hungry private sector and from councils looking to bring outsourced services back in house. 

Those charities which can provide cost effective services, demonstrate ‘added value’ and supplement statutory funding with other income sources should thrive, but those with larger fixed overheads may have difficulty competing.

Many contracts appear stable at the moment. However, in the next eighteen months as renewals or break clauses come round and government spending is cut, charities will have to fight harder to retain funding. Charities will have come up with unique and effective propositions to be able to compete.  As issues such as unemployment come to the fore, it is likely that the emphasis within public service contracts will reflect these trends and charities need to be equipped to respond.  

Action Planning recommends:

• Strong strategic and scenario planning to prepare for the potential fall in statutory funding. Review the reasons why your charity is delivering statutory services and assess the impact which the loss or non-renewal of contracts would have on the charity and the needs of your beneficiaries.
• Investment in the professional marketing of your service delivery capabilities to commissioners.
• Ensure commissioners are aware of their obligations under the Compact and make use of the Compact Advocacy Programme which provides advice and support to charities. 
• Diversifying income streams, where possible.  If it is not possible to diversify your income, try to avoid being reliant on one or two contracts, or on a single services commissioner.
• Readiness to sit down with commissioners and renegotiate payment terms. For instance, monthly rather than quarterly payments could make a critical difference to your cash flow. Funders have a vested interest in ensuring that your organisation survives.
  

George Grayson, Research and Bid Writing Executive, Action Planning
Action Planning is a leading fundraising, management and recruitment consultancy to third sector organisations and works with ACEVO on a series of national events. www.actionplanning.co.uk

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