The challenges facing small and medium sized charities

Paul joined the Lloyds Foundation in May 2013. He is Chairman of Contact a Family the leading UK Charity supporting families of children with severe disabilities and Chair of the UK Rare Diseases Advisory Group. His career has spanned the voluntary and public sector and work in international development (DfiD/Sight Savers), human rights (Amnesty International), professional and service regulation and health and social care.

The NCVO Almanac has reported that funding to the sector has decreased, its Financial Sustainability Review detailing how smaller organisations in particular are not benefiting from a wider economic recovery.

At Lloyds Bank Foundation (LBF) we support such small and medium sized charities and have invested over £350m in them over 30 years.

Our research of 800 grantees, published in our Expert Yet Undervalued and on the Frontline report, highlights that they are facing a particularly tough time as they contend with increasing demands –in terms of both numbers of those depending on their services and complexity of their needs– while at the same time face increased funding pressures.

This raises worrying questions going forward about charities’ ability to balance demand with income. There is particular concern about this in Wales where only 38 per cent of charities think that they will be able to continue in the coming years.

Smaller charities meeting needs others can’t

But why are we so concerned about smaller organisations? No doubt larger organisations are feeling the pressures that stem from decreasing statutory services, welfare reform and an increasingly competitive funding environment too.

At LBF we focus our support on smaller organisations because we believe these are often best placed to meet the complex needs of those facing multiple disadvantages, and it’s these individuals that we aim to support through the charities we fund.

Yet it is also these organisations that can face the greatest disadvantages, operating with limited resources. It’s clear that these organisations need our support now more than ever.

Focusing on quality

Our research shows that smaller organisations are being forced to compete in a system that favours scale and unit cost over quality of service, often to the detriment of those who need help most.

Convoluted, secretive bidding processes serve to exclude them from the market, irrespective of whether they are able to deliver the most effective service, and deliver impressive value for money, particularly in terms of the wider social value of their work.

In contrast, the current system favours achieving the lowest cost at the expense of attaining the best value over all. At a time when government is seeking to cut £12bn from the welfare bill, this appears a potentially dangerous oversight if short term savings could lead to long term cost increases.

Creating a level playing field

For us, the answer lies in ensuring smaller, local charities are supported to be able to meet the needs of those most at risk.

Speaking to these charities, who invariably understand the needs of their communities better than anyone else, it is clear that doing this requires a range of support. They need core, long term funding to be able to deliver services but they also need more structural changes that enable smaller organisations to flourish.

This isn’t about pushing larger organisations out of the market place. It’s about creating a playing field that doesn’t leave smaller organisations facing an uphill struggle while others are able to balance a spirit level.

It’s about ensuring the organisation that can best meet a defined need is not prevented from doing so because of the systems in place.

Supporting charities best placed to help those at risk

Our research clearly identifies ways which charities are already stepping up to the challenges they face on an individual level, but it is difficult for them to challenge the structural issues which are placing them at the bottom of the hill.

That’s where organisations like ourselves and NCVO can step in. It’s only right that we advocate on behalf of the charities we’re set up to support, and through them, the people who are most at risk. After all, society’s varied social issues cannot be solved without them.

Read the Expert Yet Undervalued and on the Frontline report.