The Almanac 2017 findings – what do they mean for you?

Earlier this week we launched the 16^th edition of the UK Civil Society Almanac, which provides a comprehensive overview of the charity sector’s structure and economy based on data reported by charities for the year to March 2015.

In many ways, the new figures can be seen as the continuation of trends identified in previous years:

• Donations continue to provide the largest share of income from individuals
• Charities are taking an increasing role in delivering public services
• Levels of volunteering remain stable

So the headline message is one of stability, and of a sector that is showing its resilience and ability to adapt to a new operating environment.

Read Veronique’s overview of the key findings.

But behind the graphs and percentages, what are the messages for charities and what are the implications for their work?

In particular, what are the wider policy issues behind the figures that charities need to consider?

Increase in government income

For the second year in a row income from government has gone up slightly, to just over £15bn.

At first sight, this steady increase could be seen as an indication of growth. However, as in previous years, the figures need to be read in context:

• Government spending is cyclical. Cuts tend to be focused towards the start of spending cycles, and this year’s Almanac data takes us to the end of the 2010-2015 spending cycle. So the increases in recent years do not necessarily mean a longer-term reversal of the preceding downward trend.
• As we explained earlier this year in NCVO’s Road Ahead report, austerity is set to continue: the Institute for Fiscal Studies for example has predicted an ‘additional dollop’ of austerity in the 2020s. Given that charity income from government sources has previously tracked departmental spending fairly closely, it’s likely that it will continue to fall at least in line with the spending cuts, and charities that get a high proportion of their income from government sources need to be cautious about expecting further increases.
• The overall increase provides a skewed picture of the sector, because the distribution of this growth continues to be concentrated in major and super-major charities. In the meantime, small and medium sized charities continue to experience considerable financial challenges, as highlighted in our Navigating Change report (PDF, 3MB). This is because there continues to be a number of considerable barriers to small and medium sized charities having access to public services contracts, so the proportion of government spending that reaches them is minimal.
• This was echoed at our launch event by Rosie Ferguson, chief executive of Gingerbread, who spoke about the realities of commissioning and tendering. From the move towards bigger, more generic contracts, to a bidding process that is often unnecessarily complex or with prohibitive timescales, the market is tailored to large providers, while small and medium-sized charities bidding for contracts find the experience ‘impossible’ or ‘difficult’.

Uneven distribution of assets

Echoing the findings on income, the data shows that nearly 90% of total assets are held by just 3% of charities, and the top 100 asset owners hold half of the sector’s assets alone.

But the vast majority of organisations have little reserves to speak of, and exist in a situation of permanent uncertainty.

We know that owning assets can be a key element for charities to generate income. That’s why in NCVO’s 2017 Manifesto we have set out proposals on how the financial assets identified by the Commission on Dormant Assets could be distributed, in a way that will create a legacy for small and local charities for a generation to come.

• Create income-generating endowment funds that can fund small and local charities now and into the future, building on the success story of local community foundations.
• Put more assets in community ownership and create more facilities for the public’s long-term benefit by using the money from dormant accounts to buy local community assets, such as pubs, green spaces or historic buildings, and put them in the control of local people.

Our manifesto ask around community asset purchase would not only enable those assets to be retained for the benefit of their communities, but could help voluntary organisations develop sustainable earned income streams.

Growth of earned income

Earned income from individuals, including fees for services and merchandise from charity shops, is slightly higher (£10.5bn) than voluntary income from individuals through charitable donations and legacies (£10.1bn).

Earned income first overtook voluntary income back in 2011/12, and has since then increased more steadily.

This growth is mostly driven by charities charging for their services, and in the past questions have been raised as to whether charging for services raises ethical issues for charities or could undermine them in the eyes of the public. But charities charging for services is a clear sign of how they have sought to diversify their income away from a dependency on grants and ensure sustainable funding, as explained by this NCVO blog from a few years ago.

It’s true however that deciding whether to charge for services requires a careful judgement, considering not just the financial aspect but also asking questions about your charity’s values and ethos, and raising issues about accountability and transparency.

Another implication is how charities’ relationship with their users can change: the payment of a fee makes the interaction a lot more transactional, and in turn this is likely to mean that users’ expectations of the service (its delivery and quality) change and become more ‘consumerist’. This is another issue that charities will want to consider when designing and delivering their services, especially if they will be charging for them.

Importance of donations

Individual donations and legacies continue to be an important source of income, having provided voluntary organisations £10.1bn in 2014/15. But compared to the increase in earned income, there has been very little net growth in donations since 2007/08 (6%, compared to 35% in earned income).

The relative lack of growth in donations is perhaps not surprising, when we consider that people have not seen their incomes rise a great deal in recent years. The OBR is expecting real household income growth to stall further because of higher inflation. If this correlation continues, charities will have to start thinking about how much they can rely on donations, and when it is still productive to put their resources into fundraising from the public.

And where fundraising does happen, charities will need to ensure their practices are not only compliant with the law, but also meet the public’s expectations. As I have explained in this policy commentary, fundraising is the ‘public face’ of many charities, the way in which most of the public know about and interact with charities. And we have seen that how charities fundraise has a huge impact on the public’s trust in our sector. So it’s important that charities develop fundraising practices that respect the interests of donors and potential donors, and re-establishes a basis of trust and confidence in their brand.

What next?

The Almanac forms the evidence base of so much of NCVO’s policy work.

For those of you who have had a chance to read NCVO’s Manifesto, you will see that our recommendations – on building community assets, strengthening small and medium sized organisations, enhancing volunteering – have been driven by the Almanac’s findings. Our work over the following months is to turn our vision into reality, engaging with the new government (whoever that may be) and telling decision makers about the huge contribution to the economy and society that charities and volunteers make.