Charities over-reliant on funding from single source

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Around one in 10 organisations would collapse if they lost their main source of funding, a survey of charity leaders has shown

10th September 2019 by Gareth Jones 0 Comments

A third of charities are over-reliant on a single source of funding, a study has shown.

A survey of 200 charity leaders by insurance firm Ecclesiastical also revealed one in 10 organisations saying losing their major source of funding would lead to their charity’s demise.

It found funding remains the single biggest concern among charities, with cuts in public sector grants and increasing uncertainty in the economy leaving many charities on the brink.

Angus Roy, charity director at Ecclesiastical, which insures more than 45,000 charities, said the situation for many charities is perilous.

He said: “The charity sector is under more financial pressure than ever before. Cuts in funding over recent years have left many charities reliant on a limited number of income streams. If one of those streams is lost then charities find themselves in a very challenging situation.”

Charity leaders were asked how long it would take to secure a replacement if they lost a major source of funding.

Over half (54%) of respondents said it would take them at least a year, signalling a critical timeframe for the survival of the charity.  Worryingly nearly one in ten (8%) of respondents said it would mean the end of the charity.

The research also found that many charities don’t have deep reserves to weather a potential financial storm, with 56% of charities saying their reserves would’nt last a year.

“This is a major risk across the sector, particularly as many charities admit they would struggle to secure new funding quickly,” Roy added. “In these challenging times, charities need to be able to adapt to ensure their long-term survival.”

The good news is that many charities are successfully managing their financial risks by diversifying their income.

Six in 10 respondents in the survey said they had successfully diversified their income in the past three years. This was mainly through providing extra services to win funding (56%), commercialising activities (49%), applying for awards (44%) and from corporate partnerships (41%).

The research shows this is set to continue, with over half of charities planning to diversify further in the next 12 months.

Richard Sagar, policy manager at Charity Finance Group (CFG), said charities need to take brave steps to ensure their sustainability.

He said: “These findings should be a wakeup call for the sector, and are consistent with CFG’s own research which indicated that the majority of our members are reliant on a single source of funding for the majority of their income. Charities will need to up-skill their workforce to gain the necessary skills to explore new revenue streams and diversify their income, and while difficult to achieve, is necessary to ensure their long-term sustainability, and in some cases, their survival.”