Should I Stay or Should I Go?

03.09.15

The dangers of not-for-profit organisations adopting “self-sacrificial” behaviour.

NCVO’s recent Financial Sustainability Review of the Sector had some important and worrying conclusions. Whilst the report finds that voluntary organisations have been resilient at a time of great strain, it also finds that their attempts to deal with the new realities of post-2008 life have been “self-sacrificial” and for small and medium sized organisations (those with incomes from £10,000 to £1million) “organisations have eaten into reserves, cut investment in their own capacity, reduced expenditure on training, and frozen staff salaries, while staff have increased their working hours” all in order to avoid cutting front-line support.

This is laudable but utterly unsustainable. The overused analogy of rearranging the deckchairs on the Titanic really does seem relevant here.

According to the report, the largest source of income growth is in fees for services; indeed earned income from individuals has grown by 30.6% in the last 5 years. Yet, this does not compensate sufficiently quickly for the loss of grants from central and local government, which have tumbled by 49.3% over the last 6 years. Additionally, NCVO point out, modest growth in income, largely from contracts secured by large voluntary organisations, mask deep reductions for the smaller ones. Small and medium size organisations are also those that have not, and probably never will, benefit from public sector contracting – their size makes them too small to bid directly for most state contracts and the short timetable of most tenders means that they are usually unable to develop bidding consortia.

So, if small and medium organisations continue to adopt “self-sacrificial” behaviour, how much longer can they continue to serve their beneficiaries? Surely there will come a point when they are no longer viable and will have to close. (The report also cites some funders saying that application numbers are down as fewer organisations have the capacity to look for new funds) This is surely a short term fix that will deplete longer term capacity? Whilst this ought to worry commissioners, both local and national, as this is not a recipe for the vibrant and diverse market place envisaged in the Care Act, it is surely a time for trustees of not-for-profit organisations to reconsider the way forward.