A new report asks why NFP leaders are getting neither the support they need or a place at the table when they are the ones providing solutions.
It will be the nonprofit sector that is expected to meet public service demands over the next five years, according to new research from the Charities Aid Foundation (CAF) who surveyed the thoughts of 1080 charity chief executives in the UK. 91% of sector leaders believe that charities will be expected to fill gaps in providing public services. At the same time, 58% are concerned about their financial sustainability.
“A fifth (21%) of charities said that they planned to use charity reserve funds to cover income shortfalls rather than for capital expenditure – this was twice as many as in 2019 (10%).”
The 2022 Charity Landscape report shows that three quarters (71%) of charity leaders believe the public are more aware of their organisations’ contribution to society because of the pandemic, and nearly two thirds (64%) think that the UK government sees charities as vital connections to local communities. However, fewer than a third (31%) think the government values their contribution to public policy, and fewer than one in three (29%) believe that charities are seen as a source of insight to help plan for future crises.
This is a demoralising position for nonprofits who have survived the turmoil of the past 24 months in which demand for their services has reached record levels.
Here, we look at the report to understand the challenges UK nonprofits face, what recommendations it makes to achieve a more stable and inclusive future, and what we can learn in Australia and New Zealand from the findings.
The top challenges cited by charity leaders were generating income and achieving financial sustainability (58%), followed by meeting demand for services (30%). The third most pressing challenge was a reduction in public/government funding (26%), although significantly fewer charities selected this option compared to pre-pandemic (32% in 2019).
75% of charity leaders stated that demand for their organisation’s services had increased during the pandemic and, against the backdrop of strained household finances, 86% anticipated that demand is likely to increase. Although most (80%) are confident that their organisation could meet demand, only 50% are optimistic about the future of the charity sector overall.
Nearly two thirds (64%) of NFPs are pessimistic about government support for the sector. Many are thinking of other ways they can fund costs. A fifth (21%) of charities said that they planned to use charity reserve funds to cover income shortfalls rather than for capital expenditure – this was twice as many as in 2019 (10%). One in 25 charities (4%) said that making the most of their investments was one of their top three challenges.
A challenging picture indeed. Are some charities faring better than others?
Larger charities were more likely to have invested in tech solutions during the pandemic
Almost all charity leaders (89%) believe that technological change is relevant to their organisation. Most charities invested in technology during the first year of the pandemic, but this was particularly the case for larger charities. Just under two thirds (64%) of charities with an annual income of less than £1 million said that they had invested in IT, new technology and online solutions, compared to 80% of charities with an income of £5 million or more.
In an increasingly digital charity landscape, only a quarter of charity leaders agree they know how to make their online fundraising truly effective
72% of charities reported introducing, or planning to introduce, new methods of giving. Separate polling undertaken by CAF has showed that 48% of charities believe that the pandemic has changed fundraising forever, with 51% of charities stating that they plan to do more campaign activity via digital platforms such as apps, websites or social media. Furthermore 45% have increased their ability to accept card, contactless and digital donations or payments.
Despite this progress, only 24% of nonprofits report having the knowledge to make their online fundraising effective, although this has improved since pre-pandemic (15% in 2019). With the move away from in-person fundraising and cash giving brought about by COVID-19, this may leave some charities increasingly vulnerable.
A geographic skew
Interestingly, three quarters (74%) of English charity leaders are pessimistic about government support, compared to two-fifths (42%) of leaders in Scotland and more than half (57%) in Northern Ireland. Why? Because charities based in Scotland (47%) and Northern Ireland (38%) believe that government values charities for their contribution to the development of public policy, compared to only a quarter (25%) in England.
Recommendations for the future
The report makes several recommendations that could just as easily apply to the Australian and New Zealand nonprofit sector as they do to the UK:
- In recognition of the funding crisis facing the sector, the government should continue its existing support and explore new ways to ensure the sector is financially sustainable in the medium and longer term. More support for small and medium sized charities is particularly needed.
- Charities can play an important role in helping the government fulfil its levelling up agenda (a plan to ‘level’ support that improves opportunities across the country for communities left behind). The government should ensure levelling up funding is available to charities and that the sector is involved in the development and implementation of the levelling up agenda. (Whilst the levelling up agenda is specific to the UK, the need for NFPs to be included in the development of initiatives that affect the communities and causes they champion is relevant across the globe).
For grant makers
- Grant makers should consider charity resilience when looking at a funding request. While charities need core funding, giving charities the time and space to identify areas where they need to strengthen their organisation, be it leadership or financial acumen skills for senior leaders, will be vital to their long-term success.
- Multi-year funding, be it from philanthropy or government should become the norm and should be unrestricted. This would help charities to become more resilient and enhance the relationship between the grant makers and the people and communities they are eager to serve.
- Businesses, too, need to view charities as natural partners to help them demonstrate their purpose and multi-year unrestricted funding should become the norm.
“Charities should talk to funders about the value of resilience as a core theme and stress their need to change how they operate in the aftermath of the crisis.”
- Charities need to invest in resilience measures such as good governance and leadership, digital transformation, and staff development.
- Charities should talk to funders about the value of resilience as a core theme and stress their need to change how they operate in the aftermath of the crisis.
- Charities need to spend time examining how the fundraising landscape has changed and how the rise of digital fundraising will affect them.
- Charities should reach out to new digital networks, social movements and mutual aid groups to find opportunities to work together. Charities require champions across other sectors to highlight their importance and the need for continued support from national decision makers.
If charities are expected to meet the growing need created by the pandemic, they must be at the table when government, grant makers and businesses seek to create solutions that address the issues affecting our communities.
Nonprofits should proactively seek out these relationships. In return, they need to receive multi-year unrestricted support for capacity building that helps them be resilient, tech-savvy and crisis-ready. It is through these myriad connections that we will be able to advance important initiatives, resolve challenges, spark innovation and ultimately improve lives.
To read the full report, click here.