Many large charities are making significant losses on government contracts, Charity Finance Group’s latest benchmarking survey has found.
The umbrella body’s Finance Count 2016 is a tool to report on a range of indicators including procurement, expenses budgeting, cash management and external reporting. Launched yesterday, over 120 organisations took part in this year’s programme which included a survey, database, reports and training.
In an accompanying discussion paper called Whither Value? Voluntary organisations and the delivery of public services, CFG’s head of policy and engagement Andrew O’Brien called for a reform of the commissioning and procurement structure of public bodies. He said that value should be appropriately accounted for and bodies rewarded for generating the best social outcomes possible for the community that they are commissioning on behalf of.
He said: “Practical policy barriers for voluntary organisations working together, such as continued problems with the VAT sharing exemption, must be addressed. Charities need a supportive tax environment, if they are to be able to compete effectively.
“Moreover, public bodies and the sector should consider how to develop purchasing groups for voluntary organisations to boost their bargaining power and help to reduce costs of service delivery.”
Survey results found that many large charities are making significant losses on contracts, with results showing that the average income per contract or agreement was £169,707. It also found that the median surplus on service agreements or contracts was 0 per cent. It found that for the bottom quartile, the median loss was 16.9 per cent, while for the upper quartile it was 3.4 per cent.
The CFG said that these shows that “even those charities which were able to generate surpluses are not making large gains”.
It revealed that the position is even worse for larger organisations. For those taking part in the survey which had an income over £50m, the median loss was 11 per cent. Showing that “even for the most sophisticated charities, delivering a surplus on public service delivery is challenging”.
Anjelica Finnegan, senior policy officer, Charity Finance Group said: “These results are a welcome reminder that at a time when some are talking about charities ‘depending’ on state support, in many cases the opposite is true: we are subsidising public service contracts.
“This data reinforces the need for government to continue to look further reform public services to make sure that it is fair on delivery organisations.”
The benchmarking tool is based on software developed by Agenda Consulting and was launched with the support of Crowe Clark Whitehill.
