Sixty-three per cent of charities believe their core functions are under-resourced, according to research conducted by Charity Finance magazine, as part of the inaugural Charity Finance Week.
In an online survey, charities were asked to comment on the resourcing of their core functions such as finance, human resources, IT, safeguarding and legal support, and 233 responded.
Only 35 per cent said these functions are resourced “just right”. Two per cent said they are over-resourced.
Smaller charities reported having the biggest challenge. Some 81 per cent of those with income below £500,000 said their core functions are under-funded, compared to 38 per cent of £50m+ income charities. The other income bands ranged from 55 to 69 per cent on this measure.
When asked why their core functions are under-resourced, the most frequent responses were: lack of money; funders refusing to give core funding; failure to keep up with growth in the charity’s operations; finance not being represented on the senior management team; and increased regulation.
The situation was at least a little better when charities were asked about resourcing for their finance function specifically. Forty per cent of charities said their finance function is under-resourced, compared to 58 per cent saying it was “just right”.
Negative impact
Charities reported numerous examples of how this underfunding had had a negative impact on their work. One charity said it had had been struggling to do financial reconciliations more than yearly, and as a result it suffered a fraud which could have been picked up much earlier.
Another charity said out-of-date IT equipment meant work was being done more slowly than it should be, with the result that it was employing a full-time finance manager when a part-time one might otherwise do.
One charity said “not taking appropriate legal advice on contracting issues due to the cost of advice had the opposite effect and tied the charity into a much greater financial commitment,” while another said: “Under-resourcing of HR has contributed to issues leading to a grievance being taken up against the former CEO. Without good systems in place things escalated quickly.”
And on GDPR, a smaller charity said under-resourcing of its IT function meant it could not afford the functionality required to comply. “We have had to err on the side of caution and delete a substantial number of ‘supporters’ from our database rather than fall foul of the new regulations.”
Value of finance
The survey also highlights the positive impact that finance functions have on their charities. One charity spoke of how a review of historic VAT claims resulted in a significant refund, while a smaller charity revealed that a finance professional had reclaimed a retrospective £40,000 from Gift Aid after this area had previously been overlooked.
Another charity said: “Our new superstar FD helped us to get our head around activity-based costing and overhead recovery, ensuring that we could bid confidently for project work knowing that we’d be financially sustainable if we won it.”
While another said: “Giving managers hands-on involvement with their own budget setting and monitoring has empowered them to see where their services are running in deficit and to act appropriately with both cost cutting and seeking further income streams. Managers are given their direct costs/income figures AND their contribution to head office core costs.”
Charity Finance’s full report on core functions is available to read for free during Charity Finance Week. You can find it here here.
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