Commissioning, cuts and charities: What’s really going on

Today we launch our new report, When the going gets tough, a comprehensive picture of how charities are getting on since the changes to public service commissioning. Earlier this year, in partnership with Zurich, we carried out a survey of the top 750 charities in England and Wales, receiving a response rate of 13.5%.

We asked charities about everything from the types of contracts they’re bidding for, to their relationships with commissioners, working in partnership or consortia, experiences of subcontracting, cuts to their government income, and how they feel about the future. We’ve talked a lot about why we did the survey, and why we think it’s important to know these things: today I want to focus on what we found out.

Charities are finding things tough.
Not perhaps a groundbreaking conclusion—charities are facing a drop in income at a time when the demand for their services is increasing. A third of our respondents have had their government income cut, and face some tough decisions in response. 65% are cutting frontline services, and 73% are making staff redundant. 9% are at risk of closing completely in the next year. Worryingly, 62% are using, or planning to use, their reserves to supplement their income—a move which harms charities’ sustainability and sets alarm bells ringing for the future of the sector.

Charities believe they face a much riskier future.
90% of our respondents believe they face a riskier future now than this time last year. New types of contracts, like payment by results, are exposing them to much higher levels of risk, and they are worried about the impact this will have both on their own financial security, and sceptical about whether these new funding mechanisms will benefit the people they help. 55% think payment by results contracts will have a negative impact on their financial security.

46% of our respondents are subcontracted by another organisation to deliver services—but again, they worry about the risks involved, and how this will impact on financial security. Just 10% feel that being a tier three provider in a supply chain has a positive impact on their financial security. One of our case studies, mental health charity Restore, didn’t receive any referrals from one organisation it was subcontracted to. Charities generally prefer being subcontracted by other charities over working with private organisations—only 41% of respondents say they have a good relationship with private lead providers, compared to 80% with charities.

Charities have changed the way they work in response to changes in commissioning.
Nearly 80% of our respondents plan to work more collaboratively with other organisations—which can help small charities get a look in on big government contracts. 75% hope to harness the power of volunteers to minimise the impact of cuts. And charities are positive about their own abilities, with 70% confident they have the right skills and capacity to successfully bid for contracts in future. 80% of those already subcontracting work believe they have the skills and capacity to manage the process effectively.

You can read more about these findings, along with five detailed case studies of charities across the UK, in When the going gets tough, available to download for free on NPC’s website—and we’ll be writing about our research all this week on our blog.

Five reasons to get involved with impact reporting

The demands for charities and social enterprises to provide more information about their work are increasing from all angles. Funders, supporters, beneficiaries, policy-makers, even the media are keen to know about the difference charities make to the people they help and the causes they champion.

But communicating impact through reporting can be a challenge: even when we are sure what we are doing is achieving something, proving it can be difficult.

With money tight and resources stretched, why should charities care about impact reporting? Why is it worth the investment and what’s in it for them?

Here are five reasons why we think impact reporting is important.

It helps engage donors and funders and makes them passionate about your work

Engaging supporters involves telling them a compelling story about what you do. Talking about the impact you make is an essential part of this: in order to win the trust of your stakeholders, you need to tell the real story of what you do and how you do it. We hope that the impact reporting principles that NPC has developed in collaboration with a host of other sector bodies can help you develop this narrative into something funders really care about.

It diverts your donors from focusing on admin costs

Funders and donors can only make funding decisions with the information you give them. At the moment, much of that information is financial based on the accounts charities must produce every year. This is contributing to the myth that you can assess a charity’s effectiveness based on overheads, fundraising expenditure and other admin costs. Impact reporting provides supporters with the right information they need to make an informed decision.

It boosts your accountability and credibility

Charities have a privileged position in society: they are some of the most trusted organisations in the UK and enjoy tax breaks and other advantages in recognition of the vital work that they do and the people they help. Impact reporting is a way of being accountable to your supporters, staff, beneficiaries and the general public and acknowledging the special status charities have.

Impact reporting can also be important for maintaining this credibility—particularly when a charity hits the headlines. The US charity, Invisible Children, came under fire for its Kony 2012 campaign partly because it was perceived to have poor accountability (to which the charity has responded).

It motivates and inspires staff

Impact reporting is often thought of as part of a charity’s external communications. But it can have powerful internal applications as well—not least motivating and inspiring your staff. Impact reporting can help track a charity’s progress towards achieving their vision and it enables staff to see how their work is contributing to the over all goals of the organisation.

It’s probably easier than you think to get started

You don’t need fancy measurement systems to report on your impact (although they can help). Much more important is having a clear narrative explaining what you achieve and how for the people you’re trying to help—we’ve suggested five questions you can use to think through how to write an impact report. Charities we’ve worked with have found they’ve made a lot progress very quickly and they actually had more of the information they needed than they realised.

Last night saw the launch of ‘Principles into practice: How charities and social enterprises communicate impact’ from NPC, CDG and ACEVO. Find out more about the launch here, and read the report here.

Helping all charities benefit from social investment

There’s a lots of talk about social investment right now: from social impact bonds, to loans, or quasi-equity. But what if you’re a charity with no reliable income stream to make repayments or don’t have an asset to secure an investment? Can you still benefit from social investment?

Today, we publish a report on a series of charitable bonds developed by the charity Allia, which use social investment to generate unrestricted donations for charity. Allia commissioned us to review these bonds and provide an independent perspective on the risks and benefits for charities and investors.

We found that the bonds are a useful tool for all charities to encourage urgently need funds into the charity sector. But they are likely to be particularly attractive to charities that aren’t ‘investment ready’ and so are at risk of being shut out from the source of funding that social investment can provide.

You can read more about our review of Allia’s bonds on the Guardian Voluntary Sector Network blog or download the report here.

Is the government sending mixed messages on data?

The government wants charities to collect data to show what they’re achieving. Or does it? A recent conversation with a charity has made me wonder.

This charity, which works with homeless people, receives a large chunk of its funding through Supporting People—a housing-related funding stream from the Department for Communities and Local Government (DCLG). In the past the charity has been required to complete a Quality Assessment Framework, which includes reporting data on key outputs and outcomes the charity had achieved. The Framework is something we cite in our manifesto for social impact as an example of the type of standardised evaluation arrangements we’d like to see more of.

The charity has found this Framework useful too. As well as providing DCLG with evidence of the effectiveness of the programme, it has given the charity a reason to collect data that has been useful internally—to demonstrate the value of what it is doing, and to help it adapt and improve its services.

However, earlier this year, DCLG announced that it would no longer be collecting data from Supporting People. According to its website, ‘the Department wishes to reduce the time-consuming and expensive burden of numerous data reporting requirements imposed on local authorities [which then commission services locally] by central government’. As a result, the requirement to complete the Framework has been removed.

This came as a surprise to me. In the last year, there have been countless news stories about outcomes-driven contracts—from social impact bonds to payment by results arrangements—which require charities to use data to demonstrate the difference they’ve made. We’ve also seen David Cameron announce plans to measure national wellbeing and make a commitment to open data. All these things require charities to get a grip on good monitoring and evaluation.

So what’s going on?

I’m sure that DCLG hopes that the organisations funded through Supporting People will continue collecting data for their own purposes. But its decision to remove data collection makes me wonder how well government understands its role motivating the collection of this information in the first place.

Take another example: the Minimum Data Sets (MDS) used by the palliative care sector. These annual questionnaires ask hospices to provide detailed outputs data across a range of their services, from inpatient units to community care.

Completing the MDS is entirely voluntary, yet the response rate is impressive—around 83% of independent hospices fill them out every year. And why? At least part of the explanation is that the NHS and health care commissioners have got firmly behind the MDS and strongly encourage their funded organisations to complete them.

Cutting red tape is an admirable aim and, at NPC, we’ve written about the importance of not overburdening charities with disproportionate reporting. But government needs to be careful not to throw the baby out with the bath water. Scrapping the requirement to collect data and report on outcomes sends out some very mixed messages.

Helping grantees focus on impact

When does a funder’s involvement with a charity, beyond the grant it provides, become ‘meddling’? How can a funder provide extra support and advice in addition to money without being seen as interfering unnecessarily?

These questions were discussed at a seminar for funders we held this week to mark the launch of our report, Helping grantees focus on impact. The report looks at how funders can support their grantees to monitor and evaluate their work, and how they can make their support as effective as possible.

More and more grant-makers are becoming interested in high-engagement funding, sometimes known as ‘funder plus’. They are keen to provide their grantees with more than just money, offering extra support to help organisations become more effective. But a report by the Center for Effective Philanthropy (CEP) found that, despite funders’ good intentions, much of this extra support fails to have an impact on the organisations it is designed to help. There’s a danger in these cases that funders may be hindering rather than helping.

Our research suggests that grant-makers are more likely to provide effective support if they think through their approach and ensure it is well structured. The CEP report agrees: it found that support was likely to be less effective where it was provided casually, without clear aims.

So what is the best way to do this? We believe an important first step is diagnosing grantees’ needs—this means working out whether they have the capacity and skills for evaluation,,and identifying gaps. Funders can then tailor their support to suit grantees, and can be confident they are meeting a real need, rather than offering the help they think charities should want.

Diagnosing grantees’ needs also helps funders to check whether their support is working. The CEP report found that only a third of US foundations always follow up with grantees to check their help has been of use. Getting feedback provides an opportunity to tweak or change their support so that it better meets grantee needs.

There are diagnosis tools out there for funders to use. Evaluation Support Scotland, for example, has developed Evaluation Declaration Health Check Tool for the Scotland Funders’ Forum, which includes resources for carrying out diagnosis on grantees. Tools like these should be applied as a matter of routine but at the moment few funders are using them.

Diagnosis is part of a wider need for funders to engage with their grantees and establishing meaningful dialogue. Research and experience tell us that funders who talk to their grantees about what both parties want to get out of support, and what they both judge grantee’s strengths and challenges to be, are much more likely to have a relationship that’s valuable to both beyond solely financial assistance.

More diagnosis, as part of more meaningful dialogue, could mean that more funders find themselves helping rather than hindering.

Changing lives: A report on the autism voluntary sector

Today we published our latest report, Changing lives: A report on the autism voluntary sector. Following on from 2007′s A life less ordinary, the report explores the changes faced by the sector over the last three years, and looks at how these changes will affect the lives of people with autism.

During the research for this project we’ve heard some really positive and inspiring stories about the difference services provided by autism charities have made to people’s lives. But its also struck me how worried a lot of people are about the possible loss of services, and the very real effect this will have on their lives.

Take Resources for Autism, for example. The charity offers practical services such as play schemes, art programmes and short breaks for children and adults with autism. These kind of services can be a lifeline for people with autism and their families, but are vulnerable to funding cuts. Liza Dresner, the charity’s director, told us that the families she works with often wouldn’t be able to keep going without such services: ‘The task of parenting a child with autism is very hard, and parents tell me that the sessions we run are the highlight of their week‘. Cuts in government funding could threaten these types of activities.

We’ve had a fantastic response to the report so far – you can read about it in the guardian, listen to a discussion of guidance on the autism strategy on Radio 4′s Woman’s Hour, or read a longer blog written by me on the guardian’s voluntary sector network. It’s great to see such an important issue being picked up and talked about.

Changing lives is available to download for free from NPC’s website – click here to read more about it and download a copy.

Do we need a charity version of Kiva?

In June we published a report about Scope’s new redevelopment project that will be partly financed by 0% interest loans from donors. Loans and other types of social investment are hot stuff at the moment, and one of the ways the government reckons it can finance the Big Society. The Big Society Bank, for example—a Labour party initiative adopted by the Coalition government—will use £60m unclaimed assets to help charities and social enterprises invest in new buildings or scale up their operations.*

But social investment is not just the preserve of government. One of the aims of the Big Society Bank is to leverage in funds from other investors. Some of these other investors, the government believes, should be philanthropists.

This makes sense. Social investment by its nature involves an element of philanthropy because, more often than not, social investors accept a lower rate of return than they would from purely financial investments.

There are compelling reasons why donors should consider lending as another way to support a charity, alongside donations or volunteering. Loans can be used to fund the purchase of a new building, or to invest in new services, or to give a charity greater financial stability by helping with their cash flow. And, because donors get their investment back, it can be recycled many times, meaning that donors and charities can make the same money go further.

Yet it’s hard to see what there is to entice donors to the world of social investment. The last UK government hoped to encourage investors by introducing a Community Investment Tax Relief (CITR) on investments made to a group of snappily named Community Development Finance Institutions (CDFIs) that lend money to charities and social enterprises, as well as individuals and small businesses.

This might appeal to institutional investors looking for investments that have a social as well as a financial return, or to donors with a special interest in community finance. But it would take an extremely strategic donor who would choose to give to a CFDI rather than directly to a cause or organisation they really care about.

The problem is that it’s just not very easy for donors and philanthropists to lend to charities directly. Organisations like Scope that are taking the initiative and developing their own loan products may be on the increase, but they are still few and far between. And, from our research, it appears that where donors have provided charities with loans this seems to be an ad hoc arrangement, often at the initiative of the donor.

If we really want to scale up social investment by donors and philanthropists, we need something that connects donors that want to give loans with charities that need them––perhaps a charity version of the website Kiva.

Kiva is a microfinance project that allows donors to make small loans to individual entrepreneurs in developing countries, which are then repaid, sometimes with interest.What makes Kiva so exciting is that it makes loan finance accessible and attractive to people who might not otherwise consider lending. Donors can choose an entrepreneur to support and see the difference that their loan has made.

It strikes me that this model could be replicated without too much trouble for the charity sector, and could help engage more donors in social investment. If it works for entrepreneurs in the developing world, why not for charities?

You’re a trustee? Really?

Lots of my friends were surprised when they heard I’d applied to be a trustee. Their ideas of trustees were generally male and middle-aged. So, being female and 24, I didn’t exactly fit the bill. Nor do I fit the stats: as Jane’s post last week highlighted, fewer than 1% of trustees are under 25.

Last week’s blog also picked up on reasons stopping young people from becoming trustees. One of these is that many don’t believe they are suitable trustee-material because they think they lack the necessary skills and experience.

I reckon that, most of the time, this is nonsense.

The charity I’m a trustee of is called Hackney Quest (HQ). HQ does really exciting work with young people in Hackney––a deprived borough in East London––from running social and educational activities, to getting young people involved with community events, to providing support to their parents and families. Now, I can’t say I really know all that much about the needs of young people in Hackney, nor what works when it comes to helping them become more engaged and involved members of the local community (although I’m starting to learn).

What I know more about, from my time so far at NPC and, previously, at Intelligent Giving, are the rules that regulate charities, how charities should be reporting and communicating what they’ve achieved, and some of the best-practice on policies and procedures that all charities should have in place. This doesn’t have that much to do with what HQ does day-to-day. But it is (I hope!) useful nonetheless, for example by helping navigate the reams of regulations and best-practice guidance around running an effective charity.

And it’s not just (somewhat geeky) charity knowledge that’s relevant. Charities need the same kind of advice that any other organisation needs, such as legal advice, web design or marketing expertise. Let me give you an example. A few months ago, HQ decided to rent an additional building to house its project providing advice and support for local parents, and its education programme for those temporarily excluded from school. In order to secure the property, HQ needed not just the support and enthusiasm of the staff, but the advice of lawyers to scrutinise the contract and a surveyor to check over the building, both of whom gave their time and expertise pro bono. They were part of the reason why HQ successfully secured the new building and, as a result, the new parenting support project will be supporting 50 local parents in the next year, and the education programme now runs in a roomier and more suitable location.

The point is that charities can use all kinds of skills to help them achieve their mission. I have to admit to being bemused in the past by friends who are qualified up the eyeballs but who think of volunteering for charity as painting walls, or sitting in a bathtub of baked beans. It’s not that there’s anything wrong with either of these things (although baked beans, really?) but more that young people can often deliver more value to charities by using the skills they already have. This is on top of the enthusiasm and fresh perspectives that, as NPC’s latest report suggests, young people can add and charities find valuable. Trusteeship is a really positive way of doing this.

How transparent is NPC’s annual report?

Back in 2009, NPC took over the work of Intelligent Giving (IG), a donor advisory website that profiles and rates charities according to the transparency of their annual reports. I joined NPC too, having previously worked at IG.

IG was set up with the aim of helping donors make more informed giving decisions. Transparent annual reports are a crucial starting point for achieving this, by giving supporters a clear, honest and full account of a charity and its work.

So when NPC launched its 2008-09 annual report a few weeks ago, I was curious to see how it measured up to IG’s transparency criteria.

You can see here how NPC would fare if it had a profile on the IG website.

The annual report gained a Quality of Reporting (QoR) score of 71%. IG reckons that any annual report with a QoR score above 70% is a pretty decent effort, so this is a good result.

The report scores especially highly against criteria looking at how charities report and describe what they’ve achieved in the year. Particularly well done is the description of what NPC did in 2008-09 and how this relates to the plans and targets it set itself.

The report is also candid about where things went wrong or didn’t work out as expected. IG has always considered the disclosure of challenges and difficulties as one of the most important features of a transparent annual report. But it’s something that annual reports rarely do: only 38% charities we’ve rated discuss the problems they faced in the year.

There is room for improvement as well – two areas in particular could be developed further:

1. The annual report gives very clear future plans for one year after the year-end. But the two-year plans listed in this year’s annual report are a little vague; next year’s report could do with being more specific about longer-term plans.
2. NPC’s annual report doesn’t go into as much detail about its finances in the main body of the report as IG would like. Ideally the annual report would provide more detailed commentary about its income sources and expenditure streams, and disclosure of how NPC performed against any income and fundraising targets it set itself.

But overall, a very respectable score, and one that’s significantly higher than the average for the 500 charities IG profiles on its website. It missed by a whisker the 75% QoR score needed to become a Top Ranked transparent charity, but there’s always next year…