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A change in charity funding: how you can help your clients with new challenges

In recent years the charity sector has become much more of a target for media and political pressure, and with this change a little more consideration is needed around the issues of funding.

charity funding percentage

It’s a Catch 22 situation – while demand for the services provided by charities is greater than ever, funding is increasingly harder for charities to achieve. A survey of the sector carried out by Ecclesiastical suggests 77% of charities say funding is among their main challenges in 2016.

With a need for change in the approach to fundraising – and to have measures in place to manage the associated risks,  your charity clients must be on a solid footing for governance, reputation and risk management. Having the right insurance protection and expert risk advice is vital.

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Changing times for charity funding

In recent years, charity income generally has been under increased pressure. An important issue for many charities is that of contracts replacing grants. Today, almost all central government funding is contract-based and is targeted towards delivery of specific services. According to the latest UK Civil Society Almanac, government contracts in the sector amounted to £12.2 billion in 2013-14, compared to just £282.5 million in grants.

One difficulty with restricted contract or grant funding is that it often cannot be reallocated, even in part, to other projects or general operating costs. This can lead to governance issues, where the charity cannot afford to invest in vital protective measures, such as adequate insurance – opening it up to liability claims.

What’s more, if restricted funding is terminated for whatever reason, not only may the funded service have to be discontinued – but also the charity may lack the funds to retain the employees that were delivering that service.

An uncertain funding future

Charities face dilemmas over what to do if government funding goes, and how they should operate. Should they pursue more contracts? Or should they seek wider sources of income?

To make matters even more uncertain, the result of the Brexit referendum has many charities worried about the likely loss of vital EU grants. One school of thought suggests that central government funding will replace the EU grants – but this may be more contract-based.

The sector is undergoing a major shift. At this time, it’s important not only to have the right insurance protection, but also to undertake careful thinking about financial planning and business continuity.

If one of your charity clients were to lose a big funding contract, what would the impacts be? How would it affect employees – could your client pay their wages? What about their premises – could they pay the bills? And will they be able to invest in adequate risk management?

Expert advice on the charity funding changes

As David Britton, Charity Insurance Director at Ecclesiastical, recently told Insurance Age: “There are charities out there that are going to be focused purely on the bottom line because they’ve got so much pressure on their funding. We’ve got to find ways to prove that the extra and right cover – and also the risk management – is really giving them value for money, rather than just being an overhead and a grudge purchase.”

With Ecclesiastical’s experience and expertise in the not-for-profit sector, we can help you offer unrivalled specialist support for your charity clients. Our added-value insights can help them develop new funding strategies – and be covered against the related risks.

Contact the Ecclesiastical team to see how we can help you provide even more expert advice for your charity clients.

David Britton - By David Britton, Charity Director

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Ecclesiastical Insurance Group plc (EIG) Reg No 1718196. Ecclesiastical Insurance Office plc (EIO) Reg No 24869. Ecclesiastical Life Ltd (ELL) Reg No 243111. Ecclesiastical Financial Advisory Services Ltd (EFAS) Reg No 2046087. Ecclesiastical Underwriting Management Ltd (EUML) Reg No 2368571. E.I.O. Trustees Ltd Reg No 941199. EdenTree Investment Management Ltd (EIM) Reg No 2519319. All companies are registered in England at Beaufort House, Brunswick Road, Gloucester GL1 1JZ. EIO and ELL are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number 113848 (EIO) and 110318 (ELL). EFAS and EIM are authorised and regulated by the Financial Conduct Authority. Firm Reference Number 126123 (EFAS) and 527473 (EIM). EUML is an appointed representative of EIO who is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number 402228.