Spending on frontline services decreases as charities income continues to fall

More than half (54%) of charities surveyed say spending on frontline services has worsened in the last month as charity sector income continues to fall.

Read about last month’s results here

For the second consecutive month ACEVO, the membership body for charity chief executives, and researchers at the Centre for Mental Health asked charities across England and Wales about financial changes across the previous month. One hundred and twenty-four charities responded to the latest survey covering the period of May, addressing five key markers of financial health. These five areas were:

• New business and donation income
• Cashflow
• FTE number of employees (including furloughed staff)
• Reserves
• Spending on front line service delivery

The score for June was 42.8 out of a maximum 100.  This is a negative score, showing that on average, conditions are deteriorating for charities. A score of 50 means no change and 100 means every area has improved. The score is higher than April’s score of 30.8, suggesting that challenges are still worsening, but at a slower rate.

New business and donations were worse for 40% of charities responding, 36% reported worse cashflow and 44% reported that reserves had got worse. In a worryingly development the number of charities reporting spending on frontline services was lower than the previous month increased sharply from 30% in April to 54% in May.

These findings suggest that charities that have been relying on reserves to maintain frontline services are now having to reduce their activity at a time when they are never more needed.

Notably the number of full-time equivalent staff employed by charities remained stable. This supports the findings of other research into the sector’s finances that has found a high take-up of the coronavirus job retention scheme (furlough). This figure will be important to monitor as furlough begins to be tapered in the coming months.

Kristiana Wrixon, head of policy at ACEVO said: “In April the chancellor announced emergency funding for charities to support the relief effort but much of it is yet to reach charities. This money was always too little, and it is now also too late to stop charities from being forced to scale back frontline services at a time when they are never more needed. The government needs to act urgently to increase funding to charities and civil society groups in order to reduce the risk of further harm being caused to people and communities that have been hardest hit by the pandemic.”

• Data was collected between 28 May and 3 June 2020 and findings relate to the previous 4 weeks.
• Data covering the month of April can be found here.
• All respondents were members of ACEVO and registered charities headquartered in England or Wales.
• 124 respondents, of which 104 provide front line services.
• 55 of the respondents had also completed April’s survey.
• Analysis conducted by Nick O’Shea, chief economist at the Centre for Mental Health
• Questions to be directed to Kristiana Wrixon, head of policy, ACEVO – Kristiana.wrixon@acevo.org.uk, 07894 668508.

Specific results are:

New business and donations are worse for 40% of charities surveyed

Cashflow – a key measure of an organisations’ health and ability to pay wages and bills – stayed the same for 41% of organisations, worse for 36%.

Full-time staff remained the same for 79% of organisations

Reserves are the same or worse for 90% of charities.

*A charity’s reserves are the funds it holds which can be freely spent on any of its charitable purposes.

Spending on front-line services has remained steady, with 70% of organisations either improving or sustaining expenditure despite the falls in cash, reserves, donations and grants. 

Spending on frontline services has worsened for surveyed organisations.