Charity leaders warn Government of real danger of further charity collapses

Published: Thursday 15 October 2015 - 11:15

Charity leaders warn Government of real danger of further charity collapses

The charity leaders’ network ACEVO warns that more charities are at risk of failure with new figures showing that they are facing unprecedented pressures. The warning is issued as The Public Administration and Constitutional Affairs Committee (PACAC) inquiry into Kids Company  began this morning and coincides with the release of data collected by the fundraising platform Localgiving and the release of ACEVO's own survey, 'Charities and Social Enterprises at Risk?’.

 

The Localgiving report surveyed just under 5,000 charities of which 538 replied. The subsequent report here shows that 75 per cent of respondents reported an increase in demand for services in the past year with 81 per cent expecting more requests over the next 12 months. Of those, only 15 per cent said they could cope. Rising demand for services were most pronounced among charities with annual turnovers of between £250,000 and £1m. 42 per cent of respondents said they had had to use their reserves over the past year.

 

ACEVO results, taken from a survey of 45 Chief Executives of small and medium sized charities show that 86 per cent of respondents expect demand for their services to increase over the next year, with 77 per cent unable to meet that demand. 34 per cent reported that their reserves were declining at pace, or that they expected them to dip in the near future.

 

These figures are further supported by the latest data concerning ACEVO’s ‘Charity CEO in Crisis’ helpline. Between 2012/13 and 2013/14, calls to the helpline rose by 80%.

 

ACEVO’s warning comes in light of The Public Administration and Constitutional Affairs Committee (PACAC) inquiry into Kids Company which began today. The issue of reserves forms part of the written evidence submitted by ACEVO to the PACAC. Kids Company’s level of reserves was an issue of concern to many prior to the collapse of Kids Company which failed despite a Government cash injection of £3 million.

 

ACEVO argues that the distress caused by the collapse of Kids Company cannot be allowed to be repeated, particularly at this time of unprecedented and rising demand for charity services. The charity leaders’ network observes that robust governance and professional management, including that of reserves, are essential for the survival of charities and that Government should play a central role in assisting this.

 

ACEVO Chief Executive Sir Stephen Bubb says: “We have seen one major charity collapse with catastrophic results. It’s clear that this could happen elsewhere given the weight of demand and concerns about reserves. Now is the time for Government to reinforce good governance and the distribution of targeted grants. Too many suffered when Kids Company went under. We must learn the lessons fast.”