Charities beat the recession by merging and pooling resources

Mar 4 2010 by Karen Dent, The Journal

Organisations across the board have faced a tough time during the recession and they're not out of the woods yet. But North East charities have proved to be resilient in the face of the downturn, as Karen Dent reports.

INCOME among the North East’s larger charities has remained stable in the last year despite the effects of the recession but in the long term, they need to look at business basics to survive.

But many organisations are facing tough decisions as they look ahead to another difficult 12 months, according to a new survey of charity finances.

The main issues include rationalisation, joining forces with other organisations, selling assets and securing funding. Some 16% said they had reduced staff or salaries and 20% had put off planned projects until a later date.

The report, Managing Charity Finances through Uncertain Times, was put together by accountancy firm Baker Tilly from the responses from more than 170 organisations with an annual income and assets of £1m or above.

Charities were concerned about potential cutbacks in public spending, falling donations and investment returns, which could all lead to the axe falling on projects in areas such as social welfare, research and education.

Donations from individuals to charities have so far held up, but there is still fears that increasing unemployment levels may effect these in the year ahead.

Four out of 10 said they were looking for new sources of finance, while 16% had suffered a reduction in the amount of income they received from the Government. Two in 10 said they were anticipating a further drop in this funding stream.

The situation has led to 16% considering a merger with another charity and 12% said they were thinking about merging with a commercial organisation.

Mark Ranson, from Baker Tilly Restructuring and Recovery in Newcastle, said: “With 90% of respondents not currently seeing any significant improvement in the economy for their charity, and 45% not expecting any positive change until the last quarter of 2010, charities will need to constantly review the position and take steps to control their finances while ensuring the charity’s objectives are met.”

In the North East, savvy charities are increasingly using business models to ensure their survival.

Linda Conlon, chief executive at the Newcastle-based Centre for Life, said: “Having been established for 10 years, we are well used to balancing the twin tasks of delivering an inherently charitable mission with running a commercial business.

“Over all, our resilient business model is standing up well in these recessionary times, which historically, can hit charities hard.

“We have also been very fortunate to have benefited from an excellent exhibition over the summer months, attracting a record number of visitors.”

The Cyrenians, which is based in Newcastle and one of the biggest charities working with homeless people in the region, is headed by Stephen Bell who uses the experience he gained in a career with Go Ahead Northern to put the organisation on a firm financial footing.

Mr Bell, who has been Cyrenians chief executive since 2001, said: “We’ve expanded by £3m, we’ve taken on an additional 60 staff and we’re doing more social enterprise.

“The recession has not hit our world yet but you’ve got to roll your sleeves up, knock on some doors and be proactive with your PR.”

The charity, which recently launched the building company TCUK Property Services to employ underprivileged youngsters looking for a career in construction, runs 41 different schemes across the North East.

But Mr Bell said: “We’ve looked at and reviewed out business model and plan,” he said. “I try to bring a private sector mentality to a public sector ethos. We are known as risk takers but do risk management on everything. Everything we do is for the service user, but there is no point if it doesn’t work and there are massive losses.”

He says not all charities approach issues with the same business mentality which they need to survive and expand.

He believes the current climate will persuade more charities and groups in the voluntary sector to pool resources and work together.

“There’ll be acquisitions, mergers, collaborations and partnership work,” said Mr Bell. “If you are a small charity and do your own finance and HR, why not contract it out to a larger charity?”

The Cyrenians business model has attracted attention from other groups in the UK, but Mr Bell said it would remain a regional charity. “We’ve been asked if we would go national but we’ve no intention of moving out of the North East,” he said.