Major charities refine their focus as incomes are set to diminish

Despite the rhetoric surrounding the big society and the government’s desire to see a more mixed economy of local provision suited to the needs of communities, even large charities are feeling the force of local authority cutbacks and reduced donations.

The latest annual accounts for three of the biggest UK children’s charities – the NSPCC, Barnardo’s and Action For Children – have been filed with the Charities Commission in recent weeks. They reveal that all three charities recorded a loss in 2010/11, for the first time in five years.

Research by the National Council for Voluntary Organisations (NCVO) predicts that funding for all charities from both local and central government is set to fall by a total of £2.8bn over the next five years.

Across the spectrum, NCVO has identified children’s charities as "particularly vulnerable", with two thirds of the forecast funding cuts predicted to come from local government, affecting smaller charities at a local level.

Meanwhile, donations from the public, already under pressure in recent years, remain an uncertain source of funding given the current strain on household finances. So how are the "big guns" adapting to the harsh financial climate?
 
NSPCC

The NSPCC appears to be conducting the most fundamental reform, investing heavily in early intervention for its strategy up to 2016.

It is overwhelmingly reliant on public donations to fund services, so is insulated to a large degree from local authority cuts.

The charity, which had 2,220 staff in 2010/11, received 78.7 per cent of its income (£116.9m) from donations, gifts and legacies last year. In comparison, it received £17.1m from the services it provides, including programmes for children and families and child protection consultancy, down 27.3 per cent on 2009/10’s figure of £23.2m.

The NSPCC has committed to try to maintain its donation income while exploring the longer-term possibilities of payment-by- results as a funding option.

To this end, the charity is prioritising seven areas of work – sexual abuse, neglect, physical abuse in high-risk families, babies under one, children with disabilities, looked-after children, and children from certain black and minority ethnic communities.

While this will potentially limit its range of work, it will in theory allow services to monitor closely what works and create an evidence base to allow a shift towards payment-by results.

Lisa Harker, head of strategy and development at the NSPCC, says: "We are seeking to bring about change by pioneering new approaches to those [seven] problems, by identifying evidence of what has worked well.

"In the current financial climate, we want to try and help by providing some evidence about what we think is effective and where investment might be viable in the future."

The NSPCC is funding a range of early intervention programmes, the first of which includes Parents Under Pressure, an intensive home-visiting and parenting programme, and Mind the Baby, an intensive home-visiting programme for vulnerable first-time mothers and their babies.

In total, 28 programmes will be launched at new centres in 40 UK towns and cities that have been selected to deliver services, but are yet to be announced.

Harker says the charity is also in talks with the government, Social Finance Ltd and local authorities on work funded by social impact bonds.

The charity is monitoring proposals by Essex County Council to keep 100 children out of care by investing £3m in multi-systemic therapy over a two-year period, with a view to exploring the methods used should it prove successful.
 
Action for Children

Action for Children has launched a major review aimed at identifying changes to ensure it remains a viable charity.

The charity has seen a number of projects close, with five family intervention projects (FIPs) axed in the past 12 months. This, combined with potential cuts to services over the coming months, will damage a key revenue stream.

Its 2010/11 accounts show its work on supporting families, which includes both FIPs and about 120 children’s centres, to be the biggest revenue generator.

Income in this field increased from £82.5m in 2010 to £94.1m in 2011, with services for children in care, disability and youth making up a smaller sum.

The £94.1m made from supporting families represents 47 per cent of Action for Children’s total income for the year. But with this figure in danger of falling both this year and next, the annual report pledges to "improve operational inefficiencies and budgets, understand and deliver competitive costs and obtain and demonstrate evidence that our partners see us as providing efficiency and excellent value for money".

Kate Mulley, head of public policy, says the charity is gearing up to secure large-scale commissions, offering local authorities a single deal to provide joined-up services across an area.

These "whole-area solutions" will in theory offer economies of scale in areas such as administration.
Despite the fact that this strategy could push other smaller providers out of the market, Mulley insists her charity is keen to work together with others "sharing information on what makes a difference".

"We have a responsibility to speak out collectively across the sector, but also a duty to look at solutions as well, rather than just standing by," she says. "We have to ask questions, such as ‘how can our services work together?’"

Mulley adds that, like the NSPCC, Action for Children is also looking into payment-by-results and social impact bonds, but work is at an early stage. She says the charity is monitoring trials currently run at a number of children’s centres.

"It could bring much needed additional money," she says. "What we are at pains to do is look at how the financial mechanisms work out to ensure there are no perverse incentives."
 
Barnardo’s

Barnardo’s reported a record income of £245m in 2010/11, but total expenditure soared to £247.3m, leaving the charity £2.3m in the red for the year.

Although each of its income generating service areas – family support and placement, education, disability support and "other" children’s services – grew to bring in a combined £156.7m, the charity was still hit hard by local authority cuts.

"These cuts have resulted in the need to close or restructure some services with consequent staff redundancies," says Geoffrey Barnett, chair of Council at Barnardo’s, in the annual report. "We are not alone in facing these challenges, but it has been very disappointing to see the enforced closure of services providing support for vulnerable children. Raising funds from the public to support our vital work is more important than ever."

Rather than introducing a new strategy, Barnardo’s is continuing to pursue a three-year business plan launched last year. Under this, it hopes to grow direct work with children, as measured by its spend on children’s services, by 15 per cent over the next three years.

This would take spend that is purely on children’s services provision from the current £190m to £218.5m in 2012/13. The £190m was already an increase of 7.7 per cent on 2009/10’s figure of £176.5m –put down to a rise in the number of children’s centres and the opening of a residential service in Scotland.
But, in light of the financial situation, Barnardo’s is already warning that this level may not be sustained and its target for next year is likely to be missed.

"We are expecting to reduce expenditure in the next financial year as we respond to government funding cuts," the report states. "As a result of the changed political and funding environment since the target was set, it is likely to take longer than three years to achieve the target of 15 per cent growth."
Barnardo’s is keen to improve the way it measures outcomes to prove effectiveness to government, both local and central, in order to win contracts.

The charity is also calling on central government to help local government to plan strategically, including providing better guidance on how to ensure local authorities spend early intervention grants effectively and to involve voluntary sector organisations in the process.