Enforcement of additional funding by the government within the Third Sector may be like getting blood from a stone.

Using data from CharityFinancials.com we can see that, of the top 500 charitable foundations (grant makers) 303 spent more than they earned during the latest financial year, compared to 250 the year previously. This shows that charitable foundations are finding it increasingly difficult to live up to their current obligations. This is exemplified by the fact that the financial surplus for the top 500 (total income minus total expenditure) was a negative £604.4 million, compared to a positive surplus of £342.9 million previously.

Research using CharityFinancials.com has also shown that the top 500 foundations made grants to the value of £2,107.8m in 2009, a decrease of 2.1% from the previous year.

The number of foundations which reduced their funding shows the extent they have been affected by the economic downturn. Of the top 500, 246 decreased levels of funding in 2009 compared to the previous year. Those that did decrease funding decreased giving from £894 million to £598 million, a decrease of nearly £300 million. This makes the government’s £100 million Transition Fund look like a drop in the ocean.

However, the government’s recent “Giving Green Paper” suggests that foundations should make minimum payouts to charities, as is the case in some other countries.

Government plans for a Big Society sit alongside severe austerity measures to cut the national deficit and these plans include cutting back on the government funding to charity sector.

Within the “Giving Green Paper” the government states that it wants to explore funding opportunities outside of government including charitable foundations which are already a major income source to the charitable sector.

However, this research from CharityFinancials.com has suggested that foundations, heavily dependent on the investment markets have already been badly hit by the current economic climate. So the charitable sector has been hit twice fold following government funding cuts and reduced funding from within the sector.

Mark Pincher, Data Analyst at CaritasData comments: “to suggest that foundations should make a minimum payout suggests that they are holding back on giving. The largest organisations analysed here are in many cases eating into their assets to ensure the delivery of their obligations. To request or enforce additional funding may be like getting blood from a stone. Additionally which parameters could be used to set the minimum payout? Each organisation is different with differing long term aims and objectives and different asset structures. A best fit rule would be extremely difficult to put into practice and an examination on a case by case basis would also require funding. “

-ENDS-

For further information, please contact Katy Dunningham: kdunningham@caritasdata.co.uk,

Tel. 020 7566 8201

Notes to Editors:

About CharityFinancials.com

Powered by the CaritasData database and containing detailed financial breakdowns for the UK’s largest charities, CharityFinancials is an advanced online tool that enables users to interact and manipulate the latest financial information for 163,000 charities, using over 200 search criteria. To find out more or to request a demonstration go to www.charityfinancials.com.

About CaritasData

CaritasData provides in-depth financial data and analysis on the UK’s charities and other not-for-profit organisations, including universities, further education colleges, independent schools and housing associations. CaritasData defines the charitable marketplace through a range of data products, financial websites and magazines providing essential knowledge and insight on the charitable environment. For further information, visit www.charitiesdirect.com.

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• type in charity name or number
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Press release

Charities in precarious position

Over 500 of the top 5000 charities may use up their resources in under a year if government funding is cut.

Latest data from CharityFinancials.com (http://www.charityfinancials.com) has shown that, with government plans to cut spending by £83 billion, charities reliant on government and local authority funding to carry out their charitable activities may find themselves in a very precarious position if cuts are directed at the sector.

According to CharityFinancials.com, around 1,500 of the top 5,000 charities received funding worth in excess of £5.9 billion from the previous government. Aggregate funding grew under Labour from £4.4 billon to £5.9 billion from 2004/5 to 2008/09. With some charities heavily dependent on public funding, any cuts would place a heavy burden on many organisations to seek alternative sources of revenue.

An analysis of charities which received government funding shows that many charities do not have sufficient resources to exist for very long if funding were to be reduced or taken away. A simple calculation which looks at the total amount of annual expenditure in relation to the assets of the organisation (asset cover), shows that of those 1,500 which received funding, 556 would use up the value of their present resources within one year if the rate of expenditure remains the same.

As the chart below shows, the analysis found that of those that would use up their resources in under a year, 104 charities had government income representing over 50% of their total. If any cuts were made this could have drastic consequences on the charitable activities they carry out, not to mention the existence of the charities themselves.

This research only covers the largest 5000 charities and does not take into account the many thousands of local community projects which are also dependent on local authority funding.

-ENDS-

For further information, please contact Katy Dunningham: kdunningham@waterlow.com,

Tel. 020 7565 8201

Notes to Editors:

About CharityFinancials.com

Powered by the CaritasData database and containing detailed financial breakdowns for the UK’s largest charities, CharityFinancials is an advanced online tool that enables users to interact and manipulate the latest financial information for 169,000 charities, using over 200 search criteria. To find out more or to request a demonstration visit www.charityfinancials.com.

About CaritasData

CaritasData provides in-depth financial data and analysis on the UK’s charities and other not-for-profit organisations, including universities, further education colleges, independent schools and housing associations. CaritasData defines the charitable marketplace through a range of data products, financial websites and magazines providing essential knowledge and insight on the charitable environment. For further information, visit www.charitiesdirect.com.

PRESS RELEASE

CharityFinancials shows major UK charities are feeling the pinch of pension liabilities

New Research from Charityfinancials.com has revealed that of the top 5,000 UK charities, 522 have a pension liability totalling £1.66bn. Charities operating pension schemes may have to plug this hole from other income sources (including donations) to ensure that all scheme members are provided for during retirement.

It appears that charities who have provided schemes based on the employee’s final salary (defined benefit), rather than the value of a pot of investments managed by a third party (defined contribution), appear to be suffering the most.

This news couldn’t have come at a worse time for the charity sector. The adverse economic climate of the past 2 years has bumped the pension deficit of the UK’s largest charities up by 51.1%.

Research from CharityFinancials.com has shown the charity sector reduced its pension deficit between 2006 and 2008 from £1.9bn to £1.1bn, but the recession during 2008 and 2009 has caused it to rise.

Organisations with the largest pension liabilities are set out in figure 1.

The list includes the National Trust, which experienced an actuarial loss of £71.734m on pension plan assets resulting in a closing obligation of £336.256m. The National Trust states: “the stock market fall led to a deficit in the final salary pension scheme, and this will be addressed through the planned increase in contributions to the Pension Scheme over the next 25 years”.

Barnardo’s, a charity highly dependent on public sector contracts, saw its pension liability rise by £17.4m over the previous year resulting in a closing obligation of £364.7m.

The current problem is that poor investment conditions have widened the pensions funding gap to worrying proportions, affecting total fund values.

Closer inspection of the ten charities with the largest pension liabilities indicates that their deficits are not just down to decreases in the values of the pension scheme assets, but also increases in actuarial losses. This combination has further increased the closing obligation of the pension funds. In this way six of the ten organisations listed in figure 2 have experienced decreasing values of pension scheme assets and seven have suffered an increase in obligations.

Managing the liability

As in most economic cycles, the markets will bounce back and when they do, there will be an increase in the value of pension scheme assets. This will go some way towards reducing the overall long-term liability in years to come. In the meantime, charities and social enterprises have a major challenge in managing the impact of this potentially huge problem.

Figure 1: Charities with the largest pension liabilities

-ENDS-

For further information, please contact Katy Dunningham: kdunningham@waterlow.com,

Tel. 020 7565 8201

Notes to Editors:

About CharityFinancials.com

Powered by the CaritasData database and containing detailed financial breakdowns for the UK’s largest charities, CharityFinancials is an advanced online tool that enables users to interact and manipulate the latest financial information for 169,000 charities, using over 200 search criteria. To find out more or to request a demonstration go to www.charityfinancials.com.

About CaritasData

CaritasData provides in-depth financial data and analysis on the UK’s charities and other not-for-profit organisations, including universities, further education colleges, independent schools and housing associations. CaritasData defines the charitable marketplace through a range of data products, financial websites and magazines providing essential knowledge and insight on the charitable environment. For further information, visit www.charitiesdirect.com.

Voluntary Income

• Legacies – legacy income reflects the gross amount of legacies received or receivable within the period
• Subscriptions – regular giving
• Donations – money given with no direct benefit to the donor
• Public Grants – public bodies for this purpose include local government, government and supranational organisations and agencies where the income is not for the provision of services
• Arts Council / Lottery – grants received from the Arts Council, the Regional Arts Boards and the Lottery where the income is not for provision of services
• Connected – money transferred from associated organisations (often global organisations)

Activities for Generating Funds

• Events – income generated from an organised activity
• Lotteries / Sponsorships –income from running lotteries or from sponsorship fees (not National Lottery)
• Merchandising – income from trading subsidiaries, shops and donated goods
• Other Activities – this income is made up of fundraising events such as jumble sales, firework displays and concerts (which are legally considered to be trading activities); sponsorships and social lotteries which cannot be considered as pure donations; providing services other than for the benefit of the charity’s beneficiaries

Investment Income

• Rent – money received from letting out property
• Bank Interest – money from cash investments
• Dividends – money from investment assets

Charitable Activities

• Charitable Activity – these are fees and charges which cover income in recognition, or part recognition, of goods and services provided by the charity. This category would include such items as accommodation charges, museum entrance charges, sales of publications, subscriptions received by professional bodies etc. They also include grants for the provision of services from public bodies.
• Charitable Contracts – money generated from charitable activities usually from government, local authority or the EU

Other

• Sale of Assets – the income received from the sale of assets
• Other Income – any other income

Total Income

• Total Income – sum of all the above

Fundraising Costs

• Fundraising Costs – this includes all advertising and promotional costs, including publicity materials incurred in connection with fundraising. They are the total incurred costs relating to total voluntary income

Costs of Generating Funds

This includes costs relating to events, sponsorship and lotteries, sale of donated goods, merchandising and charity shops

• Events – costs associated with an organised activity to generate income
• Lotteries / Sponsorships – cost of organising and running lotteries and sponsorship events
• Merchandising – costs associated with trading subsidiaries, shops and donated goods

Investment Costs

• Property Costs – cost of maintaining investment property
• Investment Management – cost incurred from retaining the services of an Investment Management firm in order to maximise return on investment

Charitable Expenditure

• Grants Made – these are grants and awards of money, goods and other resources made to other charities or third parties in accordance with the charity’s aims. For this purpose a grant or award includes equipment or other goods supplied directly or indirectly to the beneficiaries of the charity
• Charitable Expenditure – these costs encompass expenditure incurred in providing charitable services connected with the aims of the charity
• Support Costs – costs that are indirect to the charitable activity, e.g. heating, lighting etc.

Governance

• Governance – the governance of the charity (until SORP 2005, management and administration costs preceded governance. These costs were significantly higher than governance costs and this is reflected in the earlier periods of any financial tables)

Other

• Asset Loss – losses in the sale of assets
• Other Expenditure – any other unusual costs of the charity

Total Expenditure

• Total Expenditure – sum of all the above costs

Intangibles

• Intangibles – non-physical assets

Fixed Assets

• Buildings – freehold and leasehold land and buildings have been stated at book amount, net of any depreciation and amortisation and exclude investment properties
• Other Fixed Assets – this includes vehicles, equipment and other fixed assets net of depreciation
• Heritage Assets – cultural assets
• Listed – investments in equities, fixed interest, bonds, alternatives
• Property – investment property
• Cash – cash in bank to generate income

Current Assets

• Stocks / Debtors – debtors includes non-interest bearing loans with less than one year to maturity. Where a charity accrues dividend income, debtors may also include the sum dividend element of its investment valuation
• Investments – investments in equities, fixed interest, bonds, alternatives that are not included in Fixed Assets
• Cash – this includes all cash and near cash items including certificates of deposit and term deposits with less than one year to maturity

Liabilities

• Creditors – creditors include any obligations in respect of funds held on behalf or to the order of third parties and deferred income and grants received in advance
• Borrowings – borrowings include bank borrowings and other loans. Advances in respect of future covenant obligations are not treated as borrowings but included under creditors

Funds

• Endowments – the amount for permanent endowment is intended to represent the net book amount of assets held by the charity
• Restricted – these represent funds whose disposition is restricted by conditions imposed by the donor, the basis upon which they were collected or for some other reason
• Designated – funds designated for specific purposes by the trustees
• General – funds available to the trustees to meet the general purposes of the charity
• Pension Reserve – the disclosure of the pension fund