Our Director of Finance considers the financial road ahead for the sector
Wyn Jones, our Director of Finance, spoke to Third Sector about the bumpy financial road ahead for our sector.
Charities have been saddled with various financial burdens over the past few years, with more set to arrive in the year ahead.
A recent report from the National Council for Voluntary Organisations, called The Road Ahead: What Will 2017 Mean for Charities?, identifies rising inflation and reduced public sector funding as major challenges facing the charity sector in 2017. Several new tax and policy changes will affect the sector, such as rises in insurance premium tax and the national living wage.
To understand some of the financial pressures charities face, Third Sector spoke to three charities.
Rising demand and costs in social care have been reported widely in the media over the past few months. An extra £2bn of funding was announced in this year's Budget to alleviate some of the problems the sector faces.
Wyn Jones, our director of finance, says there are a number of demands on the social care sector that are stretching the budgets of charities working in the area. For example, his charity, which had an income of £23.6m in the year to 31 March 2016, will be paying a total of £96,000 on Care Quality Commission fees this year, an increase of £36,000 on the previous total. The increase in the national living wage to £7.50 an hour has added to the charity's outgoings.
"We've committed to paying at least 20p above the national living wage, and that's quite a challenge for us to do financially," says Jones. "Three years ago we were very competitive on pay; now we are only just above most of the competition."
An even bigger problem is the long-term stagnation of contracts from the NHS and local government. Jones says that a typical NHS contract includes a 2.6 per cent increase every year to account for inflation, but this is offset by a 2.5 per cent savings requirement, which means the real increase in income is just 0.1 per cent a year.
The charity was initially able to make the efficiency savings required, but Jones says there is now "no fat in the system" and the charity has had to persuade some NHS commissioners to remove the savings requirement from its contracts, arguing that the charity is already as efficient as possible. There is an awareness of the pressure social care faces, Jones says, but the focus has mainly been on the demand for services. He believes the biggest problem is that people who require help are not being supported by the system.
"I think the challenge is what we mean by demand," he says. "Is there increasing need? Yes. Is that increasing demand being commissioned? No. What we're actually finding is people who we would have been funded to support three years ago don't qualify for funding any more because the threshold for funding has been raised. The need is there, but for us the funding to meet that need isn't there any more."