Is it time to think differently about how we support charities? 2012 was something of a rude awakening for many charities - a year when household incomes continued to be squeezed and charities found themselves in greater need with reduced funding and rising costs. I'm sure that I'm not alone in worrying that this will continue throughout 2013, placing charities under yet more strain.
According to research from the Charities Aid Foundation and the National Council for Voluntary Organisations, charitable donations fell during 2012 by 20 per cent from £11bn to £9.3bn. They also found that the number of people giving to charity fell as did the amount they gave. At the very same time central and local government funding has either been cut drastically or completely disappeared. The reality is that the third sector's funding future is bleak.
At Miller Philanthropy we support 14 such charities and offer non-financial support to a further 30. Their experiences are typical of what is happening. They are facing a watershed moment of falling donations at the very time as they are experiencing a dramatic rise in demand for their services. Most are fighting for survival with as little as three months cash to keep them going and have little scope to cut costs further.
Despite the fall in donations we are still a generous nation when it comes to charitable giving, but a substantial amount of the money we give goes to the UK's largest charities and much of it is spent on administration. Charity costs are perennially under the spotlight. Since we started in October 2009 we have received over 1,300 applications and we have been shocked by how high the administrative costs have been; for several of the applicants the administrative costs have been in excess of 60 per cent. That is nothing short of scandalous. When people drop their money in a collection bucket they don't expect it to be spent paying the collector or buying the buckets.
Income across the sector is far from even. As few as ten per cent of charities in the UK generate over half of the sector's income (Charities Aid foundation), leaving thousands of smaller charities struggling in a funding desert.
My great fear is that the funding squeeze and poor financial management will see an army of smaller charities up and down the country that undertake transformational work in local communities, cease to exit over the next few years. The CAF report published in December 2012 found that as many as one in six charities are likely to close this year; that's 27,000 charities. Who will fill the gap left behind and who will continue the crucial work that they do?
The sad fact is that a fraction of the money given to larger charities could offer a lifeline to smaller charities as they seek ways of diversifying their funding strategies, or look to collaborate with other charities or not-for-profit organisations.
I am a firm believer that generosity can heal communities. But I think we need to be smarter about how we support charities whether it is through giving time, money, information, services or influence.
Here are my thoughts on five key giving steps for donors, private and corporate, to consider so they may maximum returns on their generosity.
My Five Steps to 'Smarter Giving':
1. Understand your investment: Before giving to a charity, find out how much of your donation will go to front line services. There are too many charities spending generous donations on their high administrative costs rather than on their charitable works.
2. Give time - not just money: Philanthropy is about more than donating money, it is about giving skills, time and other resources. Smaller charities, in particular, are desperately in need of skilled professionals who are able to give up some of their time to commit to helping a charity
3. Look closer to home: They say charity begins at home so try to seek out grass root charities in your local community. Not only will you have a better handle on where and how your money is being spent, you will also be able to visit the charity and become 'hands on' if you wish.
4. Donate with your head, not just with your heart: Larger charities spend an enormous amount on marketing to create heart wrenching campaigns designed to attract your donations but hundreds of smaller charities that carry out equally emotive work miss out simply because they can't afford the marketing. You may also want to question how much these adverts cost?
5. Five a day: Think about doing five good deeds a day, for example opening a door or offering a seat to an elderly person or assisting an ailing neighbour. Charity and generosity is not about one big gesture or action but an everyday habit.