Charities using own funds to subsidise public sector contracts, research finds

Two-thirds of charities who have contracts with the public sector need to use their own funds to deliver these contracts, according to think tank NPC


By Suzannah.Brecknell

24 May 2017

Charities are using their own funds – including income generated by fundraising – to subsidise public sector contracts, according to research published on Wednesday.

The thin tank New Philanthropy Capital found that nearly half of charities surveyed said they deliver public sector contracts, with 20% indicating they deliver these contracts ‘a great deal’

Of the charities who have contracts with the public sector, 64% said they use other sources of income to deliver these contracts. Over half of charities (57%) said they had turned down public sector contracts because the operational risk was too high. 


Despite these findings, just 1% of those who were not delivering public sector contracts said they had taken a strategic decision not to deliver them. The most common reason given for not delivering public sector contracts was that there were no relevant contracts available. This reason given by a quarter of small charities, and 29% and 30% of large and major charities.

The research also found that larger charities were more likely to be delivering these contracts, with 55% of major charities saying they deliver a fair amount or a great deal of public sector contracts, compared to 10% of small charities.

Nearly half  (40%) of charities delivering public service contracts said they were doing so as part of a supply chain, while 55% said they had worked in consortia with other organisations to bid for public sector contracts.

NPC's survey of 300 charity leaders found many are considering working in partnership more regularly – 52% expect to be partnering more with other charities in three years, while 41% expect to be partnering more with the private sector.

Only 23% expect to be delivering more public sector contracts in three years’ time, though this does not indicate a potential drop in the number of charities delivering public services – 64% said they expect to be delivering the same amount of public service contracts in three years.

Charities are also exploring new business models, with 36% saying they have explored social investment in the last three years, and 18% saying they have set up a social enterprise.

Launching the research, Patrick Murray, head of policy and external affairs at NPC, said: “We found some charities thriving through focusing on activities that deliver the greatest impact; collaborating with new and existing partners; embracing diversity and a new attitude to risk; and harnessing new resources, from digital technology to beneficiaries and communities themselves.

"But the research identified many others struggling. If the sector is to step up to the challenge, leaders will need to think very differently about how to deliver impact in this changing world.”

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