Goodwill hunting

The business of helping the homeless should be booming, if official figures are anything to go by. The latest statistics show demand hit its highest level since the coalition took power - with almost 13,500 households accepted as homeless between April and June this year. That’s 33 per cent more than the same period in 2010.

Yet this growth has failed to net extra public cash for charities with a mission to help homeless people. An Inside Housing analysis of the balance sheets of six such organisations reveals quite the reverse.

From large national organisations like Shelter to more modest operators like London-based Thames Reach, official cashflows into homelessness charities have been squeezed. The former’s ‘statutory’ funding - funding from public bodies, such as central and local government - has dropped by almost £1 million over the past three years from £11.6 million in 2010/11 to £10.7 million in 2012/13.

Some, such as St Mungo’s and Broadway, are considering merging because of the changing environment.

Rachel Coffey, research lead for umbrella body Homeless Link, says 50 per cent of homelessness services experienced a fall in investment last year - and that services such as day centres are ‘turning to fundraising as a way of financing their work’. But she adds that the sector is ‘still very reliant on council funding. ‘This is why it is so critical that councils think through the impact further disinvestment could have on homeless people,’ she adds.

So with these statutory supports so weakened, how well braced are those straining to serve this extra demand?

Alternative sources
Our analysis reveals that many homelessness charities have sought alternative funding sources for some time. Most are turning to so-called ‘voluntary’ income, such as gifts and donations - the kind of cash raised through corporate donations, chuggers, tin rattlers and through more sophisticated means. More goodwill from the public, in other words.

The largest charity in terms of income generated in 2012/13, Shelter, is also hoping to bolster its cashflow through an ambitious plan to grow its charity shop chain with a net increase of 17 new stores in 2012/13.

All this re-jigging is, however, creating significant drains on charities’ resources. This stress has already pushed some organisations into the red. Others are seeing the financial cushion of their cash reserves deflated, putting at risk their capacity to keep services ticking along uninterrupted.

One charity whose reserve has shrunk as its dependence on public goodwill has risen is London-based Centrepoint, a charity committed to helping homeless young people. Half of its £19.1 million income in 2012/13 came from voluntary income compared with 35 per cent of £18.2 million three years previously in 2010/11.

This increased dependence on donations and gifts is driven in part by cuts in the cash value of official contracts, with Supporting People contracts feeling the squeeze across the board. The national SP budget has dropped from £1.8 billion in 2003 to £1.6 billion in 2014/15 but because it is no longer ring-fenced councils have been slashing their budgets even further.

‘Statutory income has decreased’, a spokesperson for Centrepoint says. ‘And we have increased our support work. Young people need more than just a safe place to stay to leave homelessness behind.’

Using reserves
Signs of financial stresses are seen in Centrepoint’s figures. While aiming to hold £2.6 million in reserve to ensure ‘uninterrupted’ services, its actual cashflow cushion deflated to £1.4 million in 2012/13, according to its annual accounts. ‘Although reserves are in a satisfactory position overall,’ the charity states, ‘we shall continue our efforts to strengthen them.’

Crisis, a national charity which serves single homeless people, is also leaning more heavily on voluntary income as official sources of funding dry up. Almost 70 per cent of its £22.2 million income in 2012/13 came from benevolent donations. This compares with 55 per cent of its £17.1 million income in 2010/11. As a £11 million government contract came to an end, its voluntary income inched up by £3.5 million between 2011/12 and 2012/13.

Like Centrepoint, Crisis also expects demands on its services to rise. To prepare, the charity has embarked on an ‘ambitious’ five-year strategic plan to double its staff and swell expenditure by more than 50 per cent. This involves ‘significant investment’ in fundraising activities and a fall into the red for the immediate future. This is a move to which Crisis is resigned, saying in its 2012/13 accounts: ‘We anticipate financial deficits over the next four years and to have a strong financial base is critical.’

Leslie Morphy, chief executive of Crisis, says its expansion is driven by the rising tide of homelessness, resulting from the economic downturn and public spending cuts. ‘To meet this challenge we are expanding to help more people,’ she adds.

Merger talks
Elsewhere, as revealed last month, St Mungo’s is having merger talks with Broadway (Inside Housing, 18 October). St Mungo’s surplus fell from £3.4 million to £1.3 million in the 2012/13 financial year.

Our analysis shows that Broadway has increased its voluntary income from £253,285 in 2010/11 to £549,364 in 2012/13. Although raising more overall, St Mungo’s voluntary income dropped by 5 per cent from £2.4 million to £2.3 million over the same period.

Other homelessness charities have sought more commercial means of raising income than fundraising - for example Shelter’s shop expansion plan. But as in all lines of business, growth can tie up significant resources in the short-term.

Last year Shelter fell into deficit as it accelerated its expansion plan amid tough market conditions. Investment in its retail arm was ramped up 22 per cent as it opened 31 new shops and closed 14. This plunged its commercial operation £389,000 into deficit, its first loss for five years and helped pull Shelter £5.3 million into the red. Its retail chain returned to profit this year, a spokesperson says.

Shelter is also ploughing more cash into fundraising, another increasingly significant source of its income. According to our analysis, voluntary income made up 43 per cent of its £53.5 million income in 2012/13 compared with 40 per cent the previous year. This is reflected in an increased spend in fundraising activity, from £8.4 million in 2011/12 to £10.4 million last year.

All this extra investment is likely to keep Shelter’s finances in the red for at least one more year, its 2012/13 accounts reveal: ‘We anticipate that next year there will be a small deficit as the programme of investment comes to an end and income continues to rise.’

Primary source
Analysis from Homeless Link, in its annual SNAP report published earlier this year, revealed that fundraised income has increased as a primary source of income from 5 per cent of homelessness projects to 7 per cent over the past few years.

However, Supporting People funding continues to be the most significant source, with 67 per cent of homelessness projects listing it as their primary funding source in 2013 - down from 71 per cent the previous year.

The challenge of dealing with decreased public funding amid soaring demand is one common to all the charities we examined. Their expansion plans are unlikely to be bolstered with extra statutory funding in the future. They will instead depend on the goodwill of the general public to keep up with escalating demand.

As Crisis’ Ms Morphy says: ‘[People] understand that in hard times their support is all the more important in preventing homelessness. Individual donations have risen… and we’re incredibly grateful for that.’

But it all points to an uncertain future for homelessness organisations. As their balance sheets come under increasing pressure with service demands rising, they are entering their most treacherous financial territory for years. Any government recognition of this danger, in the form of increased official income, would be received gratefully. The business case is there in the facts and figures.

Income support