This is from an article in today’s Irish Times

‘Almost a fifth of charities in Ireland fear they will be forced to close their doors within the next year after cuts in funding, it emerged today.

Concerns were also raised that thousands of jobs would be lost and frontline services across health, education and social services decimated if Government support is pulled.’

And further down

‘Representatives from charities across Ireland heard 16.5 per cent have made staff redundant in the past six months, with 75 per cent introducing pay cuts or reduced benefits and working hours. Of the 205 organisations surveyed, 58 per cent suspended or delayed projects due to a lack of funding.

The Wheel said the community and voluntary sector is worth €2.5 billion and employs 8.8 per cent of the workforce.’

I thought there were a couple of interesting things about it. Firstly some charities are inevitably going to hit the wall. There was a serious rise in the number of small charities during the boom (including Camara), and like in any sector not all of them are strong enough to make it during a bust.

While almost a truism, it is important to stress that there should be no support whatsoever for charities merely because they provide employment. Charities should create significant value for their intended beneficiaries or they should close.

The unfortunate thing is that unlike a company operating in the market, a charity’s survival doesn’t depend on its ability to create value. Our abilities to create value for customers/beneficiaries are distinctly removed from our abilities to generate money and grow.

As the article points out, most charities derive the bulk of their core income from the state (on average in this country it’s about 60%). In many cases outside of the international Development NGOs, charities are simply fulfilling the state’s obligations to its citizens. In this respect it is literally a tendering process- the state can’t provide the services efficiently so it contracts another organisation to do it.

Much of the money that charities get from the public has no bearing on their relative merits as creators of value, as (regrettably!) individuals rarely pour over the M&E reports of charities before giving them money.

The important thing now is that money allocated by the state to charities follows one core recommendation from the McCarthy Report for expenditure by the state- to generate significant results and value for money based on a cost-benefit analysis.

The last thing we need is for good charities to close while lame ducks stay open because they’re better branded or connected.