Charities charging for services will not hurt sustainability
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Fears on charging beneficiaries are not borne from data and charities should consider putting a price on its services, according to new research.
The study ‘Fee or Free: Should Charities Charge Beneficiaries Fees for Services’ said charities traditionally relied on “emotional judgement” in lieu of data when deciding on whether to charge services, which could hurt its sustainability.
The study from Cambridge University’s Master of Studies in Social Innovation said that expenditure was found to have the most influence on a charity’s ability to deliver social goals and “therefore charities should explore all options available to increase spending on their social mission, including charging beneficiaries’ fees for their services”.
No significant correlation between charging and charity “emotional” variables had been identified, with research concluding that charging beneficiaries is not likely to affect the mission focus, charity quality, staff and volunteer morale and beneficiary relationships.
The study’s author, Flóra Raffai, Chief Executive of vision charity Cam Sight, said that charities who charge tend to “have more income, more numerous and diverse sources of income, larger staff numbers and a larger community of beneficiaries.”
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“These findings suggest charging can be considered as a legitimate source of income for charities. Fears that charging would destroy relationships with staff, volunteers and beneficiaries appear unfounded,” Raffai said. “Visionary charities that charged did not experience higher levels of mission drift nor did charging destroy their intrinsic quality.”
The study analysed 94 charity accounts with incomes between £32,000 to £117 million and an average income of £2.49 million and average expenditure of £2.66 million. The charities ranged in age from four to 225 years, with an average of 94 years.
The English charity sector suffered a fall in philanthropic income following a financial crisis in 2007-08 so charities raised funds by charging for services. During this time, income from fees for services increased by 45 per cent between 2007 and 2015.
The report concludes that although the viability of charging for services as a reliable source of income will depend on each charities’ contexts, “it should be considered a viable tool in each charity’s arsenal of income generation methods”.
The community organisation where I am a volunteer has a service/funding agreement with the government to provide services to eligible citizens in return for an operating grant. The government grant covers about 80% of our budget. One of the conditions of this agreement is that the organisation is required to recoup about 16% of the service costs from service users. The rest about 4% is funded by bank and other interest. One problem with these agreements is that there are restrictions on the use of assets so that income diversification is discouraged.