Financial resilience, income dependence and organisational survival in UK charities

Green, Elizabeth; Ritchie, Felix; Bradley, Peter; Parry, Glenn

Abstract

The financial well-being of the charity sector has important social implications. Numerous studies have analysed whether the concentration of income in a few sources increases financial vulnerability. However, few studies have systematically considered whether the type of income (grants, donation, fund-raising activities) affects the survival prospects of the charity. We extend the literature by (a) explicitly modelling the composition of sources of income, (b) allowing for short-term volatility as well as long-term survival and (c) testing alternative specifications in a nested form. We show that the usual association between income concentration per se and financial vulnerability is a specification error. Greater vulnerability is associated with dependence on grant funding, not overall concentration. Previous studies showing that concentration of income per se is problematic are picking up a proxy effect. We also show that the volatility of income streams may be an important factor in the survival of charities, but that this also varies between income sources.

• Journal Article Type: Article
• Acceptance Date: Dec 22, 2020
• Online Publication Date: Jan 27, 2021
• Publication Date: 2021-10
• Deposit Date: Jan 8, 2021
• Publicly Available Date: Jan 28, 2022
• Journal: Voluntas
• Print ISSN: 0957-8765
• Electronic ISSN: 1573-7888
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 32
• Pages: 992–1008
• DOI: https://doi.org/10.1007/s11266-020-00311-9
• Keywords: charity, nonprofit, financial resilience, funding
• Public URL: https://uwe-repository.worktribe.com/output/6975797