Not-for-Profit Performance in a Specialised Context
Lifeline Trust is a charity providing emergency accommodation. It has 14 shelters, 320 staff and annual income of £38m, of which £31m is restricted grant funding tied to specific programmes and £7m is unrestricted. The board's dashboard reports: 'bed-nights provided' up 6%; 'average occupancy' 94%; 'cost per bed-night' down 4% to £61; and 'surplus' of £1.2m. The trustees are pleased. However: 22% of guests leave within 7 days; the number of guests moving into stable housing has fallen from 41% to 33%; staff turnover is 34%; three shelters failed a recent quality inspection; and the £1.2m 'surplus' arises because £1.4m of restricted grant was unspent at year-end and will have to be returned or re-profiled. A donor has asked what difference their money made.
1. Critically evaluate the dashboard as a measure of the Trust's performance and mission.
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The dashboard measures activity and efficiency, not effectiveness or mission.
- Bed-nights and occupancy are volume/efficiency measures. Higher occupancy and lower cost per bed-night say nothing about whether guests' lives improved. Indeed, cost per bed-night falling 4% alongside rising staff turnover (34%) and three failed inspections suggests cost was cut at the expense of quality - an efficiency gain that may be a false economy.
- Mission failure is invisible. The Trust's purpose is to move people into stable housing. That outcome fell from 41% to 33% - a serious deterioration - yet it is not on the dashboard. 22% leaving within 7 days suggests the service is not engaging the hardest cases, possibly because throughput is being maximised to fill beds.
- 'Surplus' is mislabelled. £1.2m surplus including £1.4m of unspent restricted grant means the unrestricted position is actually a deficit of about £0.2m. Restricted funds are not profit; they are an obligation. The board is being reassured by an accounting artefact.
- No stakeholder or quality dimension. Staff turnover and inspection failures are leading indicators of service collapse and are absent from the headline.
Conclusion: the dashboard is internally consistent but measures the wrong things - a classic case of measuring what is easy rather than what matters.
2. Recommend a performance framework appropriate to a charity with restricted funding, and explain how it would answer the donor's question.
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Framework - a mission-led scorecard with a funding lens:
| Perspective | Measures |
|---|---|
| Mission/outcomes | % guests into stable housing at 6 and 12 months (target 41%+); % sustaining housing at 12 months; % leaving within 7 days (target <10%) |
| Service quality | Inspection ratings; staff turnover (target <20%); average keyworker caseload |
| Beneficiary voice | Exit interviews; guest satisfaction; reasons for early exit |
| Financial sustainability | Unrestricted reserves in months; restricted funds spent vs received; unrestricted surplus/deficit separately reported |
| Funding/restricted compliance | Grant utilisation rate; % of restricted grant spent within period; re-profiling requests |
Answering the donor: the Trust should report outcome per pound - e.g. '£X of your grant housed Y people, of whom Z were still housed after 12 months' - not bed-nights. Outcome-based reporting links the donation to mission.
Restricted funding disciplines:
- Report restricted and unrestricted funds separately; never present restricted underspend as surplus.
- Track grant utilisation against milestones; unspent restricted funds are a reputational and cash risk.
- Build a reserves policy expressed in months of unrestricted operating cost, since restricted income cannot cushion shocks.
Governance: trustees should review the outcome measures quarterly alongside the financials, and the dashboard should flag any measure where quality and cost move in opposite directions so that 'efficiency' is interrogated rather than celebrated.