Sustainable funding round-up: February 2016

Welcome to this month’s funding round-up, where NCVO staff pull together interesting and useful funding-related reports, resources and developments.

Financial trends for small and medium-sized charities

We’ve just launched a great new research report funded by the Lloyds Bank Foundation called Navigating Change: An analysis of financial trends for small and medium-sized charities (PDF). It’s got some fascinating insights into what the experience of these organisations has been since 2008, in a level of detail that hasn’t been available before.

I’ve pulled out two graphs that are really interesting – the first shows that it is the medium and small sized charities that have really struggled to diversify their income to combat the recession and decline in government spending. This does not surprise me – it usually takes time and resources to diversify an organisation’s income. If the organisation is grant-dependent, then usually, almost all its staff time and cash will be spent servicing projects that are funded by grants. This gives a much smaller room for flex. The graph is stark, with organisations with an income over £10m soaring away from the pack.

Which makes this second graph all the more interesting – the income streams that have been most successful for different sizes of smaller charity.

• You can see that it shows that the smallest charities have not been able to make the most of the gains in either fundraising trading (or ‘secondary’/off-mission trading) or charitable trading (‘primary’/on-mission trading).
• Whilst the smallest charities took a quick hit to their donated income, it has started to recover – whereas slightly larger organisations (£100k +) are still struggling to attract donations.
• It is interesting to see that legacies, an income source that smaller organisations often (in my experience) overlook, provides quite a steady stream.
• And critically it shows that, even though the smallest charities have made some gains with government contracts, this income source has generally plummeted for smaller charities. Yet it is precisely this form of income that has driven the growth for larger charities.

These graphs are screen shots from the full report, which is well worth a look. You can also see more analysis from Jennifer Crees in her blog post.

Here at NCVO, we have been encouraging charities to consider diversifying into trading for many years, so one paragraph from Jennifer’s blog post makes me very happy indeed:

Charities that had seen no increase in government funds were more likely to increase their earned income, suggesting that individual organisations were consciously shifting their approach to income generation. Indeed, text from charities’ accounts told many stories of developing partnerships and mergers with other charities, exploring financial mechanisms such as social impact bonds and setting up social enterprises.

The road ahead

NCVO’s annual Road Ahead report has been published, Charlotte Ravenscroft has written a blog post summarising its findings and looking at things you might want to be aware of for the next financial year.

It’s not the cheeriest read, but there are some useful tips, and reminders about assessing your priorities. The headline is that cuts will continue until at least 2019/20, but I particularly like this quote:

NCVO staff recently visited a well-known charity which explained that its internet access was intermittent because the cable was being held together with a spoon

One of the key areas I’m often looking at with organisations as part of sustainable funding is not just where opportunities for new income may lie, but also what internal factors may be undermining financial sustainability and trying to estimate the opportunity cost of these. Like relying on cutlery for your internet.

Financing a new idea or income stream

If you don’t have a lot of unrestricted funding, or large reserves, then you may be considering social investment (loans) to finance a new income stream. As the graphs from the research report above show, having the resources to develop new ideas or make the most of opportunities really pays off.

Peter Kelly from Charity Bank has written a blog post on the pros and cons of loan finance. There is also a lot of really good and clear information about loan finance on Knowhow Nonprofit.

Gift Aid Small Donations Scheme

We’ve had a fantastic response to our joint survey with CFG and IoF. We’ll be looking in detail at the data over the next couple of weeks, and putting in a response to the government’s call for evidence, which closes on 2 March. If you’d like to feed in any views on the scheme, just drop my colleague Michael a line.

Spring Budget 2016

The Chancellor will be setting out his Spring Budget on 16 March. Keep an eye out for our coverage of how it will affect charities, including the conclusions of the long-awaited business rates review.

Anti-advocacy clause

The government recently announced it would be inserting a new ‘anti-advocacy’ clause into all new and renewed grant agreements, that will prevent any grant money being used to influence government or parliament.

We’ve published a blog post setting out why the clause will be counter-productive, and have written alongside 140 charity chief executives to the prime minister calling for the government to change its approach.

This also links to the recent headlines about charities involvement in public services. Karl Wilding has written a great blog post to argue why charities can, and do, make a great positive contribution to service delivery.

Seeking support to diversify your income?

Here’s a list of the next things coming up at NCVO:

• Our Funding Conference is on the 29 February, which looks at income opportunities across the spectrum, not ‘just’ fundraising.
• The next cohort begin the Certificate in Financial Sustainability on 14 March. This OCN accredited course sits between training and consultancy, supporting CEOs and senior managers to develop robust funding strategies.
  Anood Al-Samerai, Director of TalentEd has just completed the course:

  Thank you, again, for a really excellent course and for your help and detailed feedback with the assessments. I learned so much and have already put it into practice with a signed off funding strategy from our trustees this week. Now I just have to deliver it!

• Writing Successful Bids is running again on 15 March.
• And coming up after Easter – our new short course on fundraising governance and our re-vamped training around starting a new trading venture. If you are interested in either of these, email us to be alerted when we announce the dates.

Or you can always contact us about training or consultancy support.

If you have anything you think we should include in next months’ round-up, please do drop me a line.