Core funding is an investment, not a safety blanket

The recent House of Lords select committee report Stronger Charities for a Stronger Society highlights the importance of charities to measure and evaluate the impact of their work. My colleague Shehnaaz Latif has recently written about it on this blog alongside other contributions from across NCVO. Demonstrating the difference charities are making isn’t just about making us feel good; it’s about being open and transparent about our work, reflecting on our effectiveness, and rebuilding the public’s trust in the charity sector.

The report also notes the problems charities face trying to get contributions to their core costs, a well-known funding problem across the sector and an issue discussed previously on this blog. In recent years, the funding landscape for charities has fundamentally changed. According to the NCVO Civil Society Almanac 2016 there have been significant changes to the way charities receive funding from local authorities or central government. This includes more contracts, fewer grants, and payment by results.

Comic Relief report

In 2016, Comic Relief commissioned NCVO to undertake a review of the applicants applying to its Core Strength fund (core funding grants) to understand more about the organisations applying, including their reality, aspirations and challenges. We’re pleased that Comic Relief have decided to publish the findings, so you can read and download the report. You can also read the blog post about the report by Comic Relief’s head of UK Grants.

Not only is it positive that a major funder is sharing learning – something many in the sector would like to see more of – it highlights how important it is for funders to give charities a contribution to core costs.

So what did the analysis tell us? Here are our three takeaways:

Core funding is an investment

Charity leaders and staff know they must respond, adapt and find new solutions to the changing landscape for the voluntary sector, but to do so they need the time, space, and money. Core funding isn’t sought to give leaders and staff a break; it is used to explore new funding models, build new partnerships, and foster new approaches to service delivery. Applicants to Comic Relief saw this money as an investment in their long-term development, not as a hand out for their short-term existence.

New is not always needed

Established and successful services are vital to the beneficiaries they serve. Core funding allows important services to continue at a time when they often struggle to attract funding because it is not new work. As voluntary sector organisations continue to deliver statutory services – alongside the public and private sectors – the continuity of essential services is paramount, not always continual innovation. While there are some funders, such as BIG Lottery Fund, who operate a full cost recovery model – allowing applicants to apply for funding for both direct project costs and a proportionate share of the organisation’s overheads – this is the exception rather than the rule.

Financial sustainability?

One anomaly remains: while funding was the clear top concern, more applicants had grown in income size over the two years prior to application than receded, yet funding was the top concern. This may be due to an increase in project funds – but not core funds – leading to a lack of overall sustainability. Furthermore, this is contrary to the findings of NCVO’s Civil Society Almanac: across the UK, small and medium-sized charities are suffering from decreased income. Further research is required to elaborate on this particular finding.

Funders should share their own learning

Our analysis has provided valuable insights in to the demand, need and value of core funding. In his state of the sector speech at NCVO’s Annual Conference this year, Sir Stuart Etherington encouraged the sector to be bold. We also know through research into public trust that the public want to know the collective impact of the sector. We think other funders have a responsibility to share their own learning, particularly analyses of their funding applications, to build a more comprehensive picture and encourage cross-sector learning to allow organisations to develop, grow and innovate.

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Faruk Barabhuiya is assistant consultant at NCVO Charities Evaluation Services. Faruk works on external evaluations and handles consultancy administration. He has a particular interest in the arts, collaborative working and complexity evaluation. In addition to supporting organisations to conduct effective monitoring and self-evaluation, he has contract management and information management experience. Faruk has worked extensively in the charity sector, mainly in grant-giving organisations, including Youth Music, Creative Skillset and the Commonwealth Scholarship Commission.

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