Sources of funding

An overview of the main sources of funding for the voluntary and community sector.


Company Giving

Company giving only makes up a relatively small percentage of voluntary sector income - about 4.8% compared with, for example, about 35% from the general public.

However, developments in government policies, taxation and business sector practices are affecting both the way companies give, and the amount that they are likely to give.

In general, companies rarely donate money out of simple altruism: rather, their motivation is enlightened self-interest. Historically, companies have become involved with charities, voluntary and community groups for a number of reasons, including:

  • Creating goodwill among the communities where they are based
  • Boosting staff morale
  • Associating themselves with certain causes to develop an image as part of a marketing strategy
  • Responding to appeals

Funding from companies is unlikely to come as no-strings cash donations, unlike, for example, grants from charitable trusts. Apart from cash, there is a wide variety of ways in which companies may give support:

  • Sponsoring events, projects or award schemes
  • Providing staff time, advice and expertise
  • Encouraging employees to volunteer
  • Organising fundraising campaigns amongst employees
  • Donating products, materials or equipment
  • Providing company facilities
  • Advertising in charity publications
  • Joint promotions, where the company makes a donation in return for each product sold, in order to encourage sales

Recent trends in business marketing practices mean that companies, especially the larger ones, have become more proactive in their support. There has been a shift towards Cause Related Marketing (CRM), where companies seek out major national charities with a high-level 'brand' profile to support and be associated with. Clearly, national charities with a 'household name' will have more opportunity for CRM deals than most smaller voluntary organisations.

Business in the Community and Pro Help (formerly Professional Firms Group)
www.bitc.org.uk

The Bar Pro Bono website for volunteering barristers and solicitors
www.barprobono.org.uk

Professionals who will give free help to voluntary and community groups
www.professionals4free.org.uk

Arts and Business
www.aandb.org.uk

Directory of Social Change - publishers of The Guide to UK Company Giving
www.dsc.org.uk


Grant-Making Trusts

Grant-making trusts and foundations give around £3.6 billion (£3,000 million). There are almost 10,000 UK grant-making trusts and they vary a great deal in both size and scope. The larger trusts distribute several million pounds each year, but the vast majority are smaller and more likely to give out a few thousand. Some may give funds to any charitable purpose, whilst others are restricted to specific subjects (say, education or the arts) or beneficiary groups (for example, children or the elderly). However, most trusts give in the health and social welfare fields, with a large proportion funding arts and recreation.

Most trusts derive their income from an endowment given by a wealthy individual, family or company. They are often named after the original benefactor - the Joseph Rowntree Charitable Trust, for example. Some trusts receive their income from other sources, like regular TV or fundraising appeals; examples include Children in Need and Comic Relief. Community Foundations are a relatively new kind of grant-making trust. They are set up in a local area to act as a broker for donors, usually building an endowment for future income. Increasingly they are acting as a distributor of government funding as well as charitable money.

Grant-making trusts will sometimes fund the things that other funders won't, including new ways of tackling problems and responses to newly discovered needs. They are more likely to fund one-off purchases or projects, and short and medium-term initiatives that could, once established, attract longer-term funding from elsewhere.

Because there is such a diverse range of grant-making trusts it is especially important to research and target funding applications to them. Information about grant-making trusts has greatly improved and there are now searchable databases and software to help groups decide which trusts to apply to. Many Councils for Voluntary Service and specialist funding advice agencies also keep information about local grant-making trusts, and it is possible to search the Charity Commission's register online.

The GuideStar UK website provides public access to a database of high quality information on UK charities. The website is intended to serve a variety of purposes for different users. So, for example, someone wishing to donate to a charity would be able to search for different charities working in a particular field and compare them. Similarly, charities, including grant-making trusts, will be able to increase awareness about their work. The site will also give researchers and policy makers will have a new tool for analysing the voluntary and community sector.

The Association of Charitable Foundations
www.acf.org.uk

Charities Aid Foundation
www.cafonline.org

Directory of Social Change
www.dsc.org.uk

The Charity Commission
www.charitycommission.gov.uk

Community Foundation Network
www.communityfoundations.org.uk

National Association for Voluntary and Community Action
www.nacvs.org.uk

ACRE - national network of Rural Community Councils
www.acre.org.uk

GuideStar UK
www.guidestar.org.uk


Lottery Funding

The National Lottery has revolutionised funding for many voluntary and community groups. It was established by parliament in 1994 and is the responsibility of the Department for Media, Culture and Sport. It is run on licence by Camelot, a private sector consortium, and 28% of ticket sales goes to 'good causes'.

Funding is distributed through these main bodies:

  • Big Lottery Fund (Awards for All and Building Better Opportunities)
  • Heritage Lottery Fund
  • The Arts Council of England
  • Sport England

The Big Lottery Fund was formed on 1 June 2004, when the Community Fund and the New Opportunities Fund merged, although the Community Fund and NOF continue to operate their existing programmes. A consultation process is currently underway that will hopefully inform how the new fund will work, but at this point it is unclear how much it will resemble the previous distribution arrangements. The Big Lottery Fund will also take over the Millennium Commission's role of supporting large-scale transformational projects.

Awards for All England makes grants of between £300 and £10,000 to organisations wanting to run projects that aim to help improve local communities and the lives of people most in need. The grant search facility on the website shows that in the 2013/14 period there were about 6,830 awards made in the UK totalling around £51.8 million. The annual report for the Big Lottery Fund notes that 88% of the overall awards (which totalled £670 million) 'went to projects valued at £10,000 or less.

The Heritage Lottery Fund gives grants to protect and open up the nation's heritage. It will fund large capital costs of museums, historic buildings, land and collections. It has a range of different grants programmes with grants from £3,000 to £5 million.

The Arts Council of England distributes lottery and other government funding to arts organisations and individual artists.

Sport England funds sports facilities and sports development programmes at both community and elite levels. Its Small Grants scheme uses Lottery funding to make awards of between £300 and £10,000 to not-for-profit organisations to help more people play sport Inspired Facilities is a £110 million programme that funds the rennovation and modernisation of local sports facilities.

Signposts and links to all the lottery distributing bodies websites
www.lotterygoodcauses.org.uk

Awards for All small grants
www.awardsforall.org.uk

The Big Lottery Fund
www.biglotteryfund.org.uk

The Heritage Lottery Fund
www.hlf.org.uk

The Arts Council
www.artscouncil.org.uk

Sport England
www.sportengland.org


Central Government

Most central government departments have funding programmes for voluntary organisations with a national remit or undertaking initiatives of national significance. Grant schemes are designed to fit the policy objectives and programme outcomes of each particular department. A great deal of central government funding is available through a wide range of associated agencies, quangos or non-departmental public bodies, like, for example, the Arts Council, Countryside Agency and the Health Development Agency. It is important to be alert to changes and developments within government policies, and structures. The remits, and sometimes even the names, of departments change, and funding programmes will alter accordingly.

Some central government funding programmes open annually on a straightforward competitive basis with a set deadline. Criteria may change from year to year to reflect changes in government policy. However, some departments also fund the voluntary sector through direct funding relationships with specific organisations whose work is close to their own interests. For example, the Home Office funds Victim Support, and the Ministry of Defence funds the Army Cadet Corps on a regular, annual-review basis.

Responsibility for the funding of voluntary and community sector groups outside England lies with the respective devolved governments of Wales, Scotland and Northern Ireland.


Regionally Distributed Central Government Funding

Regionalisation was part of the Labour Government’s modernisation and devolution programme. The aim was to offer greater involvement and control to local people and organisations, devolving funding streams away from central government to regional agencies ‘closer to the ground’. Regional funds were primarily distributed by the Government Office for the Regions, responsibilities were then transferred to Regional Development Agencies (RDAs).

In the coalition agreement, the government committed to establishing local enterprise partnerships to replace the Regional Development Agencies. LEPs are voluntary partnerships between local authorities and businesses set up in 2011 by the Department for Business, Innovation and Skills to help determine local economic priorities and lead economic growth and job creation within the local area. These non-statutory bodies have assumed many of the responsibilities of Regional Development Agencies (RDAs) and have responsibility for Enterprise Zones. LEPs were able to bid for funding from the first four rounds of the Regional Growth Fund, but have been barred from bidding in rounds 5 and 6 which are only be open to private enterprises.


Local Government Funding

Nearly all local authorities make grants to the local voluntary and community sector, but each one will organise budgets, administration and support differently according to local conditions and resources. Traditionally, different departments within local authorities, such as Education or Social Services, have their own pots of money to allocate in grants to voluntary and community groups. They usually have individual criteria, application procedures and timescales, although there has been a move in recent years to introduce 'corporate' one-stop application forms in some authorities.

Most local authorities employ voluntary sector liaison officers to give advice and support on its own funding. Local Councils for Voluntary Service (CVS), Rural Community Councils (RCCs) or specialised funding advice agencies should also have contact details and local authority funding information.

One of the main changes in local authority funding over the last decade has been the shift away from traditional grant aid arrangements towards contracts and service-level agreements. This is particularly significant for organisations working in the personal social services and health.

For a list of local authorities go to
www.direct.gov.uk

Association of London Government
www.alg.gov.uk

To find your nearest CVS go to National Association of Councils for Voluntary Service
www.nacvs.org.uk

Local Authority Funding Finder
www.governmentfunding.org.uk

 


European Funding

The European Union provides a huge amount of money for social and economic development in member states. More funding goes to the poorer regions, and the bulk of contributions are used to subsidise food production.

The European Structural and Investment Funds programme provides funds to help local areas grow. The funds support investment in innovation, businesses, skills and employment and create jobs.

Running from 2014 to 2020, there are three types of funds involved in the programme.

  • European Social Fund (ESF) focuses on improving the employment opportunities, promoting social inclusion and investing in skills by providing help people need to fulfil their potential.

  • European Regional Development Fund (ERDF) supports research and innovation, small to medium sized enterprises and creation of a low carbon economy.

  • European Agricultural Fund for Rural Development (EAFRD) supports rural businesses to grow and expand, improve knowledge and skills and get started.

There are two routes to apply for funding:

Route one – The Funding Finder

Through this route funding opportunities for all of the European Regional Development Fund, part of the European Agricultural Fund for Rural Development and part of the European Social Fund are available.

Apply through the Funding Finder

Route two - co-financing (European Social Fund only)

Also known as opt-in organisations, a large proportion of European Social Fund money is available through this alternative route. Co-financing means that European Social Fund can cover up to 100% of an approved project’s eligible costs.

Read details on this approach, the opt-in organisations and how to apply through this route on the partner page.


Income Generation

The last few decades have seen a major shift in funding for the voluntary and community sector, away from simple grant dependency towards increased income generation.

First came the so-called contract culture. Care in the community services, and many other health, welfare, education and leisure activities, are now delivered by voluntary and community organisations under contract to statutory authorities. The straightforward funded and funder relationship has changed to that of 'providers' and 'purchasers'.
More recently, there has been increasing pressure on voluntary and community groups to work more 'entrepreneurially' in developing 'income-generators'. There is a range of commercial activities available to most voluntary and community groups. The main ones are:

  • Providing a service under a contract with another agency, usually a local or health authority
  • Charging service users
  • Selling products made by the beneficiaries of the organisation
  • Selling publications, training, consultancy and other in-house expertise to interested parties
  • Unrelated trading, like selling charity Christmas cards or running charity shops

This interest in social enterprise and the social economy comes in part from the government's agenda on regeneration and social investment. In 2001, The Department of Trade and Industry set up the Social Enterprise Unit (SEnU), to promote social enterprise and act as a focal point for policy-making. In 2002, the SEnU published Social Enterprise: A Strategy for Success, which outlined how the Government intends to develop social enterprise in the years to 2005.

The report places a particular emphasis on ensuring that the regulatory and tax framework are amenable to the development of social enterprise. With this in mind, the creation of a new type of company, the Community Interest Company (CIC), has been included in the Companies Bill currently being considered by parliament. CICs will allow social enterprises to use their profits and assets for the public good. Subject to the parliamentary process, the DTI anticipates that it should be possible to begin registering CICs by July 2005.

The following features are included in the Companies Bill:

  • a statutory "lock" on assets and profits of CICs
  • a "community interest report" which companies must pass in order to be registered as CICs
  • an annual community interest test which CICs must provide to show how their activities have benefited the community
  • a CIC regulator responsible for ensuring that CICs comply with their legal requirements

Clearly, there are major advantages to having a secure, independent and sustainable revenue stream. However, income-generation may also bring problems and challenges, not least the danger of losing money and the organisation's original vision. If trading activity is outside an organisation's primary purpose, then there are also charity and tax law implications. Organisations wishing to establish trading activities will also need to keep on top of the forthcoming changes to the law described above.

It is therefore crucial to get thorough and detailed advice before embarking on new income-generating activities. Local Councils for Voluntary Service and Rural Community Councils may provide support and advice on contracts, whilst many areas now have their own social enterprise development agencies (see NCVO's Sustainable Funding Project's 'Technical Support for Social Enterprise' for listings).


Raising money from the Public

Raising money from the general public provides the voluntary and community sector with a large proportion of its total income. There are many ways to fundraise from individuals, from small to large-scale events through to regular payroll giving and legacies. Deciding on which techniques to use will depend on the size, capacity, location and aims of any particular organisation.

In 2000, the government introduced a package of measures under the banner 'Getting Britain Giving'. The measures were to simplify and encourage giving to charity through tax reform. The main changes were to

  • Gift Aid - which allows charities to claim back from the Inland Revenue the tax the donor has paid on their donation. There is now no minimum limit for Gift Aid donations. It is also simpler to administer, which makes it more suitable for smaller charities.
  • Payroll Giving - a system where employees sign up to donate to a charity directly from their monthly pay packet. This is deducted at source by the employer and sent direct to the charity, which gets the donation plus tax. There is no longer a maximum limit for payroll giving.
  • Donations of Shares and Securities - donors can now give certain shares and securities to charity and get tax relief.

Raising money from the public has a number of advantages. It provides voluntary and community organisations with a source of 'no-strings' funding, whilst at the same time raising awareness of the organisation's work. However, there are also potential pit-falls. Ill-planned events can lose money and waste a lot of time and effort, and some campaigns may raise money from people who can least afford it.

Careful thought and planning is needed, and there are a number of useful books and websites with ideas for fundraising events. For more detailed advice, contact the Inland Revenue or Charity Commission.

The Charity Commission
www.charitycommission.gov.uk

Charities Aid Foundation
www.cafonline.org

Directory of Social Change publishes a selection of useful books on running successful events
www.dsc.org.uk