A to Z of funding (F)


Feasibility study

Funders may want proof - or at least good evidence - that a large project is feasible before investing large sums of money in it.

A feasibility study should make clear the conditions under which a project is feasible. It can involve:

  • looking at the experience of similar enterprises
  • thinking through practical problems
  • making projections about level of use, resources required, how income will be generated in future and sustained, necessary co-operation from other agencies
  • specifying the management and organisational requirements.

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Financial year

For accounting purposes, organisations have a financial year. At the end of the year they produce annual accounts. In the voluntary sector many organisations have a financial year that runs from 1 April to 31 March.

The UK financial year, which the Bank of England and other financial organisations operate, runs from 6 April until 5 April the following year. Government funding also operates on this cycle.

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Free reserves

Reserves are your savings and free reserves are those that your organisation is free to spend on anything it likes.

If you have been given a one-off grant to do a particular thing and you haven't spent it all, the money may show up in your accounts as a surplus. But you can't spend it 'freely'. The Statement on Recommended Practice (SORP) on Accounting for Charities requires charities to show this kind of money in their accounts as a restricted fund.

Other money (even funds you have 'designated' for something in particular) is considered as free reserves by funders such as the Big Lottery Fund. Broadly speaking this counts everything other than fixed assets and restricted funds as free reserves.

Some funders consider a year's running costs as the maximum appropriate level of free reserves.

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Freedom of Information Act 2000

The Freedom of Information Act 2000 came into force on 1 January 2005.

Under the Freedom of Information Act 2000, anybody may request information from a public authority which has functions in England, Wales and/or Northern Ireland. The Act confers two statutory rights on applicants, to:

  • be told whether or not the public authority holds that information; and if so,
  • have that information communicated to them.

The Ministry of Justice is responsible for the Freedom of Information Act, for details go to the Ministry of Justice website.

Please note: For information on Freedom of Information in Scotland, please see the websites of the Scottish Executive: Scottish Executive website and the Scottish Information Commissioner website.

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Full cost recovery

Full Cost Recovery means securing funding for, or 'recovering,' all your costs, including the direct costs of projects and a relevant proportion of all overheads (or core costs). The full cost of your organisation as a whole is calculated from the direct costs of all your projects and services plus all your overhead costs. Therefore, the full cost of each of your projects should be calculated from the direct costs of your project plus a relevant portion of overheads.

Say for example you apply for a grant to deliver a particular project. In addition to the direct costs of additional staff, extra computers, office supplies and so on, the project will also occupy some of your Chief Executive's time, your Finance Manager's time, and your IT support staff's time. To achieve full cost recovery, the amount of funding you request in your grant application needs to reflect the amount of time devoted to the project by these staff, as a proportion of overhead. So, if the annual cost of employing your Chief Executive is £60,000 (including salary, National Insurance, proportion of rent/utilities etc.), and they spend 10% of their time working on the project, to recover your full costs you need to include a cost of £6,000 for the Chief Executive in your funding request. All of these costs are necessary in order for the project to run effectively and efficiently, and you are therefore justified in asking for them to be funded.

If your organisation is not recovering the full costs of projects, it is at risk of creating a deficit which has to be met by additional fundraising or by using unrestricted funds. This means that the organisation as a whole is effectively subsidising the project, which may jeopardise its ability to continue to provide its services in the future.

Acevo have a range of services to assist the third sector in fully costing their projects and services. These are available at: www.fullcostrecovery.org.uk

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Funding strategy

A fundraising strategy is a way of thinking ahead about the money you will need to carry out what you want to do, and planning how to get it. It is essentially a management tool for your organisation, though it may also help convince funders that you know what you're doing.

What it looks like and how detailed it is will depend on your circumstances, as will the period of time it covers. It may help to ask yourselves how far you can realistically think ahead. Sometimes organisations may have a 20-year vision but can only realistically plan for a few months ahead.

Management theories often suggest that you start with what you want to do, devise a fundraising strategy which enables you to get the necessary money and then carry out the work. In reality, things are often messier and less clear-cut. Sometimes new sources of money appear out of the blue and organisations, quite sensibly, change their plans to take advantage of the opportunity they present.

A fundraising strategy doesn't have to be about new work or developing the organisation, it may just be a plan to enable you to keep going as you are. For many groups, staying afloat is hard enough.

Exactly who creates a fundraising strategy for your group will depend on your circumstances. The important thing is that it comes out of the thinking and planning of the organisation as a whole, and isn't just the job of a 'fundraising sub-committee' or a worker. Whoever does it will probably need to think about:

  • current funders and what's likely to happen to that funding;
  • what activities will need funding in the future and how much will be needed;
  • what's going on in the outside world that might have an impact on your funding or on what you need to find funding for;
  • the resources you have as an organisation that can be put in to fundraising (time, money, skills, contacts);
  • the timetables you will need to work to make sure you get the money when you need it;
  • how likely it is that you will be successful (you may just have to make the best guess you can) and what you will do if you don't get the money;
  • whether you need funding for one thing in order to make something else viable; in other words, what your priorities are and whether bits of work are inter-related or stand alone;
  • what are the most likely sources of future funding for the activities that you want to carry out (you may need to first think about the kinds of likely funding - whether from trusts or companies or the council or your own activities, for instance - before you decide on specific funders to approach).

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