Sources of funding

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


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, such as, the Design Council, Natural England and the Community Development Foundation (see the Independent Grant Administrator section of the site). Departments also fund the voluntary sector through direct funding relationships with specific organisations whose work is close to their own interests.

Despite some efforts, central government departments are not generally in sync with each other. The design, administration and quality of funding programmes will vary between and even within departments. Also, criteria generally changes from year to year to reflect changes in government policy. However there are some common aspects in central government funding that can help you know what to expect and there are funding programmes which open annually on a straightforward competitive basis with a set deadline.

Office for Civil Society (OCS)

The Cabinet Office sits at the very centre of government and, alongside the Treasury, provides its 'head office’. The department has an overarching purpose of making government work better, but perhaps most importantly, it is where the Office for Civil Society (formerly the Office of the Third Sector) sits. The OCS aims to drive forward the government’s role in supporting the voluntary sector, and bring together sector related work across government.

Loan Funding

Since the launch of the Adventure Capital Fund in 2002 there has been a consistent growth in loan funding, largely from the OCS. The Futurebuilders initiative aimed to increase the participation of voluntary and community sector organisations in the delivery of public services, primarily through loans and some grant based finance. Futurebuilders has now been wrapped up by the current government.

The OCS has now set up the Social Investment Business (SIB), launched in September 2009. Taking responsibilities from the Adventure Capital Fund and the former Futurebuilders England, the SIB is the largest social investor in the UK and manages the Futurebuilders Fund, The Social Enterprise Investment Fund, the Communitybuilders Programme and the loan element of the Modernisation Fund.

Outside England

Most central government departments are primarily concerned with national organisations and projects with national significance. Devolution has meant that, apart from departments with a UK-wide remit, such as the FCO, MoD and DFID, voluntary organisations should approach the relevant departments within their own country. In Wales, Scotland, and Northern Ireland most grantmaking is handled by the departments within the National Assembly for Wales, the Scottish Executive and the Northern Ireland Executive, respectively.

For further information:

Wales
Welsh Government
Cathays Park
Cardiff
CF10 3NQ
Tel: 0845 010 3300/4400
Email: wag-en@mailuk.custhelp.com
Web: Welsh Government Voluntary Sector webpage

Scotland
Scottish Government
Third Sector Division
3-H South
Victoria Quay
Leith
Edinburgh
EH6 6QQ
Tel: 0131 244 2309
Email: gary.findlay@scotland.gsi.gov.uk
Web: A Guide for the Voluntary Sector to Scottish Government Grants


Northern Ireland
Northern Ireland Executive
Department for Social Development
Lighthouse Building
1 Cromac Place
Gasworks Business Park
Ormeau Road
Belfast BT7 2JB
Tel: 028 9082 9000
Email: vcu@dsdni.gov.uk
Web: Funding Programmes in the Voluntary and Community Sector in Northern Ireland


Website entry point to all government departments: www.direct.gov.uk

Cabinet Office: www.cabinetoffice.gov.uk

Department for Business Innovation and Skills: www.bis.gov.uk

Department for Communities and Local Government: www.communities.gov.uk

Department of Culture, Media and Sport: www.culture.gov.uk

Department for Education: www.education.gov.uk

Department of Energy and Climate Change: www.decc.gov.uk

Department for the Environment, Food and Rural Affairs: www.defra.gov.uk

Department of Health: www.dh.gov.uk

Department for International Development: www.dfid.gov.uk

Department for Transport: www.dft.gov.uk

Department for Work and Pensions: www.gov.uk/dwp

Foreign and Commonwealth Office: www.fco.gov.uk

HM Revenue and Customs: www.hmrc.gov.uk

Home Office: www.homeoffice.gov.uk

Ministry of Defence: www.gov.uk/mod

Ministry of Justice: www.justice.gov.uk


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).

The Conservative Party in particular has long been critical of regional government and the Coalition Government now aims to replace this system with localism. The Coalition Programme (May 2010) stated ‘we will promote the radical devolution of power and greater financial autonomy to local government and community groups. This will include a review of local government finance’. RDAs have been abolished and are being replaced with Local Enterprise Partnerships (LEPS) which councils can bid to become part of alongside local businesses. LEPS are intended to provide a key vehicle in delivering Government objectives for economic growth and decentralisation, while also providing a means for local authorities to work together with business in order to quicken the economic recovery.

The policy direction announced by Secretary of State for Communities, Eric Pickles (in his first speech ‘localism, localism, localism’) has taken different forms across government and led to the Localism Act.

Despite this, some departments have initiated a number of time-limited local or regional programmes. Piloting or targeting schemes in specific - often underdeprived - areas is becoming more common, the Home Office and the Cabinet Office have both launched grant schemes in this way, administered centrally and locally.

Some National Lottery schemes are run regionally and administered by non-departmental public bodies (NDPBs) such as English Heritage and the Heritage Lottery Fund. Though distributed regionally, most of the grants do not differ radically between regions and have the same application procedure. For lottery schemes, the main regional differences to look out for are: the amount of funding available and the contact information (as you will be directed to your regional office for enquiries).

With the aim to reduce overlap and to make more effective use of both domestic and European resources some European funding is also distributed regionally, such as the European Regional Development Fund and the European Social Fund. Please refer to the European section of sources of funding for more information.


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.

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.

In March 2011, Greg Clark announced the Government's intention to take stock of the statutory duties placed on local authorities by central government. The Coalition Government has brought an end to central monitoring of the targets associated with Local Area Agreements (which they also abolished) and councils now have a much greater say over how money is spent locally as some ring fences have been removed. Admist severe cuts this is having a continuing impact.

Click here to find out if there is still funding available from your local funder.

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

London Councils
www.londoncouncils.gov.uk

To find your nearest CVS go to National Association for Voluntary and Community Action
www.navca.org.uk

To find information on Rural Community Councils go to www.acre.org.uk


Lottery Funding

The National Lottery is the responsibility of the Department for Culture, Media and Sport (DCMS) which issues policy and financial directions to UK wide Lottery distributing bodies, apart from the Big Lottery Fund (which falls under the jurisdiction of the Cabinet Office).

For every £1 that the public spends on Lottery tickets 28 pence goes to the Lottery good causes. These are the arts, charities and voluntary groups, heritage, health, education, the environment and sports. Lottery funders are the organisations that distribute the good causes money to local communities and national projects.

The Big Lottery Fund is the biggest lottery distributor, responsible for giving out half the money raised by the National Lottery for good causes.

The National Lottery Act (2006) gave the Big Lottery Fund (BIG) the power to handle non-Lottery as well as Lottery funding. The Big Lottery Fund’s developing role administering non-Lottery funding has a its own title and identity, the BIG Fund to ensure a clear distinction between the Lottery Funding BIG distribute and the non-Lottery funding managed on behalf of third parties. The organisation doing the work is still the Big Lottery Fund. The Office of the Third Sector's Community Assets programme and the Department for Children, Schools and Families' myplace were both administered by the BIG Fund.

Click here for Big Fund grant programmes

The Big Lottery Fund also distributes its funds through independent grant administrators. Click here for a list of current Big Lottery Fund schemes or go to www.biglotteryfund.org.uk.

Other Key Lottery Funders:

Lottery Links:

National Lottery good causes website: www.lotterygoodcauses.org.uk

Lottery Funding is a new joint website run by all Lottery funders in the UK and the site allows you to search for information on current funding programmes: www.lotteryfunding.org.uk.


Grant-Making Trusts

Grant-making trusts and foundations give about £3.9 billion in grants to charities (including religious organisations and universities) in the UK each year. There are almost 8,000 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 (Directory of Social Change and FunderFinder are leaders in this field) 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 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.navca.org.uk

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

Getting and managing European funding can be extremely complicated for the voluntary and community sector. Support may be available from regional Voluntary Sector European Funding Advice Offices, which together form the European Funding Network.

There are several structural funds, but funding for the voluntary and community sector comes from the European Regional Development Fund (ERDF) and the European Social Fund (ESF).

  • The ERDF aims to reduce social and economic disparities between regions of the Union and is essentially concerned with business growth and economic regeneration.
  • The ESF aims to help reduce differences in living standards between regions of the Union by reducing unemployment; improving and developing the skills of employed people; investing in industrial or rural areas which are in decline; and investing in areas with low economic development.

The European Council and Parliament has agreed an EU Structural and Cohesion Fund budget for 2007-2013 of €308 billion, over a third of the overall EU budget for 2007-2013.

There will be less funding for richer Member States such as the UK, but a sharper focus on employment and skills issues. In addition, to improve the administration of the funds, a more strategic approach has been adopted through the introduction of Community Strategy Guidelines on Cohesion and National Strategic Reference Frameworks (NSRF) to determine the structural spending priorities for member states.

The UK has received approximately €9.4 billion, significantly less than the €15.85 billion available in 2000-2006. This is a result of EU enlargement and the UK's good economic and jobs performance relative to other Member States.

Under the 2007-2013 programming period, the ERDF, the ESF and the Cohesion Fund contribute to three objectives set down by the EU:

  • Convergence Objective: €252 billion in funding will support growth and job creation in the least developed member states and regions. Within the UK, only Cornwall and the Isles of Scilly and West Wales and the Valleys will qualify for full Convergence funding. The Highlands and Islands will qualify for "phasing-out" Convergence funding.
  • Regional Competitiveness and Employment Objective: €48 billion in funding is designed to help the richer member states deal with economic and social change, globalisation and the transition to the knowledge society. Employment initiatives are to be based on the European Employment Strategy (EES) (which outlines measures to increase adaptability of the workforce, create jobs and improve access to the labour market for vulnerable persons). Within the Competitiveness Objective, South Yorkshire and Merseyside will qualify for ring-fenced "phasing-in" funding. This is to provide transitional support for regions that received Objective 1 funding in 2000-2006, but no longer qualify.
  • Co-operation Objective /Territorial co-operation: €8.7 billion in funding will stimulate cross-border co-operation in order to finance and find joint solutions to problems such as urban, rural and coastal development, the development of economic relations and the networking of SMEs. A new cross-border authority will be set up to manage co-operation programmes. The Cooperation Objective replaces the current Interreg Community Initiative. It will be funded from the ERDF only. It is estimated that the UK will receive approximately €0.6 billion.

Until recently, organisations have usually been required to secure match-funding from another source in order to obtain funding. However, most Structural Funding in England is now distributed in a system known as Co-financing. Under co-financing, funding is distributed via a variety of intermediary bodies, such as Learning and Skills Councils, Jobcentre Plus, Connexions Partnerships, Business Link and some local authorities. These organisations are responsible for finding the match funding, which they then combine with their Structural Fund allocations to create a single funding stream.

The ESF Community grants programme (previously known as Global Grants) is designed to make the Social Fund more accessible for groups without the capacity to apply for structural funds. Community grants are small, pre-matched pots of money available in each region, where there are one or more projects run by organisations called intermediary bodies. These bodies award small grants of up to £12,000 to community organisations and local initiatives which would not otherwise have the administrative capacity to apply for ESF. Applicants usually do not need to provide their own match funding. GORs can provide information on what the intermediary bodies are in each region.

Scotland and Wales have their own ESF Programmes and the Community Grants scheme is administered by the ESEP (Lowlands and Uplands) and HIPP (Highlands and Islands) in Scotland and WEFO in Wales.

A number of publications on European Structural Funds can be downloaded from the Department for Business Innovation and Skills (BIS) website.

The Department for Communities and Local Government also has information about the ERDF at: www.communities.gov.uk. For more information on the European Social Fund, go to www.esf.gov.uk.

For more information on the European Structural Funds in general, visit www.europa.eu.


Company Giving

Company giving only makes up a relatively small percentage of voluntary sector income - around 3-4% compared with, for example, about 35% from the general public.

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;
  • attracting free publicity
  • staff development and/or 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, awards from grant-making charities. 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 where resources are limited and where there is less opportunity for national publicity.

When applying to companies think about what you can offer them as your bargaining tool for what you want from them.

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

Arts and Business 

www.aandb.org.uk

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


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. At the Office of the Third Sector (OTS) the Social Enterprise Unit helps promote and champion social enterprise, take action needed to address barriers to the growth of social enterprises and identify and spread good practice for the sector. The Social Enterprise Action Plan, published in 2006, sets out the govenment's vision for social enterprises.

In line with the Social Enterprise Unit's agenda, the Community Interest Company (CIC), was included in the Companies Act 2004, which came into force on 1 July 2005. Together with the Community Interest Regulations 2005, this legislation made it possible to form a Community Interest Company. CICs allow social enterprises to use their profits and assets for the public good.

The following features are included in the Companies Act:

  • 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.

To find out more about CIC's, visit: www.cicregulator.gov.uk

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).

The Sustainable Funding Project at NCVO
www.ncvo-vol.org.uk

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

The Charity Commission
www.charitycommission.gov.uk

Department for Business Enterprise and Regulatory Reform Small Enterprise and Business Service
www.gov.uk/bis

The Social Enterprise UK
www.socialenterprise.org.uk

Locality
www.locality.org.uk

Co-operative and Community Finance
www.coopfinance.coop

The Association of Charity Shops 
www.charityshops.org.uk


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.

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, or visit the publications page of the Directory of Social Change website to find details of fundraising guidance and publications.

Over the last decade, the Government has devised a number of strategies that have aimed to foster a culture of planned regular and tax effective giving.

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, with the main changes being made to Gift Aid, Payroll Giving and Donation of Shares and Securities.

In 2001, The Giving Campaign was launched as a joint initiative between government and the voluntary sector to encourage giving to charities, with an emphasis on payroll giving. Unfortunately, the campaign failed to make an impact on giving levels, and at its conclusion Chief Executive Lord Joffre admitted that giving levels had actually fallen as a percentage of GDP in the ten-year period from 1992 to 2002. The Charities Aid Foundation, one of the original funders, has launched an annual National Giving Week in October in an attempt to follow on from the Giving Campaigns work.

In 2002 Community Investment Tax Relief was introduced to encourage private finance into under-invested communities. Under this scheme the Government provides tax incentives to those individuals and companies who invest in Community Development Finance Institutions, which in turn invest in enterprises that operate with or for disadvantaged communities.

The final report from the Giving Campaign laid down a challenge to double charitable donations over the next ten years and in 2004, a strategy named ‘A Generous Society’ was created to drive up levels of charitable giving.

The original A Generous Society strategy is available here:

Most recently,the government published guidance on giving for businesses in November 2009:

Tax-effective giving programme

From 2008-11, the Office of the Third Sector is funding the Institute of Fundraising’s tax-effective giving initiative, which supports charities to take advantage of tax reliefs and maximise their income.

e of the Third Sector, the Institute of Fundraising also provides a series of useful resources for organisations looking to maximise use of tax reliefs for giving. These include:

Further information on Gift Aid, tax effective giving and other information related to raising money from the public can be found at the following link to the Cabinet Office website.