The charity funding spectrum

1. What is fundraising?

Fundraising is the way in which voluntary, community and social enterprise (VCSE) organisations go about asking for donations or other financial support from the public, businesses, government, charitable trusts, or other sources of funding.

Successful fundraising requires organisations to produce a fundraising strategy. Sometimes these form part of a wider business, project or strategic plan. This will include which resources are required in order to reach a fundraising goal and how you will achieve it.

This guide will cover the range of fundraising options you are likely to access for your charity or community group.

2. Grants

Grants are a form of ‘restricted’ funding. The funding must be spent on a specified programme of activity or an agreed set of resources. You may have to provide a detailed budget to the funder, as well as evidence of expenditure, a programme evaluation, and regular progress updates. You may also have to sign a grant agreement or contract.

You can apply for grants for capital or revenue. Capital grants include income for buildings or equipment. Revenue grants can include costs involved in running an organisation, including salaries, overheads and day-to-day running costs.

3. Donated income

Donated income from the public and businesses is classed as unrestricted funds. This means that you can choose how you use it, as long as you are meeting your objectives as stated in your governing document and you are fulfilling any promises you’ve made to donors. There are a number of ways that you can obtain donated income, e.g. Gift Aid, Crowdfunding, etc.

4. Trust funding

A charitable trust or foundation can be set up by anyone who has decided that they want to set aside some of their assets or income for charitable causes.

Often the initial endowment is a lump sum from a bonus, an inheritance, or the sale of shares. A trust will select charity beneficiaries to give money to. You may need to submit an application to a trust with your case for support. The income received from trusts is often restricted for a specific project run by your organisation.

5. Crowdfunding

Crowdfunding is the practice of funding a particular project or item through a large number of small, online donations from lots of people. It is a campaign run over a set period of time, which requires VCSE organisations to have a strong online and social media presence.

One of the first challenges most organisations encounter when trying to crowdfund is finding out which crowdfunding platform is best suited to help them launch their campaign, reach the right supporters and investors and hit their funding target.

Crowdfunding platforms require fundraisers to set targets based on how much money they require to complete the project. The majority of platforms are set up so that fundraisers only receive the funding if they reach this threshold within a fixed period of time. This is known as an “all–or-nothing” campaign. However, some platforms allow the option for “keep-it-all” campaigns, where fundraisers keep all the money they raise from the crowd regardless of whether they reach their target. Although all –or-nothing campaigns carry the risk that the fundraiser will receive nothing if they fail to reach their target, they are successful more often keep-it-all campaign.

6. Gift Aid

Gift Aid is a way of letting charities and community amateur sport clubs claim tax relief on gifts and donations made by UK taxpayers.

A donation qualifies for Gift Aid if it’s a gift consisting of a ‘payment of a sum of money’ by an individual who’s paid, or will pay UK tax, to a charity and satisfies a number of conditions.

7. Trading

Your organisation may want to raise funds by selling products or services. There are rules about how charities can lawfully trade. Social enterprises generate the majority of their income from trading. For any type of VCSE organisation, you need to be sure that the business proposition is viable.

8. Commissioning and procurement

‘Commissioning’ is a process that public sector organisations use to plan, procure, deliver and evaluate services for local residents. There is a general trend for public bodies, such as local authorities and NHS clinical commissioning groups, to move away from grant giving to the awarding of contracts through competitive processes.

Contracting is a different relationship with a funder compared to receiving a grant. It is a legally enforceable agreement between two or more parties. With this comes, a number of risks, which trustees/board directors should consider. Including making sure the organisation is incorporated.

9. Collaboration and partnerships

Collaboration refers to arrangements where all parties agree to cooperate for mutual benefit. Examples of collaboration include:

  • Being a subcontractor for another organisation
  • Another organisation signposting customers to you
  • Working with another organisation to develop new products or services

Here are a few examples of how working in partnership can help you generate income:

  • Grants: Grant funders want a wide reach. The more partner organisations that benefit from a grant, the greater the reach
  • Contracts: You may not have the capacity in your own group to win a contract, but working with another organisation could increase your capacity and help you win a bid
  • Trading: You may be able to promote someone else’s business to your customers and then they may give you a discount on their products.