Can your charity cope if you lose your core grant?
Julian Lomas
We’ve worked with many clients that are overly reliant on a single core grant:
Most, but not all, have been voluntary sector infrastructure support charities.
Most receive their core grant from local or central government.
Most understand that the core grant is unlikely to grow and may disappear altogether (although, too often, we hear complacency along the lines of “they have to fund us because it would be politically damaging for them to stop” or “no one else could or should provide our core funding”).
Our challenge is always to ask, “what would happen if you lost your core grant tomorrow?”. For many the response is an ashen look or an expression of terror at the prospect. This leads to our next question, “what could you do so you would be able to cope if you lost your core grant in 2 years time?”.
The answer, of course, is always about diversifying income. Very few charities do only one thing; their core function. Even fewer have only one source of income.
Diversifying income to fund core activity/costs always starts with understanding what the core actually is (and what it isn’t); is the core grant really paying for core activities or is it just subsidising the charity’s overheads?
Next, it is important to understand what each of the charity’s activities really costs and whether the funding for each activity is paying its fair share of the overheads, or are some, in fact, being subsidised by the core grant?
Only when you have a real understanding of the answers to these questions can you start to work out how you could cope better with losing some or all of the core grant:
You might be able to do better at full cost recovery from non-core activities to pay for overheads, thus reducing reliance on core grant subsidy.
You may be able to increase income from other sources to make a surplus (beyond full cost recovery) to fund core activities currently paid for by the core grant. This could be particularly true for any earned income such as membership fees or traded services, where the level of charges is limited more by what the market will bear than what you can justify to the funder.
There may be other sources of income available that you don’t currently benefit from, which could contribute to funding core activities and/or overheads.
We encourage you to ask yourself the same challenging questions and to recognise it is not just a theoretical exercise; we’ve seen quite a few charities close after losing their core grant. Moving away from reliance on a core grant will always make your charity more sustainable and resilient, so why wouldn't you put some effort into diversifying your income to recur the risk?
If you'd like to discuss further how we can help you can diversify your organisation's income please contact us at julian@almondtreeconsulting.co.uk.