Core funding for charities is now more vital than ever.

In recent weeks we’ve had discussions with a number of grant funders who, during the pandemic, shifted their funding into unrestricted core funding to help sustain organisations through the crisis, rather than restricted the project grants that had been their normal mode of funding. They have been been asking about whether they should maintain this approach and if so for how long.

This is a really interesting question and it’s very tempting just to say “yes” and “for as long as you can”. However, that doesn’t reflect the legitimacy of the concerns of these small and medium-sized funders that continuing core funding for the foreseeable future could be unsustainable. Their main worry is that if they lock in long term core funding for their current beneficiaries then there will likely be little or no room for new beneficiaries to secure funding from them in future. Worse still, if their income reduces (e.g. due to poorer than expected investment returns), they would be forced to withdraw core funding from existing beneficiaries who may have become dependent on that support. The result could be that they would trigger the collapse of very organisations who they had, in good faith, sought to sustain.

Nevertheless, we have been articulating a case for continuing core funding for a while longer and, alongside that, providing non-financial support (as many foundations do) to help their grantees become more sustainable in the long term (including by reducing overheads).

Why have we been advocating for continued core funding support and for how long?

There are three key factors, as we see it, that suggest a need for continued core support because, particularly for small charities, the crisis is far from over and we are certainly nowhere near having arrived at anything like a new normal.

• Income/funding volatility: as we summarised in a recent blog, there remains considerable uncertainty over likely levels of, and competition for, funding over the next few years. Some charities have actually fared very well in attracting emergency grant funding over the last 18 months but others have suffered severe reductions in income (particularly earned income). Both face significant risks, either from a semi-permanent loss of income or from a cliff-edge fall in funding as emergency support dries up. It is going to take some time to for fundraising markets to settle down; in some spheres it could take many years.

• Increased demand: a very high proportion of charities have seen big increases in demand for their services. Many are preparing themselves for that to accelerate as the economic and social impacts of the lifting of restrictions and loss of support schemes such as furlough start to bite. No-one can accurately predict how much demand will rise in different sectors or for how long those increases will persist.

• Lost capacity: many charities have suffered dramatic reductions in capacity. Those who have struggled with funding have had to reduce staffing levels and many of those who rely on volunteers have lost volunteers during lockdowns (e.g. due to shielding) and many appear reluctant to return. For the most part the surge in numbers of younger volunteers during the first lockdown appears not to have been sustained as people have gone back to work or lost motivation as the crisis has appeared to subside. It will inevitably take time to rebuild this lost capacity.

Taken together, these impacts could result in a “perfect storm” for many charities: increased demand, reduced capacity and reducing funding. To ride out this storm they need flexible funding, probably for 2-3 years in many cases. Unrestricted core funding will be a lifeline for many.

Therefore, we have been encouraging funders to be brave and continue core funding for those beneficiaries who need it and who have strategic importance to the funder’s mission. They do need to be clear that such funding will not be available indefinitely and they are well within their rights to ask grantees for sustainability plans to give confidence they will survive after the core grant comes to an end. We’ve also been encouraging them to support beneficiaries to implement those sustainability plans through employer supported volunteering and non-financial support such as consultancy and training.

If you'd like to know more about how we can help smaller charities through these challenging times please contact us at julian@almondtreeconsulting.co.uk to arrange a free initial telephone conversation.