McCracken Consultancy
Strategic Consultancy for charities and third sector organisations


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McCracken Consultancy

Funding for projects versus funding of charity core costs

Are you spending a lot of time applying for grants for an ever-proliferating number of 'innovative projects' rather than funding your core? 

Doughnut funding’ is a metaphor I use with clients to describe a bad habit that charities frequently display with regard to their fundraising…..Imagine that all your charity’s activities are represented by a big doughy blob, the centre of which represents the core activities of the charity and the outer edges your peripheral projects and activities.  Then consider which part of your dough blob is better funded – is it the edges or is it the centre?  If it’s at the edges it means your peripheral projects are better funded than your core and at some point if not already you are going to end up with a big hole in your finances, just like a ring doughnut.  Well, as I say, the metaphor works for some!  To continue….

If you suffer from a serious case of doughnut funding you are not alone.  It is a completely unsurprising state of affairs given that grant funders seem to want overwhelmingly to give money to discrete ‘innovative projects’. ‘Innovative projects’ are specific and standalone so return on investment is easier to measure, they are publicity-friendly, and they also quite simply catch the eye of the grant giver; grant panels are made up of human beings and we are all, are we not, ever on the lookout for the magic answers that solve society’s problems? But most charities are weary of ‘innovative projects’, understandably so, and furthermore they would be right to be wary of them too. 

The problem is often that it is the core function of the charity that is struggling for funding, and a healthy injection of core funding could not only support a healthy charity fulfilling a high level of need in the immediate term, but can represent precious investment to improve the functioning of that charity such that it is more effective and more self-sustaining in the longer term.  Enabling small innovations in the way it operates perhaps, using tried and tested techniques but applied at lower cost or with more consistent service delivery.

The funds brought in for new projects are of course restricted and not a basis for organisational strength and long-term growth; the project only lasts the term of the project.  Depending on the formula used by the grant giver, restricted funding awarded may cover to a greater or lesser degree a proportion of core costs.  However the definite trend has been towards lower generosity of grant providers of contribution to organisational overheads and oftentimes now grant funders do not even allow for any costs to be recouped apart from project delivery costs; a good bid-writer will of course try and attribute as many costs as possible to a project’s direct delivery costs, but grant panels are no fools and competition for grants high, hence the competing pull for the bid to always demonstrate ‘value of investment’ to the funder.  The ‘pull’ to under-cost even quite indisputable real project delivery costs is often indeed difficult to resist, in an attempt to show ‘value for money’.  And one cost that cannot be recouped of course is the time taken to write the bid, which is often senior management time.

Many charities, especially those living a ‘hand to mouth’ existence, will continue to apply for these projects to support cash flow, but as a strategy for fundraising this has serious disadvantages.  It is important to recognise the difference between when new projects are coherent with the strategic direction of the charity and a natural development of service portfolio, as opposed to when they have become an unhealthy mechanism for maintaining cash flow….these grants and proliferating new projects in fact can simply represent ‘running to stand still’.  Endless new projects will not support core strength and stability, nearly always create a lot of extra work for the charity beyond what is costed for, and create also uncosted ‘commotion in the workplace’ such as desk moving, space saving, and the politics of change.  Granted there is good commotion as well as bad; good commotion is otherwise known as excitement and new projects can bring a sense of dynamism.

There is another insidious problem that as the projects proliferate, not only does the managerial burden increase, but such projects can threaten to dilute the charity brand.   This is not only an issue external to the charity but staff themselves over time become confused over the core mission of the charity which should be the anchor from which all flows. All staff are marketers of and potential donor-generators for the organisation in their daily lives even if they are unaware of this, and it is vital they are personally and permanently anchored in what the charity they work for is really ‘about’.

There are many factors that come together to move a charity forward; I’m not a huge fan of those ‘5 ways to ensure ultimate success’ lists.  But here are some relatively high-cost high-value financial investments that have the capacity to bring significant positive changes to a charity and yet are extremely difficult to find funding for.

·         Investment in a strong core middle-management team to support the CEO; the most common situation for smaller and medium-sized charities is for the CEO to be pulled into operational issues, with no time at all left for charity strategy and development.

·         Investment in high quality technical support staff such as a good marketing and fundraising manager to bring structure and effective practice to the brand strengthening and fundraising direction of the organisation, and use of external expertise when required. 

·         The review and upgrading of information and communications systems, including data cleansing, costed time for staff training and integration into operational systems.

·         Consultancy support to review and highlight priorities of the organisation for development, and help the organisation through the change process.

Grant giving bodies that give money to charities specifically to help with core costs, or to help them strengthen the way they operate are few.  Lloyds Bank Foundation grants do exactly fill this hole in funding available, through their Invest, Enable and Enhance programmes.  ‘Invest’ grants provide longer term core or direct delivery funding for eligible charities that are delivering clear outcomes as a result of their work.  ‘Enable’ grants are awarded to charities which have identified clear development needs, and provide a great opportunity to strengthen charities to deliver more effectively. ‘Enhance’ is a ‘grants plus’ programme which provides non-financial support to grant recipients; the Foundation works with Invest and Enable grantees to identify whether they would benefit from additional support that would help the charity operate more effectively and / or respond to any challenges it faces.   This ‘in kind’ support can come from the Foundation itself, Lloyds Banking Group, and a selection of external suppliers or consultants.

So to complete the metaphor, if you can find funding to support your core costs or pay for development and consultancy costs, you’ve found the jam, and I don’t know about you but I’ve always far preferred the jammy doughnuts, not the ones with holes…..

If your charity would like help with fundraising consultancy and growth, do give me a call on 07792 503 815 for an informal chat.

Natasha McCracken