How organisations are funded

How are organisations funded? Who is most vulnerable to cuts in statutory funding? How is income delivered to the sector? Do funding sources differ depending on the size of organisation? How can I support good causes? How are organisations funded? Most of the figures on this page are drawn from NCVO’s Civil Society Almanac, which uses a slightly different definition of ‘charity’ than the Charity Commission for England and Wales. According to NCVO’s UK Civil Society Almanac 2014, the two principal funding sources for the charity t sector are individuals and statutory funding. The cuts in public funding are having a significant impact; this impact varies across the sector, according to dependence on this source of income. 2011/12 figures ascribe17.4 billion or 44 per cent of total income to individual giving with statutory giving at £13.7billion or 35 per cent. These two sources of income make up 79 per cent of the sector’s total income; both have increased significantly over the last 10 years. Who is most vulnerable to cuts in statutory funding? There has been a real terms fall of statutory income of 8.8% between 2010/11 and 2011/12 by 8.8% according to NCVO (UK Civil Society Almanac 2014). How is income delivered to the sector? 20011/12 figures for sources of income ascribe £17.4bn to income received from individuals (includes donations; trading including charity shop turnover and charitable trading), with statutory funding at £13.7bn. Income from individuals has shown a general upward trend over the last ten years, while statutory funding displayed a similar trend until 2010/11, when it dropped sharply. Statutory funding is delivered to the sector in various ways which can be summarised as voluntary income (grants) and earned income (contracts). Between 2000/01 and 2011/12, the income earned by charities from government contracts has more than doubled, rising from 4.6 per cent of total income to 11.1 per cent, or over £11bn. This increase is largely as a result of charities becoming involved in service provision. In recent years most statutory funding has been routed through local authorities, about 50% or £6.8bn in 2011/12. The next biggest chunk comes from central government and the NHS (£5.9bn – 43%) with European and international statutory sources providing the remainder. Do funding sources differ depending on the size of organisation? Generally speaking, larger organisations receive more statutory funding; 83 per cent of the sector’s statutory income is received by organisations with more than £1 million income. In contrast, small and micro organisations receive only 21 per cent of total statutory funding to the sector. Income from individuals accounts for nearly two-thirds of the income of small and micro organisations. See the Individual and small-scale giving section for more information on this. For more insights into charitable giving, see the giving pages in the UK Civil Society Almanac 2014. How can individuals engage with and support good causes? To be effective, non profit organisations need to have reasonably diverse sources of reliable income and to be demonstrably effective in how funds are spent in delivering their mission. Careful and innovative management of both income and spending allows for sustainability and resilience. In 2010/11, NCVO/CAF report that 55 per cent of the UK adult population donated in a typical month, a rise 1% from 2008/9. The median amount has decreased to £10 per donor, from £11 in 2010/11 and £12 in 2009/10. The mean donation in 2011/12 was £27 per donor, £4 lower than in 2010/11. Major donors continue to have In 2010/11, donors giving £100 or more accounted for 45% of total donations, but this dropped to 40% in 2011/12. However, the total value of charitable donations worth £1 million or more rose 9% to £1.35bn in 2012 from £1.24bn, according to Coutts and the University of Kent’s ‘Million Pound Donors Report 2013’ More women (58 per cent) than men (52 per cent) give to charity but men tend to give slightly larger donations. There is some evidence that giving increases with age. There are numerous ways in which individuals can engage with and give to charities. (see how you can support a charity) Financial donations are most valuable to a non profit when they are given over time and reliably and through a tax-efficient route. Using donated funds Funds can be donated for general use by a non profit,  unrestricted funds, or for a particular purpose, restricted and project funds. Non profits must have a healthy mix of these types of funding to be sustainable and effective as there are core costs which must also be funded without which it cannot deliver its mission. The most beneficial form of giving is regular, committed and tax efficient giving over an extended period. Increasingly, non profits view such donors as crucial stakeholders with whom they want to share the journey of achieving their mission. Further help and advice Why not try the KnowHow ‘Sustainable Funding’ e-learning training course?

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