Level and sources of VCS income

The VCS funding mix has grown and diversified to include contracts, earned income and loans, as well as traditional sources such as grants and individual giving.  Total sector income is rising, with a rise of just over £800 million in 2003/4 to £27.7 billion in 2004/05.  However, only the very largest charities saw an increase in total income, reflecting the polarisation of the sector.  Income sources are also changing.  For instance, whilst state funding is increasingly important, largely due to public services opening up to markets, corporate giving is low and falling.

What are the implications?

  • Higher expectations of evidence due to competition for funds, more strategic funding and increased involvement in public service delivery putting pressure on organisations to demonstrate their outcomes.
  • Additional skills and resources required for VCOs to negotiate increasingly complex procurement practices associated with government contracts.
  • Grantmaking trusts and venture philanthropists become more strategic in their giving and engaged with the organisations they fund.
  • Greater emphasis on organisations to achieve efficiency and value for money.
  • Increasing competition for funds.
  • Risk of polarisation of the VCS if contracts favour economies of scale.
  • Increasing need for VCOs to understand the full range of funding sources available to ensure a sustainable funding mix – from social enterprise to loan finance.
  • Increased expectation of VCOs to trade and charge for services to diversify their income sources. (See social enterprise)

Moving forward

How will the increasing complexity of funding options impact on your organisation?

  • Is your organisation ready to bid for and manage contracts? Do you know what is involved or where to go to find out more about the skills you will need?
  • Could loan finance be an option for your organisation in the future?

Earned income may help your organisation feel more in control and enable you to plan more effectively for the long term, but it can also require new skills.

  • Has your organisation considered the costs and benefits of earning more of its income?
  • What is your organisation’s attitude to earning more money? What culture changes would need to take place in your organisation if you started down this road?
  • How will the increased expectation of trading and charging for services impact on your organisation?

How will an increase in funders that are more strategic and engaged impact on your organisation?

  • How do you balance your mission with the aims of funders in order to secure funding?
  • Do you have a good process for deciding whether or not a funding opportunity is too far off mission?
  • Would your organisation benefit from a more hands-on relationship with funders and how might you handle the tensions that could result?

Want to know more?

This driver is a stub and will be completed soon.  Here we will link to external documents and resources for further reading.


Last updated at 14:32 Fri 05/Oct/07.


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