Types of Grant

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In addition to policy criteria many funders, both government and non-statutory, are quite specific about the types of grants they will make. In terms of government funding the main distinctions are between capital and revenue, core and project costs, small and large grants and one-off and regular distributions.

• Capital / Revenue
• Core / Project Costs
• Small / Large
• Regular / One-off distribution

Capital / Revenue

Grants schemes often say that funding is available for either capital or revenue costs. Capital costs are one-off costs : buildings, equipment, vehicles, spending on items that become capital assets of your organisation. Revenue costs are your ongoing running costs, items of expenditure such as heat, light, rent, wages, pensions, transport, insurance and so on.

Core / Project costs

Another important distinction in terms of types of costs that may be funded is between core costs and project costs. Many funders will only fund projects and are reluctant to fund core costs, the central costs of running your organisation. Statutory funders are more likely (than company or trust funders) to fund an organisation's core costs, although they are also unlikely to support groups in a long-term funding agreement. Within your revenue budget you may be able to define certain areas of project work and systematically assign percentages of core costs to each project using a cost-centre approach. You should be aware that many funding schemes have guidelines about which contributions to core costs may be included in a project funding application and you should check before preparing costings. And of course, within a project budget you would probably have items of both capital and revenue expenditure.

Small / Large

Statutory funders are more likely to make larger grants for longer periods than charitable trusts or companies. Make sure that the department and funding scheme you're applying to gives grants of the scale you need before you put time into your application.

Regular / One-off distribution

For some annual programmes there will be just one chance a year to apply, for other shorter-term or one-off funding programmes there may be a number of deadlines or again, just one, for longer term schemes there may be one application round every three years. Check with the department before you put work in to your application. The process of decision-making may be quite long and complicated, with several different stages to the application process involving officers / civil servants and/or politicians. You may need to apply long in advance of actually getting the money.

Lottery Funding

The National Lottery has revolutionised funding for many voluntary and community groups. It was established by parliament in 1994 and is the responsibility of the Department for Media, Culture and Sport. It is run on licence by Camelot, a private sector consortium and 28% of ticket sales goes to "good causes".

Funding is distributed through five main bodies:

• The Community Fund
• New Opportunities Fund
• Heritage Lottery Fund
• The Arts Council of England
• Sport England

Awards for All

There is also a small grants scheme called Awards for All, which draws funds from all five distributors. Grants of between £500 - £5,000 are for equipment or short term projects. Priority is for groups with an annual income of less than £15,000.

The Community Fund aims to give grants to groups that help meet the needs of those at greatest disadvantage in society and improve the quality of life in the community. It is arguably the most important lottery funder for the voluntary and community sector, with two main funding programmes, now simply called: Grants for Medium Sized Projects and Grants for Large Projects. Grants are for both capital and project (up to three years) costs. Funding is administered and distributed nationally for national projects and regionally for regional and local projects and each region has its own set of priorities. The Community Fund also has Research Grants and International Grants programmes.

The New Opportunities Fund (NOF) makes grants to health, education and environment projects. It was set up to support and complement government priorities and does so through a range of grant schemes including the Green Spaces and Sustainable Communities Initiative, Healthy Living Centres and the Out of School Childcare programme. NOF emphasises partnership working across the public and voluntary and community sectors.

The Heritage Lottery Fund gives grants to protect and open up the heritage. It will fund large capital costs of museums, historic buildings, land and collections, but has also introduced a range of smaller and medium sized grant schemes, including Your Heritage and the Local Heritage Initiative.

The Arts Council of England distributes lottery and other government funding to arts organisations and individual artists. Its main lottery funding schemes include: Arts Capital Programme, Regional Arts Lottery Programme, Stabilisation and Recovery Programme, and the National Touring Programme.

Sport England funds sports facilities and sports development programmes at both community and elite levels. Its Community Projects Fund makes both capital and revenue grants. Sport lottery fund programmes and initiatives include the Active Communities Development Fund, Green Spaces Programme and Sports Action Zones.

A significant development in lottery funding is the Fair Share scheme, launched in April 2002. This new initiative sees the Community Fund and the New Opportunities Fund jointly targeting £169 million of funds across 62 disadvantaged communities.

Grant-Making Trusts

Grant-making trusts and foundations give about £2 billion in grants to charities (including religious organisations and universities) in the UK each year. This is about the same as the total of grants given to charities by the UK government (excluding public service contract funding).

There are almost 10,000 UK grant-making trusts and they vary a great deal in both size and scope. The larger trusts distribute several million pounds each year, but the vast majority are smaller and more likely to give out a few thousand. Some may give funds to any charitable purpose, whilst others are restricted to specific subjects (say, education or the arts) or beneficiary groups (for example, children or the elderly). However, most trusts give in the health and social welfare fields, with a large proportion funding arts and recreation.

Most trusts derive their income from an endowment given by a wealthy individual, family or company, like, for example the Joseph Rowntree Charitable Trust. Some trusts receive their income from other sources, like regular TV or fundraising appeals, including for instance, Children in Need or Comic Relief. Community Foundations are a relatively new kind of grant-making trust. They are set up in a local area to act as a broker for donors, usually building an endowment for future income. Increasingly they are acting as a distributor of government funding as well as charitable money.

Grant-making trusts will sometimes fund the things that other funders won't, including new ways of tackling problems and responses to newly discovered needs. They are more likely to fund one-off purchases or projects, and short and medium-term work that could attract longer-term funding from elsewhere.

Because there is such a diverse range of grant-making trusts it is especially important to research and target funding applications to them. Information about grant-making trusts has greatly improved and there are now searchable CD Roms, databases and software (Directory of Social Change and FunderFinder are leaders in this field) to help groups decide which trusts to apply to. Many Councils for Voluntary Service and specialist funding advice agencies also keep information about local grant-making trusts, and it is possible to search the Charity Commission's register online.

European Funding

The European Union provides a huge amount of money for social and economic development in member states. More funding goes to the poorer regions, and the bulk of contributions are used to subsidise food production. Relatively little funding is available to the voluntary and community sector, and this is channeled through the Government Offices for the Regions (GORs).

Getting and managing European funding can be extremely complicated for the voluntary and community sector. Support may be available from regional Voluntary Sector European Funding Advice Offices, which together form the Third Sector European Network. The Government Office for the Regions should have relevant contact details for your area.

There are four Structural Funds

• European Agricultural Guidance and Guarantee Fund (EAGGF)
• Financial Instruments for Fisheries Guidance (FIFG)
• European Regional Development Fund (ERDF)
• European Social Fund (ESF)

Funding for the voluntary and community sector comes from the ERDF and ESF.

• The ERDF aims to reduce social and economic disparities between regions of the Union and is essentially concerned with business growth and economic regeneration
• The ESF aims to help reduce differences in living standards between member regions of the Union by reducing unemployment; improving and developing the skills of employed people; investing in industrial or rural areas which are in decline; and investing in areas with low economic development.

The European Social Fund (ESF) is now administered by the Department for Work and Pensions (DWP).

For the period 2000-2006, the ESF budget is:

• Objective 1 - £557 million
• Objective 2 - £286 million
• Objective 3 - £2,519 million
• EQUAL - £216 million

Objectives 1 and 2 ESF funding is used in conjunction with the other structural funds.

The Objective 1 and 2 programmes are designed to address the specific needs of the region and are described in the Single Programming Document (SPD). Any projects which apply for help from these programmes must satisfy the requirements of the SPD. All appplications are sent to and processed by the relevant regional Government Office

Applications for support under Objective 3 must be in line with the Operational Plan for England and Gibraltar and the relevant Regional Development Plan to ensure it addresses UK and England policies along with the needs of the region. Most applications are sent to and processed by the relevant regional Government Office. Scotland and Wales have their own Objective 3 operational plans.

EQUAL is an initiative to promote new ways of combating all forms of discrimination and inequalities in the labour market through transnational co-operation. The social and vocational integration of asylum seekers is also addressed. Further information is available from www.equal.ecotec.co.uk

The total spend by ESF on the voluntary sector in 2000 (the last year for which figures are available) was £142,636,976 on 991 projects in England and Wales.

Funding is currently available for new applications which are encouraged from all eligible organisations. There is no lower or upper limit to the amount of finance available per project. Most regions have systems in place to give support to smaller organisations.

General information is available from www.efsnews.org.uk. For specific information and to receive application packs, please contact the appropriate Government Office (in England). Contact information is available from the GO Network page at www.government-offices.gov.uk

The Scottish Executive and the National Assembly for Wales can also provide information about ESF Funding.

Structural Fund spending priorities are set by Objectives and Community Initiatives. Funds are also allocated on a geographical basis, so specific priorities vary from region to region.

The ESF has historically required funded organisations to provide match-funding. However, Global Grants and Co-financing are two recent developments that go some way to overcoming the potential obstacle of match-funding. Global grants are small pre-matched pots of money for groups without the capacity to apply for main structural funds. Co-financing is where GORs distribute funding via a series of intermediary bodies, like for example, Learning and Skills Councils which at the same time deliver match-funding. Voluntary and community organisations can bid directly for funds to the intermediary agency, without the need to find match-funding themselves.

Government Offices for the Regions

Government Office for the East of England
www.go-east.gov.uk

Government Office for London
www.go-london.gov.uk

Government Office for the South East
www.go-se.gov.uk

Company Giving

Company giving only makes up a relatively small percentage of voluntary sector income - about 4.8% compared with, for example, about 35% from the general public.

However, developments in government policies, taxation and business sector practices are affecting both the way companies give, and the amount that they are likely to give.

In general, companies rarely donate money out of simple altruism: rather, their motivation is commonly called enlightened self-interest. Historically, companies have become involved with charities, voluntary and community groups for a number of reasons, including:

• creating goodwill among the communities where they are based
• boosting staff morale
• associating themselves with certain causes to develop an image as part of a marketing strategy
• responding to appeals

Funding from companies is unlikely to come as no-strings cash donations, unlike, for example, grants from charitable trusts. Apart from cash, there is a wide variety of ways in which companies may give support:

• sponsoring events, projects or award schemes
• providing staff time, advice and expertise
• encouraging employees to volunteer
• organising fundraising campaigns amongst employees
• donating products, materials or equipment
• providing company facilities
• advertising in charity publications
• joint promotions, where the company makes a donation for in return for each product sold, in order to encourage sales

Recent trends in business marketing practices mean that companies, especially the larger ones, have become more proactive in their support. There has been a shift towards Cause Related Marketing (CRM), where companies seek out major national charities with a high-level "brand" profile to support and be associated with. Clearly, national charities with a "household name" will have more opportunity for CRM deals than most smaller voluntary organisations.

At the same time, the government has appointed a Minister for Corporate Social Responsibility (CSR), and supported a number of initiatives to encourage wider partnerships between the business and voluntary and community sectors. These include the Business Impact Website, Innovations through Partnerships and the Phoenix Fund. The changes made to charity tax laws in 2000 (in particular those relating to Gift Aid and Payroll Giving) may also affect company giving.

Income Generation

The last few decades have seen a major shift in funding for the voluntary and community sector: away from simple grant dependency towards increased income generation.

First came the so-called contract culture. Care in the community services, and many other health, welfare, education and leisure activities, are now delivered by voluntary and community organisations under contract to statutory authorities. The straightforward funded and funder relationship has changed to that of "providers" and "purchasers."

More recently, there has been increasing pressure on voluntary and community groups to work more "entrepreneurially" in developing "income-generators". This interest in social enterprise and the social economy comes in part from the government's agenda on regeneration and social investment. In 2000, the Social Investment Task Force produced the Enterprising Communities report which included a raft of recommendations encouraging community finance initiatives. The Department of Trade and Industry has recently set up a Social Enterprise Unit. There is a range of commercial activities available to most voluntary and community groups. The main ones are:

• providing a service under a contract with another agency, usually a local or health authority
• charging service users
• selling products made by the beneficiaries of the organisation
• selling publications, training, consultancy and other in-house expertise to interested parties
• unrelated trading, like selling charity Christmas cards or running charity shops

Clearly, there are major advantages to having a secure, independent and sustainable revenue stream. However, income-generation may also bring problems and challenges, not least, the danger of losing money and the organisation's original vision. If trading activity is outside an organisation's primary purpose, then there are also charity and tax law implications.

It is crucial to get thorough and detailed advice before embarking on new income generating activities. Local Councils for Voluntary Service and Rural Community Councils may provide support and advice on contracts, whilst many areas now have their own social enterprise development agencies (see NCVO's Sustainable Funding Project's "Technical Support for Social Enterprise" for listings).

Raising money from the Public

Raising money from the general public provides the voluntary and community sector with a large proportion of its total income. There are many ways to fundraise from individuals, from small to large-scale events through to regular payroll giving and legacies. Deciding on which techniques to use will depend on the size, capacity, location and aims of any particular organisation.

In 2000, the government introduced a package of measures under the banner "Getting Britain Giving." The measures were to simplify and encourage giving to charity through tax reform.
The main changes were to

• Gift Aid - which allows charities to claim back from the Inland Revenue the tax the donor has paid on their donation. There is now no minimum limit for Gift Aid donations. It is also simpler to administer which makes it more suitable for smaller charities.
• Payroll Giving - a system where employees sign up to donate to a charity directly from their monthly pay packet. This is deducted at source by the employer and sent direct to the charity which gets the donation plus tax. There is no longer a maximum limit for payroll giving and the government will add 10% to any payroll donation up until April 2003.
• Donations of Shares and Securities - donors can now give certain shares and securities to charity and get tax relief.

Despite these changes, the Giving Campaign (a joint initiative between government and the voluntary sector) has estimated that, by not taking full advantage of tax-effective giving, charities missed out on a potential £107 million over the last Christmas period.

Raising money from the public has a number of advantages. It provides voluntary and community organisations with a source of "no-strings" funding, whilst at the same time raising awareness of the organisation's work. However, there are also potential pit-falls. Ill-planned events can lose money and waste a lot of time and effort, and some campaigns may raise money from people who can least afford it.

Careful thought and planning is needed, and there are a number of useful books and websites with ideas for fundraising events. For more detailed advice, contact the Inland Revenue or Charity Commission.