‘It’s like pilates!’ The importance of a strong core

core-costs

As a funder, DCF is concerned with the impact of its grantmaking on individuals, but also on the organisations it supports, and on the wider community. We’re always on the lookout for ways to make our funds work as efficiently as possible, and for new ways to evidence and understand this impact. This conversation was a very welcome chance to explore some of that with grantholders. Many thanks to all involved for finding the time to come along!

“If only I could fund some basic admin time which would free me up to think strategically about the future of the organisation.”

“What we really need is to know that we can pay the electricity bill for the next couple of years.”

“Being able to make a commitment to staff and to the sustainability to the organisation is worth a great deal in the long run.”

If you are associated with an organisation with some reliance on grant funding, the statements above will likely strike a chord. Very often, grant funding opportunities focus on operational projects at the expense of ‘core costs’ – everything from rent and services to professional registration fees, IT security, training and office furniture. While project-based funds usually make some allowances for general overheads, it can be a struggle to finance the ’boring bits’. The second of our Grantee Forums brought together representatives of four organisations to discuss the implications of this, and to explore the alternatives. Here’s a flavour of our discussion.

Grantmaking, projects and core costs – a vicious circle

Small organisations, especially those working with vulnerable people, face a number of demands in terms of regulation, documentation, audit etc, Examples are: secure IT systems, GDPR, safeguarding checks and training, and professional clinical supervision of practitioners, as well as more generic elements such as financial audit, evaluation activities and telephone systems, etc.

On the other hand, there is pressure to minimise costs that are not directly related to operational work. ‘Admin’, ‘overheads’, ‘management costs’ and so on are not likely to set the average funder’s world alight, however essential they may be.

There is therefore a tendency for applicants to downplay the importance of core costs to funders. As a result, funders are not fully aware of the situation, don’t therefore see core funding as a priority, and the cycle is perpetuated.

Grantmaking with a focus on project work can have a number of effects:

  • Organisations can feel under pressure to divert from their own strategic plans to undertake projects that fulfil funder objectives. This can affect organisations’ ability to support beneficiaries in the most effective ways. Whilst responding to external priorities can provide welcome challenge, new directions, or a natural progression, in other contexts adapting to external funding sources can be unhealthily destabilising.
  • The strength of small voluntary organisations is their flexibility, and ability to adapt to specific circumstances. Funders differ as to how open they are to requests to change direction mid-project.
  • Project-based funding can, intentionally or otherwise, involve a tendency to prioritise innovation over refining or repeating proven activities.

How could core-cost funding be different?

Funding an organisation’s core operations, whether through restricted funds for specific activities, as part of a full cost recovery approach to grants applications, or through access to unrestricted funds, can help:

  • Provide stability and security for staff. Most small organisations’ greatest asset is their staff, but attracting and retaining skilled people is difficult if all you can offer are short-term contracts, and high levels of organisational uncertainty can affect morale. There are additional costs associated with short-termism: recruitment is expensive and time-consuming, and frequent staff changes cost the organisation in terms of institutional memory. Organisations can also pay a premium to rent premises without long-term tenancy agreements.
  • Contribute to organisational development. This could be through giving senior staff the time to develop strategic plans, or the stability to be able to look beyond the immediate future.
  • Contribute to organisational learning. Removing a pressure to change and innovate can allow an organisation to focus on what is does well, in order to do it better. In some cases, this may be simply a case of security of core funding allowing activities to be repeated and refined. In others, it may be through a core allocation for robust evaluation or research exercises, beyond those required simply to satisfy funders.
  • Support risk-taking or pilot work on new ideas that are not yet at the stage to attract funders, but that could develop into fundable initiatives in the future.
  • Provide a source of match funding, especially if it is a multi-year agreement.

Changing the evaluation question

Our suspicion is that even a relatively modest amount of unrestricted core funding, secure over a longer period than a year, can be an extremely efficient use of a funder’s resources.

Collecting evidence of this would require us to change the question we ask from: ‘what have you spent your money on?’, to ‘what difference has this made to your organisation? You may have spent money on some admin/data entry, or you may have bought a new IT package, but this has freed up your time for some strategic thinking, or allowed you to meet the data security requirements of a new potential commissioner.

Core Funding Opportunity!

Local funding programme Chiggy Pig, which supports projects tackling disadvantage and deprivation in the Torridge area, is now inviting applications for core cost funding for up to 3 years. If you are an organisation supporting communities within this geographical area and could benefit from a small grant towards your core costs, contact our Grants Team on 01884 235887 to discuss further.

Nicola Frost, Knowledge Guru