Money

2. Money

Learning outcomes

By completing this section and the associated quiz, you will:

• have a better understanding of budget terms and how to interpret the elements of a straightforward voluntary sector budget

• have an awareness of where the money for voluntary organisations comes from

• feel more confident trying to raise money from different sources.

2.1 The basics of budgets

Having the skills to read and interpret a budget is useful in all walks of life but particularly in organisations. All organisations set budgets. A budget is a plan expressed in financial terms and it helps organisations to achieve their aims within the resources available to them. It is usually prepared on an annual basis and looks ahead to the following year. Sometimes there is a need to change things or move money around as the year goes on, and unforeseen circumstances arise or new funding comes in, but generally speaking budgets should be regarded as relatively fixed each year.

Most organisations will have a set of budgets by department, function or project as well as their organisational-level budget. Many people who are budget-holders are not necessarily financial experts. In some organisations, volunteers may also be budget-holders and trustees will also need to understand their organisation’s budgets in order to help with developing financial strategy and the overall direction of the organisation. For registered charities, trustees have a legal duty to look after their charity’s money and other assets. In some types of organisations, trustees can be personally liable for any debts. Understanding how to read and interpret budgets at a basic level will always be important and if you are planning to become a trustee you may wish to take your knowledge to a more advanced level.

Although all organisations set budgets, there are a few differences between voluntary and private sector organisations:

• voluntary organisations do not talk about profit and loss but about surplus and deficit

• registered charities produce a Statement of Financial Activity (SOFA) rather than a profit-and-loss statement

• voluntary organisations usually produce an annual report which details all the funding coming into the organisation and going out (expenditure).

You will now look at the main elements of budgets namely income and expenditure.

What is in a budget?

Budgets are practical statements because the budget establishes and directs what activities and actions can happen within the organisation. It is also an estimate of what the organisation needs, that is, it addresses questions such as: how much will salaries be for the year, what expenses staff and volunteers might need to claim, what equipment is needed for this year. It is a way of hopefully avoiding nasty surprises later in the year. Clearly, before a budget can be set, people need to discuss and agree what the expenditure is likely to be in relation to the aims of the organisation for the year ahead. An organisation’s financial staff will usually be involved in the finer details of the financial information but ‘ownership’ of the budget should be perceived as wider and involving all levels of the organisation.

Budgets are usually internal documents although, for example, if you were writing a bid for funding to an external organisation, you would usually include a budget as an estimate of proposed costs. The organisation puts its financial information into the public domain through its annual report and statements for the Charity Commission if it is a registered charity.

In terms of content, budgets set out financial information about:

• income: the resources available to the organisation, different departments and projects

• expenditure: how these resources will be used.

Income and expenditure

Income is a list of all the money the organisation has coming in or has in the bank as reserves or surplus. If an organisation was not intending to spend the reserves they might not be mentioned, although the budget would usually refer to the expected interest to be earned for that year. In a very small organisation it may be easy to have a good idea of how the organisation is funded and where the money comes from, but in bigger organisations this may not be so apparent. It may be clear how individual projects are funded but not how the money for everything the organisation does is raised. One good way to find out is to look at the organisation’s annual report: it’s a requirement for registered charities to submit the report to the Charity Commission, and even organisations that are not registered usually produce an annual report for staff, volunteers and supporters. However, annual reports are primarily providing information about the previous year rather than the forthcoming year (although most organisations will look ahead too).

Charity reserves – the money that charities hold that has not been spent, committed or designed for a particular purpose– are a controversial issue. The media often criticises charities for holding large reserves whilst still doing fundraising appeals. Yet having reserves probably means that good financial management has been practised. Should the charity lose a key stream of income then they will have enough in the bank to cover the running costs until they can secure alternative income. This prevents their beneficiaries from being left without services that they may rely on. However, because of concerns about financial management in charities, the Charity Commission for England and Wales states that voluntary organisations should ‘explain and justify’ the level of reserves they hold. Therefore, registered charities need a reserves policy.

A budget aims to be a realistic view on how much money the organisation expects to have for the coming year. This can include grants from other organisations, membership fees, donations, trading activities, interest on reserves and so on. A budget is usually based on looking at previous years to get a sense of how much money came in. Therefore, it is important to have discussions amongst staff and with trustees in order to assess what is needed for the forthcoming year.

Income is usually a mix of unrestricted and restricted funding. Unrestricted funding includes income that can be spent at the discretion of the trustees. Restricted funding includes money given for a specific purpose within the wider objectives of the organisation. It might come from a funder or a public appeal. Restricted funding is becoming more commonplace as the amount of money available from government decreases. It involves a legally binding agreement through a contract, which sets out which services will be provided by the voluntary organisation and what it will be paid for those services. On the positive side, a contract creates a partnership between organisations and may provide a period of secure funding. On the negative side, voluntary organisations may feel these contracts mean a loss of independence and less choice or freedom in deciding which services to provide. This money must be isolated, that is, only used for the purposes for which it was given. The charity needs to have procedures in place for tracking the funding and what expenditure can be applied to it. Some voluntary organisations will also have endowment funds which the trustees are legally required to invest or to keep and use for the organisation’s purposes.

All this information about income needs to be set out clearly in annual reports and budgets.

Expenditure involves everything you might have to pay for and could include salaries to staff, volunteers’ expenses, building and energy costs, office and cleaning supplies, computer and website maintenance, publicity and so on. It is important to be realistic about costs, so a new budget would require some research into what new items might cost or how much a building costs to heat per month or per quarter, and so on. Organisations need to be accountable for their expenditure and ensure that income is spent according to their values and purpose. They should also look for cost-effective choices.

Balancing the budget

Organisations need to decide whether their budget should balance in any given year. In some cases, the organisation might want to project an imbalance of revenue over expenses (a surplus), perhaps because of plans for bigger expenditure the following financial year or just as a safety net. A deficit budget might also be acceptable in some cases, for example if there is an urgent need to spend on a big project, on investment in new staff or on service improvement. Trustees and staff will obviously need to look at the different implications. If they are not happy with expenditure exceeding the income then the organisation would need to rethink the plans. This might involve spending some reserves or postponing some activities.

However, the focus should not just be on whether the figures balance but also how well the organisation’s objectives and wider resources can be best used to impact on the maximum number of beneficiaries.

2.2 Sources of financial income

Being a voluntary organisation or registered charity does not mean that money has to come from a particular source. Most voluntary organisations get their money from a combination of sources and this helps them to be stable, protecting them from any sudden reductions in funding from one source.

The National Council for Voluntary Organisations (NCVO) divides charity and voluntary sector income into four main categories or streams. These are illustrated in a spectrum of income that goes from ‘asking’ for money to ‘earning’ money. Each stream is accessed and managed differently and relies on a particular relationship, either with an individual or an organisation. Having a good relationship with the donor, funder, purchaser or customer is important to being successful in raising money.

Figure 1  The income spectrum (NCVO, 2016).

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The graphic shows an Income Spectrum diagram from NCVO which includes the four main streams of income: Gifts (donations given with nothing of value received in return), Grants (money you’ve applied for, to carry out a specific activity), Contracts (an agreement to deliver a product or service, for a fee) and Trading (selling products or services on the open market). These streams of income are represented on a spectrum from ‘asking’ on the left, to ‘earning’ on the right. From left to right it shows Gifts then Grants then Contracts then Trading. The diagram also shows each income type's associated relationships – donors for Gifts, funders for Grants, purchasers for Contracts and customers for Trading.

Figure 1  The income spectrum (NCVO, 2016).

Money that is ‘asked for’ includes donations from members of the public or companies and grants given to a voluntary organisation by a funder for specific projects. Working with gifts or grants, you usually define the aim of your work and ask for support from donors or funders to make it happen.

Money that is ‘earned’ includes payment for goods and services sold to people by trading on the open market as well as through longer-term contracts with larger bodies such as government. With contracts and trading, the purchaser or customer usually defines what they want to pay for and you earn income by meeting their requirements. Each of these categories of income will be explored later in more detail.

Gifts

Gifts are also referred to as donated income. The money is freely given from donors towards the voluntary organisation’s work or activity. These donors could be members of the public or companies. There are lots of different ways that people can donate to a voluntary organisation.

Fundraising products

Another way of asking for donations from individuals is through creating fundraising ‘products’, such as child sponsorship. These ‘products’ parcel the large total amount of money voluntary organisations need to raise into smaller amounts that make all donors feel that they have been able to make a difference.

The figure below shows some examples of fundraising products from the organisation Good Gifts (www.goodgifts.org).

Figure 2 Fundraising products from Good Gifts.

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A screenshot from the Good Gifts website, showing things that can be bought via the site. A drawing of a man playing a violin sits above the heading ‘Music sessions for children in hospital’ and the amount of £8. An image of a saw and a hand-drill is shown above the heading ‘Tools’ and the amount of £7. An illustration of a hot cooked meal is above the heading ‘30 school dinners’ for the value of £9. Each item has an ‘Add’ button, for adding to the gift-seeker's virtual shopping basket.

Figure 2 Fundraising products from Good Gifts.

Popular causes

The annual UK Giving Survey asks people which cause area they have given to in the last four weeks. The top 5 are

Figure 3(Source:https://www.cafonline.org/docs/default-source/about-us-publications/caf-uk-giving-web.page 12)

Medical research (26%), animal welfare (25%) and children or young people (24%) were the most popular causes to donate money to. The survey report states:

Gift aid

The UK government has pledged to return the tax paid on money donated to registered charities via a scheme called Gift Aid. There are rules on which donations you can claim Gift Aid on, but put most simply, charities can claim back 25p on every £1 donated by an eligible individual. Charities will ask donors to fill out a short form confirming that they are a UK tax payer and are happy for Gift Aid to be claimed on their donation.

There is also a small donations scheme that allows charities to claim Gift Aid on the small donations from community events or street collections, without needing each person to fill out a form. Gift Aid cannot be claimed if the person giving the money receives something of value in return, for example if they were buying charity Christmas cards. Gift Aid is an important source of income for the voluntary sector.

Grants

Grants are also money donated to voluntary organisations. They are usually larger amounts of money than gift donations and are given by a funding organisation for a specific purpose or project.

The voluntary organisation will usually write an application to receive a grant from a funder. Grant funders include charitable trusts and foundations set up by companies or individuals to distribute funding to a particular cause: for example the Joseph Rowntree Charitable Trust, which was founded by an individual to address conflict and injustice, or The Lloyds Bank Foundation, set up by the bank to help to break the cycle of disadvantage in the UK. The government also gives out grants at both a local and national level. Most grants are given for specific projects or pieces of work covering a period of two to three years. Grants account for around 10% of the voluntary sector’s income.

In the UK, many voluntary organisations with an annual turnover of between £500,000 and £5 million have traditionally been ‘grant-dependent’. This means that they are receiving most, if not all, of their income from grants.

Even though they are getting harder to find, grants do have some big positives for voluntary organisations, including:

• once a grant is secured, it can often provide a large and reliable income for several years. This means grants often have a good ‘return on investment’ as the cost of securing and administering the grant is often relatively low in proportion to the amount of money received.

• grants will often pay for activities that might not be particularly attractive to the public or other supporters.

Charities can often build up good relationships with grant funders to make the case as to why an activity is important and help them to understand their area of work.

Contracts

Figure 4 Shaking hands on an agreement.

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This is a stylised drawing of two people in smart jackets shaking hands.

Figure 4 Shaking hands on an agreement.

A contract is an agreement to deliver requested goods or services. Because voluntary organisations have a social purpose, there is often a lot of overlap between what they want to achieve and what the government funds services for, for example helping people into employment or with housing, education or health needs. Voluntary organisations are often well placed to deliver government services because they can be very close to the communities they serve.

Delivering public services through contracts with government is a really important source of funding to the sector, accounting for 32% of all income in 2015/16 according to the UK Civil Society Almanac 2018. But unlike grants and gifts, this type of income has not been evenly spread across the voluntary sector. Larger charities have been growing rapidly through winning contracts. Smaller charities often find the administrative processes around winning contracts too complicated and might not be large enough on their own to deliver the full service required. Some small voluntary organisations have still been able to get involved, but often through supporting larger charities or companies to deliver part of a contract (sub-contracting).

Voluntary organisations have been criticised in the press for becoming too reliant on money from government because this threatens their independence, meaning they might feel they cannot speak up against government policies. Competing for contracts can also push them to reduce the quality of their services as they cut costs to be competitive. Voluntary organisations need to strike a careful balance. Just as with grants, if voluntary organisations can avoid being too dependent on money from one source, then they will be in a stronger position to decide which contracts to bid for and which to walk away from.

Trading

Voluntary organisations, including registered charities, are perfectly able to trade (sell) goods and services to individuals on the open market, for example they might sell goods like books, or services like training. There is an important distinction though between two types of trading:

• Primary-purpose trading contributes directly to the voluntary organisation’s mission or purpose (it is ‘on mission’): for example, an education charity selling a training course. The training course both meets the charity’s purpose of advancing education and also brings in income. Registered charities can do as much primary-purpose trading as they wish.

• Secondary trading also known as Non-primary purpose trading is done solely to bring in money that can be used to fund the charity’s other activities (it is ‘off mission’): for example, an animal charity selling Christmas cards. There is no reason for the charity to sell cards other than to bring in money. There are strict financial limits though on secondary trading, and once those limits have been reached the charity needs to create a separate trading company and run the secondary-trading activities through that. The profits can still be transferred back to the charity, but it makes sure that the charity is protected from the risk if the trading activities go wrong.

Generally, it is much better to raise money ‘on-mission’. This is because it means that all the money the charity is spending is going towards achieving its purpose. It also means that if you aren’t successful at raising lots of funds, at least the organisation will have spent its money on charitable activities, not fundraising ones.

Secondary trading can be much more risky for a voluntary organisation, because when it goes wrong they can lose money and still not contribute to their purpose or mission. The examples below illustrate what the risks can be.

As these two examples show, the primary purpose trading still has some clear benefits for the charity even though it hasn’t made money, whereas the secondary trading initiative was a disaster, costing the charity money and not furthering its cause.

An appropriate funding mix

Thinking back to the idea of ‘mission drift’, it is really important that voluntary organisations have the right funding to pay for the things that they want to do to achieve their purpose. Voluntary organisations should start by thinking about what they want to achieve, and then work out which types of funding are the right fit. Usually there will be several options, and for many registered charities the best choice is to raise some money that is unrestricted. This means that the donor or funder hasn’t specified what the money should be spent on and the charity is free to choose how, or when, to spend it. The two methods that raise the most unrestricted income for charities are individual donations (gifts) and selling goods or services (trading).

Having a diverse funding mix also allows charities to have more control over their activities and protects them from any sudden reductions in funding from one source. For example, income from legacies, whilst usually unrestricted, can be hard to predict and uneven: the charity cannot know when the donor will die and the donation be made. A voluntary organisation that is quite reliant on legacies might want to develop a trading idea or a grant-funded project to give the organisation a bit more stability.

Activity 6

Timing: Allow about 15 minutes.

Figure 5 Charity Commission for England and Wales.

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An image of the Charity Commission logo including their name and a silhouette of people and a landscape.

Figure 5 Charity Commission for England and Wales.

Registered charities must report their income and expenditure to the Charity Commission for England and Wales. This information is made publicly available on the Commission’s website and is a very useful resource for anyone wanting to find out more about a charity’s funding.

1. In a separate tab or browser window on your computer, open up the Charity Commission website: https://www.gov.uk/ government/ organisations/ charity-commission

2. Select ‘Search for a charity’ and in the purple charity search box enter ‘Windmill Hill City Farm’ (or other charity of your choice). Click on the organisation name when it comes up. On the charity overview page (at the top of the left-hand menu) you can see their total income and total expenditure.

3. Click on ‘Financial history’ in the left-hand menu. The financial history bar chart shows their income in the blue bars and expenditure in the orange bars.

4. Has their income increased or decreased in the last few years?

Discussion

Windmill Hill City Farm’s income increased from £917,226 in 2011 to £1,326,342 in 2015. This was an impressive increase of over 40%.

If you would like to find out more about Windmill Hill City Farm’s finances you can download their latest accounts from the ‘View accounts’ tab in the left-hand menu and then select the most recent year. These accounts contain a written summary from their Chair of Trustees near the beginning that gives a clear account of the different areas of the charity’s funds. Pages near the end of their accounts contain tables that list their different types of income. In particular, you can see a list of all the grants that they received within that year.

2.3 Raising more money

Whilst in the longer term it is advisable to raise income from a diverse range of sources, when considering how to raise more money for your work in the short term (the next year or so) the first strategy should be to maximise the kind of successful fundraising you do already. This is because completely new ideas usually carry the most risk: they take time, money and other resources to set up and there is no guarantee of success.

For every category on the income spectrum that was covered in Section 2.2, increasing success will rest on two pillars:

• Knowing and understanding your audience (donor, funder, purchaser or customer)

• The ‘fit’ of your organisation or project with their wants, needs and interests.

What this means in practice will now be considered in more detail for two of the income categories: gifts and grants.

Gifts from individuals: increasing the lifetime value

The quickest way to raise more money from individuals is to increase the amount your existing donors are giving you. This is often referred to as maximising the ‘lifetime value’ of a donor. It costs a lot more, both in terms of time and money, to recruit new donors, so it’s important to look after the ones you already have.

Larger voluntary organisations will often have a lifetime value plan that takes donors on a journey through different ways of giving that relate to their interests. For example:

Figure 6 The donor is recruited, perhaps at a community event. It is a face-to-face point of contact with a volunteer or staff member. They might be asked to make a donation at the event, but their details will also be taken so that the charity can get back in touch with them in the future Show description|Hide description A photograph showing a smiling lady in a sports top taking a clipboard and pen from another lady, apparently signing up to something. Figure 6 The donor is recruited, perhaps at a community event. It is a face-to-face point of contact with a volunteer or staff member. ...	Figure 7 After the event, they will then be contacted and asked to sign up to become a regular donor, perhaps by describing ‘X amount per month will allow us to do Y’ Show description|Hide description A photograph of a woman reading a letter. Figure 7 After the event, they will then be contacted and asked to sign up to become a regular donor, perhaps by describing ‘X amount per...
Figure 8 Once the person is signed up to a regular amount, the charity will then offer other opportunities to give such as: one-off appeals (for example when there has been a disaster that the charity is responding to); opportunities to buy merchandise (Christmas cards is the classic example); and becoming a volunteer fundraiser themselves, perhaps taking part in a sponsored challenge (such as a marathon) or organising a community fundraising event (such as a coffee morning) Show description|Hide description A photograph of three jubilant women in matching striped tops 'high-fiving' each other at the end of a charity fundraising race. Figure 8 Once the person is signed up to a regular amount, the charity will then offer other opportunities to give such as: one-off ...	Figure 9 At some point, the donor might be asked whether they feel able to increase their donation and will be introduced to the idea of leaving a gift in their will Show description|Hide description A photograph of a hand holding a pen and signing a document titled ‘Last Will and Testament’. Figure 9 At some point, the donor might be asked whether they feel able to increase their donation and will be introduced to the idea of ...

The trick to maintaining and maximising the loyalty of existing supporters is to think about two things:

• their motivation for giving

• their ability to give more.

You can try to work these two things out based on the information you have about the donor. For example, do they have a job? Where do they live? Are they involved in any hobbies? How did they first get in touch with the charity? Charities developing major donor programmes (i.e. when they’ll be asking for large amounts of money from an individual) often use wealth-screening companies to find out as much as they can about potential donors. Providing opportunities and information that are tailored to the motivation of those able to give more is most likely to generate more money.

Increasing the lifetime value of a donor has to be underpinned by strong marketing and communications. For instance, the organisation will need to keep in touch with donors, keep them informed about what the charity is doing and show them how their support is making a difference. This doesn’t have to cost a lot of money. Many charities communicate effectively with their donors using social media or emails.

Grants: Writing better bids

For organisations that receive a lot of their income from grants, making sure grant applications are successful is crucial. Otherwise you waste time, and also squander the opportunity as many grant funders ask that you don’t apply again for a while, sometimes several years.

Many voluntary organisations employ a member of staff with experience of writing successful bids. However, many do not and instead grant applications are written by whoever has the best knowledge of the project they wish to gain funding for or is the most skilled at writing.

There is no such thing as a typical grant application and no ‘one-size-fits-all’ approach: you need to tailor each opportunity to the funder you are approaching. This means that in order to write good funding bids, you probably need to spend sufficient time on each one. But before you begin writing, you first need to do the planning. In this stage make sure you do the following:

• Check:

  Check the funder’s priorities and preferences, and how they might fit with your aims.

  Most grant funders set out some criteria. Some are looking to support a broad group of people, for others it might be a specific geographic area or type of project. If you don’t fit their criteria, it’s not worth applying to them. Look at the funder’s’ website and the list of organisations they’ve funded in the past, and if in doubt give them a call to check. This research is much quicker than a wasted application.

• Think:

  Once you know what the funder is looking for and what they are interested in, try to put yourself in their shoes: think about how your project might fit with this and how it could be described to make the most of that fit.

  Think about what kind of evidence the funder will require to support your case. If you are applying to a larger trust or government body, they may want to see large-scale numbers to evidence statements. If you are applying to a smaller trust or company, they may respond better to the evidence from a case study or personal experience.

  Think about who you could involve in the preparation of your funding application. By drawing on the knowledge around your organisation you can strengthen your offer to the funder. For example, those delivering a service may have ideas about how the funding could be best used or management staff might have a realistic view of costs.

When it comes to sitting down and writing the application, consider that the funder will be looking for answers to the following questions:

• ‘What makes you special?’

  There are many thousands of voluntary organisations competing for funds. Think carefully about what really makes you different, whether it’s your people, your approach or the need you are tackling. Describe this and show your energy for your organisation and for the project you are looking to fund. That way you will infect others with your enthusiasm. Tell funders about your organisation’s track record: projects you’ve successfully managed and the difference they’ve made, other funding successes and experience of staff or volunteers.

• ‘So what?’

  Funders will want to see details of how you intend to spend the money: who is going to run the project, what are they going to deliver and when. But don’t forget that they will also be looking to know what difference you think it will make to the people or animals that you will work with.

• ‘How do you know?’

  You will need to give evidence for what you are saying: evidence of the need for the work, information about the people who will benefit or a demonstration of past successes. By using a client survey to establish need, or drawing on the local area statistics on deprivation, health or housing, you can add authority to your case. Remember that you are writing for humans though and that humans love stories, pictures, videos and real-life case studies as well to engage them.

  You will also need to tell the funder in the application how you plan to assess the progress of your project by collecting evidence as you go. It is best practice for funders to allow you to budget around 5–10% of the overall budget for ongoing monitoring and evaluation, although this will vary by funder.

When writing, consider that funders have a lot of papers to read and will not re-read muddled applications. Make yours as clear and concise as you can. Only use technical terms if the funder will understand them and if you’re sure they add value. Once you’ve written it, get someone else to check it before you submit it.

Don’t forget that funders want to spend their money: you just need to make it easy for them to support your project. If you submit the application and it isn’t successful then don’t be afraid to ask the funder for detailed feedback. It will help you to make the next application better.

Ethical considerations

When fundraising, voluntary organisations face a dilemma in balancing the need to raise as much money as possible for their cause with doing it in an appropriate and ethical way, particularly from members of the general public and companies.

From the public

The pressure on charities to increase the amount of unrestricted income they generate from the public has led some to employ some fundraising practices that have been criticised. You may have seen some of the press headlines about charities repeatedly contacting donors and sending emotive material to them. The possible negative impact on vulnerable donors, such as older people, was of particular concern. Whilst the majority of charities were not associated with the scandal, it will have a lasting impact on how all charities fundraise.

Figure 11 Press story about vulnerable donor.

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News headline reading ‘For Olive Cooke’s sake, charities must be less brutal’

Figure 11 Press story about vulnerable donor.

Until recently, charities were most concerned about not appearing to spend too much charity money on fundraising. They wanted to be able to say that as many ‘pennies in the pound’ as possible went straight to their cause. So they used whichever fundraising tactics generated the most money for the smallest cost. Door-to-door fundraising, direct mail and street fundraising all generated very good returns. They were therefore seen as sensible, ethical choices because they were making the best returns from the charity’s investment and had the smallest financial risk.

However, the mood about what is ethical is now changing with the attention on any possible negative effect on the individual donors themselves. The press stories highlighted that some individuals had been bombarded by fundraising requests from a small number of charities, causing them considerable distress. These cases galvanised action to increase regulation of charity fundraising. The voluntary sector established a new Fundraising Regulator with a code of fundraising practice, a complaints system for the public and a fundraising preference service to allow donors to remove themselves from email and phone lists.

A fundraising case example

Figure 12 Windmill Hill City Farm website homepage.

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The figure shows the homepage of the Windmill Hill City Farm website. An image of goats sits above text that reads ‘Windmill Hill City Farm is a charity that provides recreation, education and therapy using food, farming and the environment as a theme.’ The top navigation bar of the website is shown, including tabs such as ‘what’s here’, ‘what’s on’ and ‘about us’. There are buttons at the top of the screen shot for actions to make a donation, volunteer or become a member. The organisation’s contact details and logo are shown, along with a strapline of ‘A place where people grow.’

Figure 12 Windmill Hill City Farm website homepage.

Windmill Hill City Farm in Bristol is a registered charity with a very diverse and sustainable mix of income across all the four income categories. This includes:

• Gifted income: Requests for individual donations and a farm membership scheme.

• Grants: From a range of funders for projects such as their ‘People Grow’ project to develop community gardens engaging families, schools and the community in general.

• Contracts: The charity delivers services for the local authority including a drop-in mental health group, two groups for older people and several sessions of supported volunteering for people with learning difficulties or mental health issues.

• Trading: They sell a number of things that contribute directly to their mission (on-mission) and those that are purely to raise money (off-mission). The on-mission trading includes courses and workshops, nursery and other childcare and services for schools. The off-mission trading includes venue hire, a gift shop, café and meat production.

As you will have already noted from the previous topic, the financial history from the Charity Commission website shows that the organisation increased its income from £917,226 in 2011 to £1,326,342 in 2015. In the context of the recession during those years, when many charities struggled to maintain their levels of income, this was an impressive increase of over 40%.

In order to raise more money for their work, the staff and trustees of Windmill Hill City Farm have squeezed as much value as they can out of both their physical space and the relationships with their supporters. This is a great strategy: making the most out of the assets they have.

One of the key fundraising relationships that they have maximised was with parents of young children living in the Bristol area. They have increased the lifetime value of those relationships by offering lots of opportunities for the parents to engage with the charity and to donate money and purchase goods or services.

On their first visit to the farm, as well as visiting the animals and playground, parents can:

• buy lunch or a coffee in the café

• buy a gift from the shop
• take part in one of the free or charged-for children’s activities
• drop some coins into a donation box.

Hopefully, they will enjoy their visit and have a good impression of the farm. And because there are lots of different things happening at different times of the year, parents are likely to return regularly with their young children, spending money each time.

The parents’ relationship with the farm may then lead them to:

• choose to send their children to nursery there
• recommend the farm to friends and school teachers
• join the membership scheme
• choose to hire a room at the farm for their child’s birthday party.

When there are special appeals, such as to renovate a pig sty, these parents are already supporters of the farm and are likely to donate.

The farm has a very broad appeal. Their strapline is ‘A place where people grow’. This shows that the farm is a physical location, where people grow things and look after the environment, but that it is also where people themselves are nurtured and grown. This will help them to be flexible in their grant applications and to find a good match with funders.

2.4 Key points from Section 2

In this section, you have covered the following:

• The difference between restricted and unrestricted funding, the benefits of the latter as the most flexible income for voluntary organisations, and how to treat it differently in a budget.
• The four categories of income for voluntary organisations that sit on a spectrum from ‘asking’ to ‘earning’: gifts, grants, contracts and trading, and the types of activity that underpin them. You have considered how important it is for voluntary organisations not to become too reliant on just one source of income but to achieve the right funding mix to achieve their purpose. You have also explored the difference between raising money ‘on-mission’ and ‘off-mission’ and why charities need to take extra care with ‘off-mission’ fundraising.
• Raising more money, in the short term, requires voluntary organisations to build on what they already do and develop their relationships with donors, funders or customers. This means getting to know them better, working out their motivations, needs and wants, and emphasising the parts of the voluntary organisation’s work that best fit with those.
• The Charity Commission website is a rich source of information for finding out about a voluntary organisation's finances.

2.5  Section 2 quiz

Well done, you have now reached the end of Section 2 of Taking part in the voluntary sector, and it is time to attempt the assessment questions. This is designed to be a fun activity to help consolidate your learning.

There are only five questions, and if you get at least four correct answers you will be able to download your badge for the ‘Money’ section (plus you get more than one try!).

If you are studying this course using one of the alternative formats, please note that you will need to go online to take this quiz.

Glossary

crowdfunding

A relatively new method of raising funds, usually online. A specific project, activity or item is described, with a target amount that will pay for it. Supporters are then invited to pledge money to make it happen.

direct mail

Fundraising appeals sent by post.

endowment funds

Money given or left to the charity from someone’s will. Charity law specifies how this money can be used.

open market

An unrestricted market where any buyer or seller can trade goods and services. In the case of the voluntary sector, usually voluntary organisations develop the goods or services first, then advertise and sell them to individuals or other organisations.

purchaser

The individual or organisation that is purchasing goods or services via a contract. Often also called the ‘commissioner’.

street fundraising

When charities ask for donations, either immediate or subsequently by direct debit, from people on the street.

References

Acknowledgements

This free course was written by Julie Charlesworth (tutor at The Open University) and Georgina Anstey (consultant from the National Council for Voluntary Organisations).

Except for third party materials and otherwise stated (see terms and conditions), this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Licence.

The material acknowledged below is Proprietary and used under licence (not subject to Creative Commons Licence). Grateful acknowledgement is made to the following sources for permission to reproduce material in this free course:

Figures

Figures 1 and 3: adapted from National Council for Voluntary Organisations (NCVO) (2016) UK Civil Society Almanac [Online].

Figure 2: courtesy Good Gifts, https://www.goodgifts.org/.

Figure 4: © Meilun/iStockphoto.com.

Figure 5: https://www.gov.uk/ government/ organisations/ charity-commission, https://www.nationalarchives.gov.uk/ doc/ open-government-licence/ version/ 3/.

Figure 6: Steve Debenport/iStockphoto.com.

Figure 7: © Yarinca iStockphoto.com.

Figure 8: © my-site/iStockphoto.com.

Figure 9: © BrianA Jackson/iStockphoto.com.

Figure 10: © o01shorty100/iStockphoto.com.

Figure 12: courtesy http://www.windmillhillcityfarm.org.uk/.

Every effort has been made to contact copyright owners. If any have been inadvertently overlooked, the publishers will be pleased to make the necessary arrangements at the first opportunity.

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