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.

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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.

Activity 3

Timing: Allow about 10 minutes.

A voluntary organisation’s website will often give lots of information about where they get their money from. In a separate window on your computer, open up the website of Windmill Hill City Farm in Bristol: www.windmillhillcityfarm.org.uk [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)]

(We have chosen one particular charity as an example for the purpose of this activity. If you wish to look at another charity’s website or compare this charity to another charity of your choice, please do so.)

Have a look around the website. Does it give you any clues about where their money comes from?

Some key things to look out for:

  1. A button to ask you to donate, or a section of the website called ‘Support us’.

    This shows that the organisation is asking for money to be donated from the public (gifts).

  2. Thanking funders for their support.

    This is a sure sign the organisation has received grants for their projects.

    (Tip: Look at ‘What we do’, and then ‘Projects’. Click on some of the projects for more information about them.)

  3. A section of the website aimed at professionals – perhaps social workers or other public sector workers.

    This suggests that the organisation is likely to be involved in running public services through an agreement with the government (contracts).

    (Tip: Click on ‘What we do’, then ‘Health and social care’.)

  4. A shop or cafe. Do they sell products, merchandise, gifts or cards? Perhaps tickets for events?

    This suggests that the organisation is selling products or services directly to the public (trading). (Tip: Click on ‘What’s here’ from the main home page.)

Balancing the budget

Gifts