Where to Look for ‘Difficult to Fund’ Costs

Introduction

‘Difficult to fund’ costs for many not-for-profits usually means core costs. This can be a tough nut to crack. Raising funds is enough of a challenge in itself but core costs are often viewed as ‘not sexy’ and something that donors don’t want to give towards.

Let’s first outline what we mean by ‘core costs’. These are the central costs involved in running an organisation such as:

• General costs

• HR

• Compliance and governance costs, including those around finances/accountancy (audit, processing payments, etc.)

• Management and admin salaries

• Fundraising operations

Where to Start

One way to start ‘finding’ these costs is to use a full cost recovery approach to accounting and budgeting for your work.

This means that all the core costs associated with an organisation are allocated across its project areas, usually using the calculation of how many staff are involved.

The advantage of this is that it covers your core costs, but as with many things there is a downside too! Unfortunately, it can make some of your projects and activities look expensive, as well as needing a robust finance system to allocate, track and calculate the actual costs.

Nevertheless, this is preferable to many funders who feel that adding an overall admin-type percentage to all project work is inappropriate. There are direct and indirect costs for most projects, but to make something happen you need a mixture of both.

Check out the following website for more information on full cost recovery: Project budgeting and full cost recovery | NCVO

Many organisations successfully tackle this by re-packaging and turning a core cost into a project cost. Some core costs can be redefined as projects in their own right and direct approaches for funds can be made for these.

So get out your budget spreadsheets and have another look at what you could make a good case for reinventing. The key to doing this successfully is to link them to the benefits for your charity’s users.

A quote from the consultant, speaker and author, Kay Sprinkle Grace often comes to mind when thinking about securing core costs, “People give to organisations that meet needs, not to organisations that have needs.”

Generating Unrestricted Income

Even if the above does not offer a full solution, it can be a partial answer to the question of how to raise some of those difficult costs. Let’s now go further to help you tackle this challenge.

Another way to cover core costs is to use fundraising methods or techniques that generate unrestricted (or general) funds.

This can mean:

• Cash appeals to individuals

• Membership schemes

• Lotteries or raffles

• Events

• Community fundraising

• Corporate partnerships

• Legacies

• Trading

• And more…

All of these bring in money that can be spent in whatever areas you need cash for.

Consider ramping up the ways that individuals can support your organisation as the following all can generate unrestricted income:

• Gift aid

• Payroll giving

• Membership schemes (widen so you have junior, adult, seniors, family and one plus one membership packages)

• Adoption schemes (growing in popularity with heritage organisations and popular as an alternative and more meaningful gift)

• Committed/regular giving

• Personal friendship groups

Commercial trading is a key way to provide an unrestricted income stream for lots of heritage organisations. This covers a wide range of opportunities including shops, catering, merchandise, consultancy, training, facilities hire, etc. Are you making the most of this opportunity?

You may also look to secure corporate sponsorship for some of your fundraising costs, such as the expenditure surrounding a Summer Appeal to individuals or the costs associated with putting on a fundraising event. This will then mean that your net income is higher as you’re not having to take out all or some of your expenditure from the proceeds, meaning the contribution is higher.

Finding Costs Creatively

Anyone involved in fundraising should be prepared to deploy some creativity and imagination; this should be reflected in your fundraising strategy (another reason for having one!). Over time it is possible to build up general income streams that address the core cost challenge.

Seek gifts-in-kind and pro-bono support for areas of expenditure in your budget. This reduces the need to raise funds to cover those costs. If you can’t get things for free then always ask for a discount.

Grant Funding for Core Costs

If you still need some cash to cover the things that you can’t repackage, get as a gift, etc. the good news is that more and more grant-makers are recognising the need for organisations to have unrestricted / core funds. Many now state that they will accept applications for these costs.

For example, The Fore will make grants of up to £30,000 which may be spread over one to three years. These are unrestricted grants that can be used for any purpose, including core costs and capital funding. They accept applications from registered charities, community interest companies, charitable incorporated organisations and community benefit societies, as long as their income in the last completed financial year is under £500,000.

For more information, see: Vision, Mission and Purpose – The Fore

Key Resources

A number of umbrella organisations exist whose purpose is to support Third Sector research and compile information to help identify funding.

For example, Hunts Forum has a page on core cost funders (and their definition is ‘funding running costs that most others wouldn’t’!).

For more information, see: Core Cost Funders | Hunts Forum.

Another example of such lists can be found at: Funding to Support Core Costs of Small Charities – Community360.

Final Words

Good luck! Perseverance pays off when it comes to sourcing difficult costs, as does approaching your funding needs from a different angle.

For more fundraising focussed resources for Heritage Organisations, click here.

This article was written by Gill Jolly (of Achive Consultants Ltd.) on behalf of The Chartered Institute of Fundraising for the Rebuilding Heritage training programme.

Stock images from Pixabay.

More Resources

Video

What Does Fundraising Look Like For Heritage in 2023?

The Chartered Institute of Fundraising presents a webinar examining heritage fundraising trends in 2023.

Watch the video

Guide

Needs-Led Fundraising for Sustainability

Your comprehensive guide to writing strong fundraising bids for the work that your heritage organisation really wants to achieve.

Read the guide

Video

Maximising Your Fundraising

A recording of the webinar on how to maximise your fundraising income in challenging times, presented by Chartered Institute of Fundraising, discussing how heritage organisations can plan fundraising during these challenging times. This session took place on 26 November 2020.