1/4

Three major themes emerging
from academic literature

• The risks of diversification

• The importance of non-financial resources

• Unrestricted funding

2/4

The risks of diversification

• According to some academics, scaling up is not always a good thing and having many different types of income streams can be difficult to manage. Business models and techniques are not always appropriate as VCOs do not necessarily work like businesses.
• ‘Private sector models of growth and revenue diversification do not directly translate in the non-profit world.’
• Revenue diversification can lead to resource dependencies through having too many ‘masters’, as well as additional layers of infrastructure and new costs to meet management requirements.

3/4

The importance of non-financial resources

Writers highlight VCOs’ other useful resources:

• Links and mutual trust with communities
• Legitimacy with stakeholders, the community, volunteers and the public
• Networks and collaborative support

Some may be intangible – including the ‘very often underestimated social capital, including informal relations, local trust and voluntary engagement’. Some argue for the idea of ‘social sustainability’ – assessed through organisational and advocacy capacities, service provision, public image and reputation – or a ‘sustainability formula’ of three primary dimensions: leadership, adaptability and programme capacity.

4/4

The importance of unrestricted funding

As we highlight in Thinking about Core Funding ‘a lack of core funding can cause or compound other organisational challenges, including staff shortages, inappropriate premises and a lack of capacity to meet beneficiary demand’. This links to other arguments that over-dependence on restricted funds is an indicator of potential unsustainability and an inability to undertake strategic planning and development.

1/8

2/8

The new normal - less funding, more need

Profound structural changes have affected (and continue to affect) VCOs in three significant ways:

1. Deep cuts to public services: Welfare expenditure and local authority budgets have adversely affected disadvantaged communities, resulting in increased need (e.g. for the local support services provided by VCOs)
2. Direct funding cuts
3. Shift of social delivery towards market mechanisms: The shift has tended to favour larger organisations, often at the expense of locally designed, community-led approaches

3/8

Keeping services running
– what really matters is the work

‘Sustainability is about service continuation, which depends on the charity being there. It is important because the needs of other communities continue to grow and they have nowhere else to turn if we are not there.’ - Filsan Ali & Anne Pirie, Midaye Somali Development Network.

There is a risk that less time (and even value) is given to the work itself than to organisational and financial features. Funders need to ensure that their judgements and decisions give primacy to the work.

4/4

Pressure on management

• Cuts in public funding; short term contracts with more demanded for less
• Rising needs amongst beneficiaries

5/8

The cost of contracts

• Inexperienced commissioning staff
• Difficult process: The difficulty of winning and managing public service contracts with public and private sector organisations – onerous reporting, focus on unit costs, penalties for missed targets and rigid accountabilities

6/8

The experience of assessment

• Management capacity: Funders like to see improved governance, diversification of income, better monitoring of outcomes, improved financial systems and strong external networks. VCOs need funding, especially core funding, to give management the capacity to lead and adapt in a time of rapid change
• Security and longevity of funding: In an environment where public funding is often awarded on an annual basis, longevity of funding is important because the needs being addressed require long-term engagement. Funders who expect quick transformations from short-term funding for long-term work are a particular frustration, as are those who offer no feedback to unsuccessful applicants

7/8

The need for core & longer term funding

‘Many funders only offer project funding. What is desperately needed is core funding. It is very difficult for grassroots organisations to plan ahead if they are inadequately resourced. Much of the work is by its nature long term, for example FGM and mental health work which requires clients to be worked with sensitively over the longer term.’  Filsan Ali & Anne Pirie, Midaye Somali Development Network

‘We do not want to be in a position where we have set something up which we cannot continue because the estate has been let down so often. You cannot make effective changes in three years and most funders only fund for 12 months. We have to think of the long-term.’ Keith Cartner, Mirehouse Residents’ Group

8/8

The fantasy of self-sufficiency

‘The implicit agenda seems to be “when will you stop needing to be funded by third parties”, but this is a dishonest position. Charitable activity is about helping people who can’t buy services without intervention. Some income is sustainable (e.g. from personal budgets) but mostly you are making a case to a third party who has funds so that people who cannot afford to pay can get the help they need.’ - Nick Dunne, Bede House

1/7

Points made by funders

• Sustainability in the new context

• Life beyond the grant

• Resilience and the capacity to survive

• Sustainability as a negative concept

• Sustainability as a concept drained of meaning

• Sustainability not always the priority

• Closure can sometimes be the best solution

2/7

Sustainability in the new context

‘The Foundation model is bust. Foundations have been used to providing funding which is the icing on the marzipan. That is no longer realistic.’ - Paul Streets, Lloyds Bank Foundation for England and Wales

‘For me, sustainability becomes about an organisation’s ability to understand, adapt and plan for its future. That’s very different from way back when we’d ask ‘what’s the exit strategy’ and the answer would inevitably be: 'Well, hopefully they will demonstrate the impact in the middle of year two and the local authority will pick it up’. Of course that’s just not real anymore.’ - Gilly Green, Comic Relief

3/7

Life beyond the grant

Funders care about sustainability in different ways.

• Reasonable assurance that organisations have ongoing capacity to deliver
• VCOs to find alternative sources of funding (when the funding relationship comes to an end) and not to be wholly dependent on grants
• Their grant and engagement with a grantee will leave the organisation stronger at the end than at the beginning, and will offer additional support to help with organisational development
• Grantees to understand the present well enough to plan for the future, with funders taking more responsibility to encourage greater honesty

4/7

Resilience, fragility & the capacity to survive

Coping with changes and shocks means ‘resilience’ is often more relevant. For organisations which form a critical part of a local community or are the only local player, resilience is essential. Even seemingly robust organisations can suddenly fail with drastic changes in circumstance if they are too big or do not have enough time to adapt.

‘Fragility’ is not necessarily the opposite of sustainability and some foundations are willing to take more risk to try something new. Organisations are sometimes fragile because of their context. Some are fragile by choice, travelling lightly to create change and moving on when their task is done.  

5/7

Sustainability as a negative concept

Promoting sustainability can privilege organisational strength and survival over the work. This may promote models of practice which are not the best for beneficiaries but simply the best funded, at the expense of ‘creative disruption’ by people trying out new ways of working.

The rapidly changing social context means sustainability often carries unrealistic assumptions about the degree to which any VCO can plan a route to long-term continuation.

Sustainability can be perceived as a shorthand for a negative form of risk management, or has been drained of meaning through over-use as a ‘feel good’ word for both funders and funded – something to be ticked off on a checklist.

6/7

Sustainability not always the priority

For some funders, the sustainability of the organisation is not the be-all and end-all of their assessment. For experimental work, it matters that an organisation is there long enough to see the work and learning can be distilled and applied. The organisation is sometimes simply the vehicle – success might be passing the model onto others who can use it on a larger scale. 

In a fast-changing environment where funding can grow and recede with little warning, organisations may need to wane as well as wax, or merge or close rather than limp along ineffectively.  Funders can help by encouraging the most creative solutions which are in the best interests of beneficiaries.

7/7

Closure can sometimes be the best solution

Sustainability carries an implicit assumption that continuation is success and closure is failure.  However, many funders recognise that there are occasions when closure is the best way of securing the future of good work. For example, by transferring remaining assets to an organisation better equipped to continue or transition the work.