What are the barriers to financial sustainability?

Published: 11/11/19 | Categories:
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Author: Dewi Smith

In this blog, WCVA’s Sustainable Funding Manager Dewi Smith outlines the issues raised at our funding roundtable discussion last November – along with some practical solutions.

Data from WCVA’s Third Sector Data Hub has shown that third sector income in Wales increased between 2011 and 2016. However, income levels per head are still significantly lower than in other parts of the UK.

The number of voluntary organisations active in Wales is estimated at 32,200. Most are pretty small in terms of income, with relatively few having a turnover of over £1 million a year.

WCVA arranged the sustainable funding roundtable discussion in November to try and get to the bottom of this issue.

We got a mix of people from voluntary organisations, Welsh Government, funders, local government, academic institutions and charitable foundations to hash it out and try and understand why we’re struggling in comparison with the rest of the UK.

This week we’ve released a report to support our findings – but below I’ll run through some of the key points that arose, including internal and external factors that are affecting us all.

Internal barriers

Time to think

This came up a few times – we just don’t have the time, or the staff, to sit down and plan out a funding strategy. There are only 250 odd ‘fundraising’ jobs in Wales, from a pool of 100,000 potential roles.

If you think about your work across the sector, I’m sure you’ll find that a lot of it consists of ‘putting out fires’ – a cycle of addressing short term problems that arise rather than thinking towards the future and developing our services.

We need to combat this way of operating if we want to compete for sustainable funding on a national scale.

Skilling up

Many people seem to just ‘fall’ into fundraising roles rather than seeking them out. They often start out as enthusiastic volunteers who quickly learn on the job.

Unfortunately, this often means that they aren’t as well equipped to deal with the challenges generating charity income can bring.

And this goes all the way up to board level. Garfield Weston research discovered that although boards are involved in fundraising activity, many aren’t engaged at a strategic level. This can mean that their decisions are led by opportunity rather than strategy.

Training in subjects surrounding fundraising – like bid writing and strategising – can help engrain the process in your everyday thinking.

Demonstrating impact

We’re not alone in this issue – many industries struggle with demonstrating their impact.

But many funders have reporting requirements that are so time consuming, smaller organisations can’t even consider them (see ‘Time to Think’).

A combination of smoother reporting systems and internal training should help organisations show the value of their work.

External barriers

Commissioning

‘…the funding environment has not favoured SMCs (small and medium sized charities) …they receive a much smaller proportion of local government funding (16 %) than larger charities (84 %) …’
(p2, The Value of Small, Institute for Voluntary Action Research, 2018)

Public sector commissioning is getting broader and is favouring larger charities who have more capacity to deliver across the board.

Also, when there are opportunities for charities to collaborate on bids, smaller organisations are warier of being exploited by larger partners and tend to shy away.

Ambition

Wales is a beautiful country, but it’s also very small. This works on certain levels. It makes communication a bit easier, less ground to cover, everyone knows each other…but it also sometimes limits our sight of the bigger picture.

When it comes to bidding, smaller organisations often find they get squeezed out by larger organisations with greater capacity to strategise.

There seems to be a slight crisis of collaboration in Wales’ third sector – and work is needed to ensure that smaller organisations can be competitive in the current environment.

….Brexit

I know you’re sick of it but it’s going to majorly affect how we all work. The worst thing is, we don’t even know how.

There are questions about what impact Brexit will have on us all. The lack of clarity around successor funds and the general future of the country make the funding landscape a bit more treacherous.

WCVA is receiving funding from the EU Transition Fund to try and get a better understanding of the likely impact on community services. We’re also part of the Wales Civil Society Forum on Brexit.

Related links: Is your organisation prepared for Brexit? Have a look at the Getting Brexit Ready guide from Wales Civil Society Forum on Brexit.

Potential areas for growth

However, it’s not all doom and gloom – data suggests several potential growth areas for the sector as well. Here’re a couple of ideas to diversify your income streams to become more resilient.

Relationship building

Trusts and Foundations like ‘relational’ funding – working in partnership with the people they fund to achieve impact together. If you’re bidding for funding, think about how your project matches the mission of your funder – remember they’re charities too!

Government funding accounts for 46% of the sector’s income – we need to embrace a more co-productive approach to involve communities, and future funding needs to encourage this approach.

Legacy fundraising

As Rob Cope highlighted in a previous blog for WCVA, legacy fundraising has huge untapped potential in Wales. We need to be braver at broaching the seemingly difficult topic of Wills.

There are more solutions, along with greater detail on the above points and some key shared outcomes to us to aim for in our new report ‘Sustainable Funding for the Third Sector