Engaging with and supporting good causes

What’s the overall picture?
According to NCVO’s 2010 Almanac, the two principal funding sources for the non profit sector are individuals and statutory funding. The presaged cuts in public funding will have a significant impact; this impact will be different in different areas of the sector according to their dependence on this source of income.

2007/8 figures ascribe £13.1billion or 37 per cent of total income to individual giving with statutory giving marginally lower at £12.8billion or 36 per cent. These two sources of income make up 75 per cent of the sector’s total income; both have increased significantly over the last 10 years.

Who is most vulnerable to cuts in statutory funding?
NCVO (2010 Almanac) reports that 70 per cent of income generated by employment and training organisations is derived from statutory sources. More specifically, law and advocacy, education, housing and social services receive around 50 per cent from statutory sources. These are therefore the sub-sectors that are at most risk from austerity measures involving public spending cut backs.

How is income delivered to the sector?
Statutory funding is delivered to the sector in various ways which can be summarised as voluntary income (grants) and earned income (contracts).

Since 2000/01 the amount of earned income produced by non profit organisations has increased by 76 per cent, largely as a result of more non profit sector involvement in service provision. Earned income from statutory sources in the form of contracting increased by 128 per cent over those seven years and now amounts to £9.1billion. At the same time, grants from statutory funders declined £0.4billion to £3.7billion.

In recent years most statutory funding has been routed through local authorities, some 52 per cent or £6.6billion in 2007/8. The next biggest chunk comes from central government and the NHS, (41 per cent) with European and international statutory sources providing just 7 per cent.

Do funding sources differ depending on the size of organisation?
Generally speaking, larger organisations receive more statutory funding; 79 per cent of the sector's statutory income is received by just 3,742 large and major organisations. In contrast, small and micro organisations receive only 3.3 per cent of total statutory funding to the sector.

The main source of income for nearly two thirds of micro organisations and nearly half of small organisations is individual giving.

See the Individual and small-scale giving section for more information on this. For comprehensive and detailed insights into charitable giving, see Professor Cathy Pharoah’s Market Monitor which provides a regular and reliable source of robustly researched and digested data.

How can individuals engage with and support good causes?
To be effective, non profit organisations need to have reasonably diverse sources of reliable income and to be demonstrably effective in how funds are spent in delivering their mission. Careful and innovative management of both income and spending allows for sustainability and resilience.

In 2008/9 NCVO reports that 54 per cent of the UK adult population donated in a typical month, some 2 per cent down on the previous year; this is attributed to the effects of the recession on individual spending. Similarly the amount given saw a decline. Donors still gave, but gave less.

The sector is heavily dependant on major donors, 7 per cent of the donor population gave almost half of donations received. More women (58 per cent) than men (49 per cent) give to charity but men tend to give slightly larger donations. There is some evidence that giving increases with age. The 65 plus age group has more donors than any other (61 per cent).

There are numerous ways in which individuals can engage with and give to non profits.

We can donate financially and we can donate our time and talent in a way which reduces the amount that would otherwise be spent.

Financial donations are most valuable to a non profit when they are given over time and reliably and through a tax efficient route.

Regular giving and gift aid
Making a regular gift by standing order or direct debit from your bank account accompanied by a gift aid declaration to cover all such gifts from you is the optimum way to donate from the charities point of view. They can rely on the income and know how much and when it will be, they can receive the gift-aided uplift back from the Inland Revenue, they are administratively straightforward and inexpensive to process.

So for example a monthly gift-aided and committed donation of £20, gift-aided, with a prevailing basic tax rate of 25 per cent means that the gift costs the donor £20, an additional £5 (25 per cent) is added by the Revenue giving the non profit £25 to spend in achieving its charitable purpose.

Increasingly, non profits are seeking to benefit from the gift aid uplift on one off donations by asking individuals to make use of gift aid envelopes which carry a gift aid declaration or to add your own declaration when responding to a particular appeal.

To benefit from gift aid, the donation must be made by someone who pays income or capital gains tax at least equivalent to the amount of the uplift. It requires the donor to give their name and address to the benefiting organisation alongside. If you do not wish the organisation to contact you for other purposes you can stipulate this.

Gift–aided sponsorship is also actively encouraged and provided for by good on-line giving facilities as well.

Gifting shares
It is also possible for individuals to gift shares to non profits tax effectively; where this is done professional advice is likely to be beneficial.

Legacies
Legacies are another way of donating whereby an instruction is contained in your Will to distribute cash or other assets to a named non profit organisation. Your solicitor can readily advise on how to do this.

CAF cheques
CAF (Charities Aid Foundation) provide CAF accounts whereby individuals can lodge a lump sum into their CAF accounts and then write CAF cheques in favour of particular non profits as and when they wish to donate. CAF cheques may only be used for donations and not for purchasing items being sold in aid of charity.

Employee-giving
Regular giving schemes such as payroll giving enable regular amounts to be deducted at source and passed on to non profits if employers offer such a facility. Sometimes employers will commit to matching (sometimes up to a fixed cap) their employee’s committed giving in this way.

Employers may also encourage staff to undertake fundraising activities the proceeds from which they may match and they may also encourage staff to volunteer time, during work hours, in working as a volunteer in a charity or other non profit organisation.

Encouraging children to give
School children are frequently encouraged by their schools and supported by their parents to develop the habit of engaging with non profit organisations by a committed programme of fundraising activities and events and volunteering where appropriate.

Later on, in tertiary education or through social ,sport and leisure groups are motivated to work together to devise and participate in fundraising for chosen non profit beneficiaries; these include organisations such as Rotary, Round Table, Inner Wheel, the WI, and a host of special or mutual interest groups Religious groups are regular fundraisers and donors to non profits.

Using donated funds
Funds can be donated for general use by a non profit, unrestricted funds, or for a particular purpose, restricted and project funds. Non profits must have a healthy mix of these types of funding to be sustainable and effective as there are core costs which must also be funded without which it cannot deliver its mission.

The most beneficial form of giving is regular, committed and tax efficient giving over an extended period. Increasingly, non profits view such donors as crucial stakeholders with whom they want to share the journey of achieving their mission.

KnowHow NonProfit is a new portal for people working in the third sector. It covers all areas of setting up and managing a non-profit organisation. It is the first port of call for people wanting to share ideas and expertise about their work, and engaging and supporting good causes in non profits.