Funding

No matter how small a project is or how large it becomes, funding is always an issue. We have put together some advice and guidance on where to look and how to go about acquiring funding for your community work.

Moneystack

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Funding Sources


For for up to date funding information we would recomend visiting the NCVO website: Funding Central which provides the latest information about sources of funding for community work and gives you free access to over 4000 different grants and contracts. 

Funding Central

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Developing Sustainability

Transforming your community will take time, so your project must be sustainable.  Contrary to widespread practice, it is not usually the case that organisations are made stable and sustainable by securing successive grants.

This approach can cause projects to become trapped in cycles of reinvention – always seeking a new way of attracting a funder, and always at risk of the consequences of rejection.

The most sustainable organisations generally have several diverse sources of income.  Some of the most popular are grants from statutory agencies and trusts, traded income, loan finance, individual donors and corporate sponsorship.

The clever organisation will try to secure the sort of funding that is most appropriate to its stage of growth and purpose.  Grants, for example, are most appropriate for starting projects and seeing them through their early stages of growth.  Trading can be an excellent way of weaning an organisation off grant income and creating a platform for further growth.  A funding strategy can help an organisation to choose and use funding wisely.

What’s a funding strategy?

A funding strategy need not be a complicated document.  It should simply help you to clarify what your organisation wants to do, work out how much it will cost, and think about what sort of funding would be most suitable.  The greatest benefit of making a strategy is that it puts you in control – your organisation becomes driven by your mission, not by chasing funding opportunities.  It will also help to ensure that the costs of fundraising are reclaimed, and enable you to use the available sources of funding as effectively as possible.

In a nutshell, the stages of a fundraising strategy are as follows:

  • Clarify your vision to form a project.  We will imagine that we are dealing with just one project here, but if you have a complex organisation you may wish to divide your organisation’s activities into manageable project-like chunks to make the task more achievable.
     
  • Detail the aims and objectives of the project so that everyone clearly understands what you are setting out to achieve. 
     
  • Create a list of tasks and targets (milestones, if you prefer).  This is to clarify what activities you propose to do in order to achieve your aims and objectives. 
     
  • Figure out what resources are required to undertake those tasks.
     
  • Prepare a budget – and remember to include the costs of fundraising!
     
  • Assess all the sources of funding available.  Your aim should be to identify the most suitable available sources of funding, bearing in mind your budget, aims and objectives, activities and vision.  You can be creative at this stage – for example, you might be able to develop a partnership that could save you money and also help you to achieve your aims.

Once you have a strategy that others have seen and approved you can use it as a guide to the costs and benefits of different forms of fundraising, and a reminder that funding should serve your mission, not the other way around.

For more information on sustainable funding, see

 * The Directory of Social Change, www.dsc.org.uk <http://www.dsc.org.uk>. Their fundraising resources relate to charitable grant funding in particular.

 * For more on statutory funding see the government funding portal, www.governmentfunding.org <http://www.governmentfunding.org>

 * For free training on grant fundraising try your local 'council for the voluntary sector' (CVS). You can find yours using Google by typing in your area and 'voluntary sector'. CVS exist to support grass roots charities and therefore usually run various local courses

 * For more on social enterprise development see the Social Enterprise Coalition, wwwsocialenterprise.org.uk

 * Try your local Business Link advisor or businesslink.gov.uk for more on commercial business development

 * For more on corporate responsibility programmes - ask your congregation (!) or look at websites of big businesses in your area

 * For advice about Charities and trading - Charity Commission Website http://www.charitycommission.gov.uk/publications/cc35.asp

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Identifying Potential Funders

The main sources of funding are as follows:

Charitable Trusts

These may be local or national grantmaking trusts. Useful publications to start your research include A Guide to the Major Trusts and a series of Guides to Local Trusts, available in the reference section of your local library. Also, for grant making agencies such as Lions or the Rotary Club, see your local Yellow Pages.

Media Grants (e.g. Comic Relief, BBC Children in Need)

Contact them directly for details of criteria and deadlines for applications.

Statutory funding

Contact your local council for details of government grant initiatives that apply to your local area, such as Single Regenerative Budget (SRB).

Local Government contracts

Local governments increasingly offer contracts to voluntary sector agencies to deliver certain services. Contact your local government for details.

Big Lottery Fund (formerly Community Fund and New Opportunities Fund)

Some churches and Christian groups will not wish to apply for this funding on ethical grounds, so it is important that any decision is fully discussed and agreed by the management body of the church/project before an application is made. Visit www.biglotteryfund.org.uk to find out more.

Companies and businesses

Many local or national businesses have a community affairs department (though that may not be what it is called), which funds charitable projects. Your nearest Chamber of Commerce may be able to give you information about businesses that support local causes and the relevant criteria.

In-house fundraising

This is money that you and your users raise through sponsored events, personal donations, standing orders, regular giving, etc.

Although initially attracting and then building this type of funding can seem like very hard work, it’s an extremely useful resource for the following reasons:

  • It often has no strings attached (officially what is known as ‘unrestricted giving’) and therefore can be used to fund areas of your work that are vital but may not be attractive to other funders (e.g. central administration, ongoing running costs, etc.). Funders often want to allocate the money they make available to specific aspects of your work (e.g. salaries, new equipment, new developments).
  • It is an important and effective way of building a local support base while at the same time raising your profile locally.
  • When regular, ongoing and given through a standing order, it helps create a solid underpinning and strength for your work.

Community Development Financial Institutions (CDFIs)

These are independent financial institutions which provide capital and support to individuals or organisations to develop and create wealth in disadvantaged communities or under-served markets.  They seek to create both a social/environmental and financial return on the money they lend.  Click here to read more about the benefits and risks of this form of funding.

Where to get advice

Contact the local Council for Voluntary Services (CVS) (www.ncvo-vol.org.uk) or your local authority. A growing number of local authorities now have community fund officers. Find out who it is in your area and ask what advice they can give. Also ask about any training courses on offer.

There are also many good books available, but funding directories can be expensive and many are updated annually, so don’t invest in your own copies. Instead contact your local Council for Voluntary Services or go to your local library.

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Making an Application

In order for your church to develop its role at the heart of your local community, you will probably need to secure funding for the community projects you wish to run.  This can be a challenge!

Secular funding bodies often distinguish between work that seeks to promote Christianity (which cannot be supported by public funds and will be ineligible to most grantmaking trusts) and work that provides valuable services for the community beyond the church.  If your project is of this latter sort, you may well be eligible to apply for many different sorts of funding.

But, once you’ve found an appropriate pot of money, how do you prepare a strong application?  Your mission is to help the funder to realise that they are able to fund your work and, second, to persuade them to want to give you a grant.

The Golden Rules:

  • Closely read the criteria, priorities and guidelines set by the funder.
     
  • Explain as well as you can how your project meets the funder’s priorities. 
     
  • Do exactly what you are asked to do within the timescales specified. 
     
  • Make everything you write relevant, accurate and confident.
     
  • Aim to be outstanding. Make your application distinctive and excellent.

The Golden Rules may seem self-evident however every year some of the applications that Faithworks receives for its awards programme have misread the criteria, miss the deadline and misspell throughout.  Here are some more tips to help you avoid unnecessarily missing:

Never apply to a fund for which your work is ineligible – contact the funder for clarification if necessary.

If no application form is provided and no length of application specified, do not exceed two sides of A4.  Write clear and logical short sentences.  Get to the point as soon as possible and avoid waffle! 

Be human, vulnerable, humorous and enthusiastic in your applications. The people who open your letters are human and have emotions - grab their attention by being passionate. Too many applications can be a bit dull!

Paint pictures of the lives that will be changed or the situations transformed by a donation. Too many fundraising letters go into huge detail about the project itself without really illustrating the project's outcomes and consequences. Include photos, stories and testimonies that bring applications to life.

Use their language.  Make a list of keywords from the guidelines, like ‘innovative’ or ‘user-led’ and include them in your response.

The funder probably doesn’t know your organisation, so do not use jargon, acronyms or specialist concepts, including Christian ones.

Support your statements with evidence wherever possible.

Budget realistically and specifically.  Indicate the other sources of funding you have or hope to secure.

Pay attention to detail.  Make sure you have the correct contact details and documents, sign the application and enclose exactly the supporting information they request.  Ask someone else to proof read and edit the application for you.

Most funders will answer questions unless they say they won’t.  Make a good impression whenever you have contact with a funder.  They may call for clarification about your application so have the paperwork to hand.

Call to check the funder got the application if they don’t acknowledge receipt.

Always keep copies of your applications and thank the funder if successful!

Advice specific to gaining funding from Trust's

Do your homework! There are several websites and handbooks detailing all UK trusts and the things they do and don't support. Better to write a targeted appeal to 10 trusts than a scattergun application to 100.

Be open with the numbers. For example, say that you've raised £X already and you need another £Y to reach your target. You are writing to a number of trusts and you are hoping for a donation of £Z as a result of this application. This helps the trust understand how hard you have worked at raising the funds, and how far you still have to go. Few trusts are going to give money if you can't give evidence of how hard you have already worked within your membership, community or congregation at raising funds.

Work at networking and getting to know people - most grants are given where a personal link exists, and the trust therefore has a greater degree of reassurance that the money will be properly used.

Tell the fund specifically how to give to your project. If a trust wants to write a cheque for something they need the details of who to make the cheque payable to! Make it as easy as possible for the trust to send you something.

Contributed by Ian Watkins, Chair of Alvor Charitable Trust and Zoe Sanderson

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Fundraising Tips

  1. Some aspects of your work will be easier to fund than others. Most funders like ’new’ and ‘finite’ projects, which makes covering your ongoing running costs more difficult. Be prepared to review, refocus and repackage.
     
  2. Funders are always impressed if you can show that either you or another funder are already contributing towards the cost of what you are asking for. Your contribution does not have to be monetary; it can be in kind (e.g. staff hours, volunteers’ time or rent of your premises).
     
  3. Whenever possible ask for funding for a number of years. If your funding is only agreed for a twelve-month period it tends to make long-term planning difficult. Many funders will be open to a three-year funding application in the right circumstances.
     
  4. If your application is successful, always write and say thank you. Some funders have a procedure in place for you to report back at a specified time on how you spent their money and the difference it has made. If not, use your initiative. Keep in touch with regular updates on the progress of your project.
     
  5. Make sure that you appropriately acknowledge the support you have received. Discuss with the funder whether they would like you to display their logo on your literature, and, if so, how you should do this.

Many funders have annual programmes of giving, so if you are unsuccessful on one occasion do not let it put you off reapplying.

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Loan Finance for Social Enterprises

Loans are one of many types of finance that your organisation can use.  As with all types of income, loans contribute to an organisation’s sustainability most effectively when you use them as part of a portfolio of different sorts of finance. 

But why might your organisation choose to seek a loan, which has to be repaid, rather than a grant, which normally doesn’t?
  
Amongst other benefits, loans can:

  • Contribute flexibility to your organisation, rather than restricting income for specific purposes
     
  • Provide a relatively quick injection of cash, particularly for covering cash flow problems and controlling risk where other sources of funding are uncertain
     
  • Encourage medium and long term planning, unlike grant dependency
     
  • Help an organisation to buy capital assets that generate income in the future (or can be used as security against future loans)

As part of a range of other sources of finance, then, loans can catalyse growth and sustainability.  This is particularly true in the early stages of an organisation or when it seeks to expand. 

However, your organisation should not consider a loan if:

  • It is currently not or is not likely to be making a profit/surplus in the future, or cannot do so.
     
  • It does not have robust financial management procedures.  Some loan providers do offer support to help organisations to develop the skills needed to manage borrowed money, but some do not ensure that an organisation can cope before they lend.
     
  • Its management committee has not fully assessed the risks involved in loan finance, particularly with regard to securing a loan against the assets of the organisation.  If your organisation is not incorporated (i.e. has not registered as a company) the management is likely to be individually and collectively liable for repaying the loan if the organisation cannot.  Your organisation should take professional advice if it does not fully understand these risks.

Community Development Financial Institutions (CDFIs)
The Community Development Finance Association defines a CDFI as: “A sustainable, independent financial institution, providing capital and support to individuals or organisations to develop and create wealth in disadvantaged communities or under-served markets”.  In other words, CDFIs seek to create both a social/environmental and financial return on the money they lend. 

Some CDFIs are ‘friendly lenders’, practising a highly relational form of lending that seeks to build capacity in the organisation taking the loan (and thereby increase the CDFI’s chances of getting the loan repaid!). 

Because, like many faith-based organisations, CDFIs tend to make money primarily in order to create social benefit, they generally take a fairly responsible view of lending.  As such, they are likely to require robust repayment projections and supporting documentation but may be willing to support small organisations in producing material of a satisfactory quality.  Producing such evidence is a prerequisite to successful borrowing, so it is appropriate that a lender ought to demand it. 

Some CDFIs will lend unsecured in recognition of the fact that many organisations do not have a sufficient asset base to secure ordinary loan finance.  In most cases, CDFIs will charge higher interest rates than high street banks to cover the costs of these services.  

For further details on CDFIs, see www.cdfa.org.uk. For guidance on borrowing as a charity, please see the Charity Commissions leaflet OG22, available for free from www.charity-commission.gov.uk. 

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Christian Charities and Borrowing Money (Kingdom Bank)

  • Is it right and proper for a Charity to borrow money to deliver its services? 

  • As a Christian charity should we consider anything different? 

  • What are some the issues that we might face along the way?

What does the Bible say?

The bible has a lot to say about money and possessions and provides a clear framework of our attitude as believers.  The same principles that apply to our personal finances would equally apply to the way we manage Church or Charity money. 

The foundation principle is laid down in 1Chr 29 v 11 & 12 which says ‘… for everything in heaven and on earth is yours.  ‘Wealth and honour come from you; ...’.  We know that our Lord is the provider and our task is to manage and use his resources wisely.

In the parable of the talents the servants are encouraged to use the resources at their disposal to bring about the best return and in Matt 25 v 28 we read 'Take the talent from him and give it to the one who has the ten talents. For everyone who has will be given more and he will have an abundance. Whoever does not have, even what he has will be taken from him.’

We are also encouraged to be trustworthy and to plan the use of our resources.  Jesus says in Luke 16 v 10 ‘Whoever can be trusted with very little can also be trusted with much,…’.

The bible speaks a lot about generosity and also our attitude to lending as for example in Psalm 112 v 5 ‘Good comes to those who lend money generously and conduct their business fairly’.  It is implicit that people are borrowing the money that has been generously and fairly lent.

Whilst in a different context the principle expounded in Luke 14 v 28 is relevant: ‘Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it?’ 

Some would draw a distinction between borrowing to fund delivery of services as compared to investing in the infrastructure such as premises.  It is always dangerous to expect the future to be more financial secure than today and so the remainder of this article is focused to towards long term premises related borrowing.

 

So you want to borrow – what next?

Having decided that the project you wish to operate is one that is suitable to borrow in order to deliver - what should you do next?

There are really only two things that a Bank or other lender will consider when assessing a loan to a Charity.  First and most important is whether you can afford the repayments.  The second is what happens if it all goes wrong and what is the security for the loan – usually a legal mortgage on some property.

Can you afford the repayments?

Each organization is different and will be starting at a different place.  There are however a number of income sources that can be considered under broad headings.  Lets look at a few of the more common ones.

  • Track record:  If you are already in operation this is the biggest strength you have.  You will need a good three years Annual Accounts all properly prepared in line with Charity Commission guidelines and submitted on time.  These will need to show that on average over that period you have operated at least at breakeven and hopefully with some surplus.  You will need to confidently project these figures forward starting with the last formal accounts as a base and explain the changes under the same headings.
  • Generated income:  Your project will perhaps bring income from clients and or premises and being able to reasonably and clearly predict this is important.  As much evidence that you can supply as possible will help your case.
  • Grant income:  Often this will be related to outcomes but nonetheless will justify the repayment.  The biggest area of risk here is the term of the grant and the possibility of this not being renewed in future.  You will need confirmation of any grant and a clear assessment of your expectations for renewal.
  • Donations:  A solid track record of donors is vital to underpin the operation.  If you can approach donors and seek extra committed giving this gives a great support to any project.  It also means that your supports are committed to the project and if times are tough in the future are more likely to give generously.  You will need a schedule of new donations with a commitment for at least 5 years.

These factors will combine to provide an amount that will reasonably be available to support the repayments.  You will need to have a safety margin over and above the repayment to allow for fluctuation in interest rates, the greater the better but aim at a 50% margin.  So for example if the annual repayments are £50,000 you will need £75,000 or available income.

What’s the fall back?

Banks will generally seek some security to cover a loan – particularly if the amount is above £10-20,000.  By security they usually mean property which could fall into one of these categories: -

  • Freehold: means the property is owned forever by the persons named on the Land Register.
  • Long leasehold: normally in excess of 50 years – usually 99 years – and treated the same as freehold.
  • Short leasehold: often with a rental payment, sometimes with a premium up front but usually having NO value for security.

The property will need to be valued in a format specified by the lender both in its present state and forecast to take account of any improvements. As it is likely to be a commercial property the method of valuation is quite different from a house, if you bidding to buy it make sure you get professional help and advice from a commercial surveyor.

The property should ideally be owned by the Charity or trustee on behalf of the Charity.  It would not normally be possible to have someone else’s property used to secure a loan to the Charity.  A guarantee either by the trustees or any other individual would not normally be sufficient as this does not provide any property.

What else might we need to know?

Undoubtedly you will come across many highs and lows as you go through this process but there will almost certainly be a need to deal with a few other specifics.

  • Charities Act:  there are requirements that charities must follow when using their property to support a loan.  These are clearly explained on the Charity Commission web site and will include an independent report on the financial aspects and purpose of the loan and a valuation if buying a property.
  • Planning Permission: whatever you wish to use a property for you, will need to ensure it has the correct planning use.  If not, an application for change of use will be required, which may need careful handling by a professional.
  • Solicitor:  it is important your solicitor is familiar with acting for charities as a number of requirements are unusual, it’s not a good idea to just go for the cheapest quote. 
  • Fees and costs:  commercial loans operate slightly differently from personal loans.  There is usually an Arrangement Fee of around 1 – 1.5% of the advance plus you will need to pay for the lenders legal fees and the cost of the valuation.  The costs of professional advisers should also be budgeted for but you will not need to pay Stamp Duty as a charity.
  • VAT: be careful as some commercial properties have VAT payable on their purchase price.  Ensure you take professional advice, probably from your solicitor, at an early stage in negotiations.

Where do we go from here?

Your starting point should be ensuring you have the basics right in your organisation.  Are you a Registered Charity?  Are you incorporated and if not is that advisable for this new project?  Are your returns all submitted on time?  Do you have up to date financial information?  Do you have the best people with the right skills as trustees and are all the records up to date?  Do you have all the right permissions in place for your current activities?

Whilst these aspects might seem irrelevant to the future they are the marks of a well run and properly administered Charity.

When it comes to applying for a loan it is often a good idea to start by talking to you current account bank as they should know the organisation.  You will find it depends on who you speak to as to how helpful they might be and often it is difficult to get past the call centre.

There are some specialist banks that you could approach:

  • Kingdom Bank:  specialise in financing Christian Churches and Charities across all denominations.
  • Charity Bank: who work across all types of Charity
  • Future Builders:  a government funder loan and grant making body.
  • Depending on your project there are others such as Big Invest and Local Investment Fund.

It is a good idea to start the conversation with the Bank before you have progressed too far with the project.  Lenders are not too keen to be approached after you have agreed terms to buy a building for example but you do probably need to have made some progress with planners if you are redeveloping your own site.

In other words know what it is you are asking for and have a good presentation to show you afford it but do not be committed to a point where you need the money in the next few weeks.

Go for it?

Having considered these and other factors what should you do?  Remember the point of the organisation and what it is you are delivering.  Will the beneficiaries of your Charity be best served by having the proposed premises or will they be just as happy receiving more services in the same old tired building? 

If your plans do all these things then move forward cautiously and with careful planning along the way, remembering you role as a trustee of the Charity and a servant of our Lord.

Produced Chris Sheldon from Kingdom Bank (www.kingdombank.co.uk)

 

Faith into Action: Finding Funding (Malcolm Duncan)

Taken from the Faithworks 'Faith into Action' series, part 6

Written by Malcolm Duncan, Leader of Faithworks

 If faith is the engine that drives your community work, then funding is the lubrication that keeps it running. Because no matter how small your community project is or how large it becomes, funding will always be an issue.

 

In this, the sixth of the ‘Faith into Action’ series, which aims to take readers through the 7 steps of setting up a community project, Faithworks examines how churches and Christian projects can acquire funding for their community work.

 

For many churches and Christian projects, getting hold of long-term sustainable funding for community work can seem like searching for the pot of gold at the end of a rainbow. But the reality is that there are many potential sources of income, depending on the nature of your project.

A community café, for example, is likely to be able to produce a good percentage of its income simply from its sales, while a project that partners with a local school may find much of its funding coming from the Local Education Authority (LEA).

 

Before you set up a sales arm to your project or apply for funding from your LEA, it is helpful to return to the original vision for the project - what it exists for. You should be at the stage where you can rely on clearly stated aims and objectives, a mission statement, a business plan and a budget to guide your approach to fundraising.

 

Mixing it up

It is a good idea to aim for a mix of funding from different sources. Some might come from your church/organisation, fundraising events, individuals donating money, or on the other hand, from businesses, charitable trusts or government bodies (known as statutory funding).

                 

                 

                 

                 

      Here are just some ideas for potential sources of income for your community project:

  • • Charitable grant making trusts
  • • European Social Fund
  • • Local Authority / NHS Trust grants
  • • Community Fund
  • • Local Business / Company support or sponsorship
  • • Central Government
  • • Membership Fees
  • • Contracts with statutory bodies or other organisations
  • • Charges to users
  • • Individual donations and legacies
  • • Local fund raising collections and activities
  • • Support in kind           

                 

Grants and Trusts

If you are looking to apply to a grant making body or charitable trust, it is important that your applications are targeted and project specific. It is a waste of time writing a standard letter and circulating it to 30 different trusts, as not all of these will fund what you want to do. Find out which trusts provide funding for your area of work (e.g. homelessness) as well as those that fund organisations in a particular geographic area.   

 

Many community projects say that while it is possible to get funding for activities, it is almost impossible to get funding for capital spending or core costs. This is where you have to be ‘project specific’. It is much easier to attract funding for something specific like a discrete project or piece of equipment because most funders want to see exactly what their money is being used for and the results of their donation.

 

For more detailed advice on how to apply for statutory funding, including writing your application, visit the Association of Charitable Foundations website, www.acf.org.uk.

 

Relational funding

Relationship is also central to the way that you approach any potential funder. If you are successful in your application, some funders will want to come and visit you, while others will correspond with you by letter or email. In any case, you will want to avoid adopting a ‘hit and run’ approach where you take the money, never to be heard of again.

Always be sure to write to the funder to thank them and be helpful in complying with any requests for information from the project. Funders will want to be kept up-to-date with the progress of the project they have funded and the impact that their specific contribution is making.

Relationships can also be helpful in applying for funding. You might want to consider getting together with other churches or community projects when applying for funding. Other groups have a wider range of resources, skills and ideas than people acting alone and some funders are more likely to listen to a representative from a group rather than a lone voice.

 

Final thoughts

While funding may be essential to your work, it is important to remember that it’s not the reason for your work. As you look at ways in which your project can acquire funding and how to present your work in a way that will attract potential funders, don’t lose track of your original aims and objectives. After all, funding is only a means to a much greater end!

Funding is a complex and ever-changing part of running a long-term community project, but there are several organisations and websites to help make this process a little simpler:

Association of Charitable Foundations – advice on how to apply to trusts and foundations. Visit www.acf.org.uk

Directory of Social Change – provides books and training on statutory funding. Visit www.dsc.org.uk

GrantNet – an online grant locator for UK businesses and charities. Visit www.grantsnet.co.uk

Faithworks – provides bespoke consultancy and up-to-date information on sources of funding. Visit www.faithworks.info/funding.

 

For further information on setting up a community project, visit the online version of the ‘7 Step Community Project Guide’ at www.faithworks.info/7steps.

© All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the author except for the fact that excerpts of up to 250 words may be reproduced without prior permission from the author, where the excerpt does not amount to more than 25% of the final document and provided that a copy of the final publication is sent to the address below bearing the following citation:

‘Excerpt from an article written by Rev Malcolm Duncan, Leader of Faithworks,

 

 

 

 

                               

 

Faith into Action: Finding Funding (Malcolm Duncan)

 

How to start a registered charity (Stewardship)

 

Stewardship, the Christian financial support services group, explain how churches and community projects can set up a registered charity.

 

Setting up a charity can be a daunting prospect. You may have heard stories of long, cumbersome procedures, and how difficult the Charity Commission can be. Well, the good news is, it doesn’t have to be like that.

 

As with so many things, the key is to get the right advisor. They know how to navigate the smooth channels and avoid the rocks. Critically, they should set you up with a governing document and structure that is robust, future-proof and acceptable to the Charity Commission.

 

Finding the right advisor is critical, and not necessarily easy. Check their experience. It’s a specialist field and few solicitors are experts in it. Stewardship has extensive experience in this area, focussed particularly on the needs of churches and Christian organisations.

 

Alternatively, you could always do it yourself. The Charity Commission provides a lot of useful guidance and, provided you find the right governing document, the procedure is not rocket science. But be aware that the saving on fees can be more than offset by the potential delays and complications of going it alone.

 

Is a charity the right structure for you?

There are many benefits of having charitable status, but the downside is that you are more restricted on your freedom of operation and control.

                 

                 

Benefits include:

  • • Tax relief - e.g. Gift Aid (28% extra from the Revenue on gifts by taxpayers), plus no income/corporation tax.
  • • Status – having a charity registration number can be invaluable, giving credibility to your work in the community.
  • • Clear legal structure – if you are not a charity, what are you? If your status is unclear, there is a danger that you could be taxed as a private enterprise.

Disadvantages include:

  • • Limits on activities - for instance in relation to trading.
  • • Charity Commission regulation – much of this is about good practice, sound management and accountability for any organisation.
  • • Control - if single person ownership and control is important, the charity structure will not allow this.      

                 

                 

When is the right time?

If you are looking to formally establish a charity, you must have more than just vision and ideas. You need to be able to demonstrate to the Charity Commission that you are financially viable and ready to operate. Some evidence of income, or prospective income of at least a few thousand pounds a year is normally expected. Anything below this and you have to query the value of setting up a charity.

 

What will the legal structure be?

The classic structure is the charitable trust. This is relatively simple and suitable if the charity is run by a small group of people. Another alternative is a charitable company, an increasingly popular model. While more complicated than a trust, being a charitable company can limit trustee liabilities in relation to potential claims that might be brought against the charity.

The governing document

Having decided on your legal structure, you need a specific governing document. If you have chosen the company structure it will be Memorandum and Articles of Association. If you want to become a trust, you will need a Trust Deed or Declaration of Trust.

But what will it actually contain? Your advisor will have model documents you can use, which have been developed over time and work! Resist the temptation to reinvent the wheel. That said, there is of course scope for tailoring, but listen to your advisor - they know where you might be storing up trouble for the future or potentially fall foul of the Charity Commission.

Charity Commission models (available from their website) are good to a point, but can be quite conservative, for example over trustee remuneration powers. If you are preparing your own, take care and try to work from something that has been previously accepted.

 

Trustees

You need at least three trustees to act as key decision makers for the charity. Paid church leaders can be made trustees with a suitable power included for this purpose. The Charity Commission are also becoming more flexible on senior paid employees of other charities being trustees.

 

Charitable purposes

Your charitable purposes will need to be wide enough to cover all anticipated activities. Be careful not to be too precise or limiting, and allow for wide geographic operation. These purposes also need to be expressed in ways recognised by the law and the Charity Commission as being charitable. (e.g. raising money for another charity’s activity is not a charitable purpose)

With a church or community project, you may want to include the object of advancing the Christian faith. You should first consider whether you need a specific Christian objective for your intended activities. Will it hinder your access to funding? If you are concerned about maintaining the Christian basis of your organisation, requiring trustees to adhere to a statement of faith or some other foundation statement could achieve this. What you choose will depend on your specific situation.

 

More information

For further information and advice about forming a registered charity, contact Stewardship on 08452 262627 or visit www.stewardship.org.uk.

Alternatively, visit the Charity Commission website on www.charitycommission.gov.uk - where you will find extensive guidelines relating to setting up and operating a charity.

 

If faith is the engine that drives your community work, then funding is the lubrication that keeps it running. Because no matter how small your community project is or how large it becomes, funding will always be an issue.

 

In this, the sixth of the ‘Faith into Action’ series, which aims to take readers through the 7 steps of setting up a community project, Faithworks examines how churches and Christian projects can acquire funding for their community work.

 

For many churches and Christian projects, getting hold of long-term sustainable funding for community work can seem like searching for the pot of gold at the end of a rainbow. But the reality is that there are many potential sources of income, depending on the nature of your project.

A community café, for example, is likely to be able to produce a good percentage of its income simply from its sales, while a project that partners with a local school may find much of its funding coming from the Local Education Authority (LEA).

 

Before you set up a sales arm to your project or apply for funding from your LEA, it is helpful to return to the original vision for the project - what it exists for. You should be at the stage where you can rely on clearly stated aims and objectives, a mission statement, a business plan and a budget to guide your approach to fundraising.

 

Mixing it up

It is a good idea to aim for a mix of funding from different sources. Some might come from your church/organisation, fundraising events, individuals donating money, or on the other hand, from businesses, charitable trusts or government bodies (known as statutory funding).

                 

                 

Here are just some ideas for potential sources of income for your community project:

  • • Charitable grant making trusts
  • • European Social Fund
  • • Local Authority / NHS Trust grants
  • • Community Fund
  • • Local Business / Company support or sponsorship
  • • Central Government
  • • Membership Fees
  • • Contracts with statutory bodies or other organisations
  • • Charges to users
  • • Individual donations and legacies
  • • Local fund raising collections and activities
  • • Support in kind           

                 

     

Grants and Trusts

If you are looking to apply to a grant making body or charitable trust, it is important that your applications are targeted and project specific. It is a waste of time writing a standard letter and circulating it to 30 different trusts, as not all of these will fund what you want to do. Find out which trusts provide funding for your area of work (e.g. homelessness) as well as those that fund organisations in a particular geographic area.   

 

Many community projects say that while it is possible to get funding for activities, it is almost impossible to get funding for capital spending or core costs. This is where you have to be ‘project specific’. It is much easier to attract funding for something specific like a discrete project or piece of equipment because most funders want to see exactly what their money is being used for and the results of their donation.

For more detailed advice on how to apply for statutory funding, including writing your application, visit the Association of Charitable Foundations website, www.acf.org.uk.

 

Relational funding

Relationship is also central to the way that you approach any potential funder. If you are successful in your application, some funders will want to come and visit you, while others will correspond with you by letter or email. In any case, you will want to avoid adopting a ‘hit and run’ approach where you take the money, never to be heard of again.

Always be sure to write to the funder to thank them and be helpful in complying with any requests for information from the project. Funders will want to be kept up-to-date with the progress of the project they have funded and the impact that their specific contribution is making.

Relationships can also be helpful in applying for funding. You might want to consider getting together with other churches or community projects when applying for funding. Other groups have a wider range of resources, skills and ideas than people acting alone and some funders are more likely to listen to a representative from a group rather than a lone voice.

Final thoughts

While funding may be essential to your work, it is important to remember that it’s not the reason for your work. As you look at ways in which your project can acquire funding and how to present your work in a way that will attract potential funders, don’t lose track of your original aims and objectives. After all, funding is only a means to a much greater end!

Funding is a complex and ever-changing part of running a long-term community project, but there are several organisations and websites to help make this process a little simpler:

Association of Charitable Foundations – advice on how to apply to trusts and foundations. Visit www.acf.org.uk

Directory of Social Change – provides books and training on statutory funding. Visit www.dsc.org.uk

GrantNet – an online grant locator for UK businesses and charities. Visit www.grantsnet.co.uk

Faithworks – provides bespoke consultancy and up-to-date information on sources of funding. Visit www.faithworks.info/funding.

 

For further information on setting up a community project, visit the online version of the ‘7 Step Community Project Guide’ at www.faithworks.info/7steps.

© All rights reserved. ‘Excerpt from an article written by Rev Malcolm Duncan, Leader of Faithworks, www.faithworks.info.’

 

 

 

 

Funding Your Project

 

Making Successful Funding Bids

There are about 7,500 grant-making trusts and foundations in the UK, giving in total about £1.7 billion per year to charitable causes, including church-based community projects and other Christian community initiatives.

Have you considered applying to trusts to help fund your community project? The following information will help you get started.

 

Selecting trusts for application

Trusts can only preserve their distinctive role by doing special things. They therefore like to concentrate their funding on:

  • • New methods of tackling problems.
  • • Disadvantaged and minority groups that have trouble using ordinary services, or are inadequately served by them.
  • • Responses to new or newly discovered needs and problems.
  • • Work that is hard to finance through conventional fund-raising.
  • • One-off purchases or projects, including research.
  • • Short and medium-term work which is likely to bring a long-term benefit and/or to attract long-term funding from elsewhere.

 

The three golden rules for applying to trust funds are:

1. Do your homework beforehand.

2. Prepare your application carefully.

3. Leave plenty of time.

 

There are various directories and websites (see text box) listing trusts that you may be able to apply to. When drawing up a shortlist of trusts, look out for:

  • • Trusts which operate in your geographical area.
  • • Trusts which are interested specifically in your field of work and the sort of people who will benefit from it.

 

Writing your application

When writing an application, remember to include the following points:

  • • The purpose of the work to be funded - who it will help and how, what is distinctive about it and what will be achieved if a grant is given.
  • • A budget for the project. Don't economise on essentials, such as training or unavoidable overhead costs.
  • • Ask for a specific sum of money. If necessary, say that you are seeking a contribution of £X towards a total budget of £Y, and that you hope to raise the remainder from other sources which you specify.
  • • Your name, address, and phone number - oh yes, people do forget!

Make the application long enough to properly describe what you want, but short enough to be easy to take in at first reading - usually no more than two pages for your main letter. Make sure that you include your most recent annual report and accounts.

If your organisation does not have charitable status, explain why the work to be funded is charitable, and if possible name a registered charity that will take responsibility for any grant on your behalf.

 

What to expect from trusts

Trusts generally make decisions through trustees' meetings, which take place every two or three months, so be patient in waiting for a response.

 

The sheer volume of applications means that most trusts do not normally acknowledge applications, and many are unable to reply to applicants who are ultimately unsuccessful.

Remember that trusts get many more applications than they can fund. But if you don't succeed, it may not reflect on the quality of your application. It may just be that the trust has insufficient money to fund all the applications that it would like to support.

 

How to continue a relationship with a trust

If you are lucky enough to receive an offer of a grant, ensure first of all that you acknowledge it and make arrangements to meet the conditions (if any) that are set for releasing payment.

Try to keep in touch in whatever way the funder suggests. If the funder wants frequent reports then make sure you supply them, but if the funder only wants a report once a year do not bombard them with information in between times.

 

Useful publications

  • • A Guide to the Major Trusts Vol. 1, 2003-04 edition covers the largest 300 trusts, each giving over £400,000 a year. £20.95 plus p&p from Directory of Social Change, 24 Stephenson Way, London NW1 2DP, Tel: 020 7391 4800, website: www.dsc.org.uk.
  • • A Guide to Major Trusts Vol. 2, 2003-04 edition covers a further 700 trusts, each giving annual grants of at least £60,000. £20.95 plus p&p from Directory of Social Change.
  • • A Guide to the Major Trusts Vol.3 2002-03 is a new volume listing a further 500 trusts funding nationwide with a grant expenditure of over £20,000 per year. £17.95 plus p&p from Directory of Social Change.
  • • The Directory of Grant Making Trusts 2003-04, now in its 18th edition, gives details of almost 2,500 trusts. Priced at £80.00, it is distributed by Directory of Social Change.

 

 

 

Insurance: Look before you leap! (Kevin Russell)

Insurance: Look before You Leap!

Arguably, when the Government is actively promoting faith based community projects, there has never been a better time for the church to be outward facing and ‘reach out’ to the community on their doorstep.

 

However, trustees must take steps to manage risk and potential liability. Historically, that has meant just putting an insurance policy in place. Often little concern was given to the precise wording of the policy and assumptions were made as to the breadth of coverage. For example, the public liability section of the church insurance package may be assumed to cover that ‘special event’ or the bouncy castle that the church brings in for a special celebration. But does it?

In an increasingly litigious society where insurers have taken more than a few ‘big hits’ in recent years, trustees need to know how they can best help themselves. None more so than ‘public liability’ issues. In the last two years, somewhere around 60 – 70% of voluntary sector insurers have withdrawn from the market. With huge premium increases in the last couple of years, voluntary sector insurance is becoming increasingly inaccessible.

Stewardship Services, a Christian Charity specialising in church related insurance, is looking to dialogue with insurers to secure cover where it may otherwise be refused. As a Faithworks partner, we are also seeking to provide resources for community project leaders to help them optimise their chances of obtaining cover at good rates.

 

So what should trustees and church leaders be doing? The key is showing that you are on the ball. In advance of approaching an insurer (and before each renewal), trustees should have assessed the risks and taken steps to address (limit) them. This will include having appropriate policies and procedures in place (such as child protection, health and safety etc.), which are effectively communicated to and actioned by those that need to know.

 

An aerobics class at an independent venue may be an excellent way of engaging with the community. But will there be adequate qualified first aiders on site? Does the instructor have adequate knowledge to not put attendees’ health at risk? Is the venue safe? How do the organisers control who attends? Have all health and safety aspects been scrutinised?

If you can show that you have considered all material risk aspects in advance, insurers are more likely to be prepared to do business on reasonable terms.

 

By Kevin Russell,  Technical & Professional Services Director at Stewardship Services (www.stewardshipservices.org)

 

The issue of VAT (Kevin Russell)

 

To pay or not to pay, VAT is the question

Churches and Christian charities are not often able to recover VAT on purchases. Therefore, trustees should consider how to reduce or eliminate VAT costs on expenditure by:

  • • Using suppliers that are not VAT registered themselves (because, for example they are too small to need to).
  • • Making sure that all available reliefs are claimed.   Business suppliers may not always be aware of these, so be alert to opportunities.
  • • Taking advice on big projects (eg building work).   Sometimes significant savings can be made by designing things slightly differently.

                 

The following purchases can be “zero rated” for VAT purposes if certain conditions are met:

  • • Advertising.   Virtually all advertising and advertising services, placed on third party media.  Your own website and direct mail shots are excluded.
  • • Goods connected with appeals/collections.   Secure collecting boxes or buckets, nominal acknowledgements (eg. lapel stickers), pre-printed appeal letters and envelopes, response envelopes, offering envelopes and similar.
  • • Printed matter.   Books, booklets, brochures, pamphlets, leaflets, newspapers, journals, periodicals and associated minor supplies.
  • • Building Work.  As a general rule, new construction (including certain builders ‘fixtures’), construction of independent annexes to existing buildings or approved alterations to listed buildings, in each case used for charitable purposes, should qualify.   So does a ‘substantially reconstructed’ protected building.
  • • Facilities for the disabled.   Including wheel chairs, construction of ramps, widening of doors and passageways, and services (not goods) provided to adapt a washroom or lavatory for handicapped persons.  

                 

                 

A reduced (5%) rate of VAT is applicable to:

  • • Fuel supplies used by a charity other than for business (note ‘business’ is widely defined).  
  • • Supply and installation of certain energy saving materials used for charitable purposes.

Exemption

A vendor or landlord cannot opt to add VAT at 17½% to a building sold to, or rented to a purchaser/tenant who uses the building for a relevant charitable purpose (not as an office).   If they do, resist!   The transaction is exempt.

Conclusions

Churches and charities should look for opportunities to legitimately reduce or eliminate VAT costs.   There are detailed rules and conditions for the reliefs described, so competent advice should be taken, especially where significant expenditure is involved.

By Kevin Russell of Stewardship Services, Technical and Professional Services Director at Stewardship Services