State of the Sector 2024 - Funding

Many participants had accessed statutory funding, and referenced: MoJ contracts, for example for Commissioned Rehabilitative Services, the rehabilitation of female offenders, CFO Evolution, personal wellbeing, dependency and recovery services, women’s services and family court work; probation contracts; being sub-contracted partners under MoJ contracts; government grants, for example through the Probation Service, HMPPS or the MoJ; contracts with prisons; contracts or grants from PCCs; local authority contracts or grants; NHS or health provider contracts; education provider contracts; the Arts Council; other national or local statutory sector funding and housing benefit.

Many noted concerns about the availability of statutory funding, including:

• Less funding being available.
• A freeze on some prison budgets, such that no new services are being procured or fewer activities can be funded. One organisation noted that larger providers increasingly wanted to subcontract them for prison work without paying them because of tight prison budgets.
• A lack of information on what government funding, government grants, local authority contracts, or PCC grants will be available beyond March 2025, leaving organisations on a ‘cliff edge’.
• Relatively short-term funding periods, and funding periods getting shorter.
• Central government commissioning large contract management organisations or providers big enough to deliver regionally, rather than smaller organisations operating locally. A few argued that the work done by some larger providers was of lower quality than would have been the case if smaller organisations had been commissioned.
• Perceived misuse of money by funders, with only a small proportion going to community groups to deliver frontline work.
• A freeze on some – although not all – central government grants or local authority contracts over several years, resulting in a large real terms cut.
• National funding opportunities not reflecting cost differences related to geography.
• Main contractual providers receiving increased contract payments as a result of inflationary increases in contracts, and then choosing not to pass those on to subcontracted organisations.
• Accommodation services no longer being commissioned by local authorities and being taken back in-house.
• Funding being insufficient to deliver the work requested.
• Continuation funding not being offered after a successful pilot, such that an organisation had to use its core funding from a foundation to continue work to which it felt it had committed.

A few organisations noted that reviews of particular areas, including Ofsted and HM Inspectorate of Prisons’ review of reading education in prisons, Dame Carol Black’s review of drug treatment services, and the Farmer review of the provision for families across the prison estate, had helped to increase available funding in those areas. One, operating in an area with a combined authority, was hopeful that devolution funding would result in more money being available for their work.

These funding issues also meant some organisations described direct impacts on their service delivery, including having to deliver more for less, and only having the resources to deliver less support, or less effective support, to their service users. Organisations called for longer-term funding, more funding to be unrestricted or for core costs, funding for a range of specific kinds of work, more statutory funding for smaller organisations, and feedback from funders to unsuccessful applicants, amongst others.

Contractual Delivery Requirements

Organisations delivering under government contracts described overly prescriptive terms and processes that hampered organisations’ ability to meet service user needs.

Now the CRS contract is very prescriptive…within ten days you’ve got to do this and then you've got to do this. And probation tick the pathways. And if they're not the right ones that are ticked that, you know, we can't work with them. So it's annoying and not very user friendly and not really person centred.

One organisation reported having pulled out of a contract because it didn’t sit with their values.

Several smaller organisations had taken deliberate decisions to avoid some or all statutory funding because of concerns that they would need to change their delivery approach to fit funding criteria.

We don't want government funding. We don't want that because we will then end up like a commissioned service, like everything else, tick box, that means nothing, that doesn't help anybody. We will not succumb to that.

A few organisations saw possible opportunities for voluntary organisations to be sub-contracted to corporate providers under contracts with social value commitments, although they cautioned that there was a need to support the sector in this to avoid a situation where organisations were used as ‘bid candy’ and not included in actual delivery.

Applying for Statutory Funding

Some organisations described complex application processes and prohibitive requirements associated with some statutory funding. A couple mentioned deciding against applying to be on the Dynamic Framework (the commissioning mechanism for certain rehabilitative service contracts) because of these. Another had decided against applying for a contract to work in prisons in a region, even though they felt they would be particularly well placed to deliver it. An organisation that held a CRS contract described ‘hidden costs’ for their organisation, such as information security requirements.

One organisation mentioned that bidding timelines were often too tight: ‘The MoJ are very kind at putting out tenders in December and wanting them back on the 2 January’.

A couple of organisations mentioned that it was difficult to use the Dynamic Purchasing System (an online procurement system for prisons to commission specialised education services, like skills development and art therapies, directly from local providers). Two others reported securing work with prisons via their relationships with senior prison staff rather than through the DPS.

Many organisations talked about the frustration of many funders not wanting to provide unrestricted funding, or to cover core costs. One commented:

If I'm writing a funding bid and a funder is saying, ‘well, we won't support any organisational costs beyond direct delivery’, I'm like, well, how do you think we are going to operate if you're not contributing towards anything else other than that work that that one practitioner does on that one day? It's just quite an old-fashioned approach. And I would like to see that change at all levels that we're supported and funded. I think that would be something that would make a world of difference.

A few organisations mentioned more positive experiences of having been able to access unrestricted funding from trusts and foundations and the MoJ.

Several organisations had found reporting requirements for some of their funding to be onerous or disproportionate – where they specified, they applied this to trusts and foundations, and government contracts. Two others felt positively about funding they had received with lighter touch or less prescriptive reporting requirements.

A few organisations were undertaking projects to look at how best to evaluate their work. One had secured government funding to partner with a university to create an evaluation tool that they could use across the prison settings in which they operated.

Another organisation argued that it would be helpful for the sector to have ‘some consistency around the way in which evaluation is done’ across funders.

Diversifying Funding Sources

Many organisations said that they had made efforts to diversify their funding sources – some over several years, others more recently in response to the increasingly challenging funding environment. Others were planning to diversify.

Efforts and planned efforts included developing corporate partnerships, work with major donors, individual giving, community fundraising, earned income, securing social investment, and exploring other sources of statutory funding.

A few organisations reported that they had made changes to generate extra staff capacity for fundraising. However, some small organisations noted that it could be difficult to allocate resource to fundraising.

Corporate Partnerships

A few organisations talked about their positive experiences in securing corporate partnerships. For example, one runs a mentoring scheme pairing corporate firm partners with prison governors and another runs corporate away days where partner organisations make products with the organisation’s service users. Others had, or anticipated having, more difficult experiences including an unrealistic expectation from partners of outcomes for prison leavers, it being difficult to offer volunteering opportunities or other activities for partners in prisons, and corporates treating partnerships around prison work ‘with caution’.

Earned Income

Several organisations said they earned income, or planned to do so, through activity or training provision, selling products made by their service users, membership subscriptions, or renting out properties or building space. One noted that funders responded positively to their sales activity because it shows a diversity of income sources.

Barriers included competition between organisations to sell training packages, having the capacity to run training which could require frontline workers for meaningful delivery, and the time-consuming nature of selling products.

Individual Giving and Community Fundraising

While a couple of organisations mentioned their positive experiences of building up contributions from individual donors, it was noted that generating this type of income was a slow process. Other mentioned barriers were the cost-of-living crisis, competition between charities for donors, and lacking a base because of remote working with prisons.

Fundraising Skills

One organisation argued that the voluntary sector had less fundraising experience because of a decline in funding for infrastructure organisations in the last 10 to 15 years and because many chief executives had left since the pandemic. Specifically in the criminal justice sector, another felt that public fundraising was not as well embedded as in voluntary organisations working in other fields because of an assumption that the public wouldn’t give money to criminal justice work.

Staff Job Insecurity

Many organisations said that short-term funding and late notice confirmation of continuation funding resulted in job insecurity for staff. At the time our research was conducted in November and December 2024, one organisation had already lost experienced staff as a result of the uncertainty about government and local authority funding after March 2025; others were concerned that they would.

A couple of organisations noted having lost delivery staff at the end of project funding periods. Others mentioned having made other posts redundant or cutting staff salaries. One spent a brief period paying staff out of her own pocket. Given the wider staffing pressures many organisations described, it is important that funders understand the compounding impact that uncertainty about funding can have on organisations’ ability to retain staff and consequently deliver high-quality services.

Conversely, other organisations talked about having expanded, with bigger teams than they had had previously.

Threat of Closure

The risk of running down reserves or organisational closure because of a lack of funding or challenges, such as the increase in employer NICs, hovered over some of our conversations. While some organisations had recovered from significant financial problems experienced during Covid, others noted that they, or other organisations in the sector, were facing precarious situations at the time of our research. One said that, in spite of possible expansion opportunities, it was a challenging time:

I had my board meeting a couple of days ago, sort of talking about the risk we’ve got from April 1st [2025] and actually keeping our doors open. … Luckily for me and my services, we’ve got relatively healthy reserves. Because we’re a large charity and [have] a very committed board so we can [manage] a small drop in income, but not the significant drop that’s coming. Not for a long time, anyway. You know, they can underwrite it for maybe Q1, but not for longer term.

Another described the measures they were taking to try to stay in operation:

So everybody in our organisation is stepping up for less money to try and sustain the organisation. We have gone from £100,000 turnover a year to a budget forecast for 2025 of £25,000 a year, and we’ve done that by cutting 75%, actually slightly more than that. We’ve cut all our salaries. We’re basically not paying any salaries.

Difficult to Plan, Fundraise, or Grow

Organisations said that short-term contracts, delays in confirmation of continuation funding and a lack of core funding made it difficult for them to plan work, or even to know if their services would still be in operation. One argued that sustainable growth was difficult to achieve:

You can't create scale, because to actually pay anybody to do the job you can't raise the money, sustainably. … One year you can get this massive glut of money. But in a way, all it presents you with is a bigger fundraising problem. Instead of having to raise £100,000, you've now got to keep on raising £200,000 to pay the people that you're paying now.

Difficult to Deliver Ongoing Work

Some organisations noted that many funders’ interests in project work and new work areas could make their work ‘disjointed’ and ‘octopus’-like, or make it more difficult to continue to deliver ongoing work with service users:

Many people want you to do something new or a new project … and you’re always having to extend what you’re doing into areas that are beyond your core work in order to try to bring the funding in, often at the detriment to the thing, your reason for being. Which presents a challenge. It’s sort of like that octopus syndrome, where you’re always reaching for a project.

Doing More for Less

Some organisations noted high delivery expectations of some statutory funders, noting that their work was not being fully remunerated.

We had other money through the [statutory funder]. And they want your blood back. They want everything for the little bit of money that they’re giving you.

This continues another trend that we have seen over multiple years of State of the Sector research. For instance, in our 2023 report, 61% of survey respondents said they did not achieve full cost recovery on at least some of their contracts, with 11% reporting they did not achieve full cost recovery on any contracts. This saw organisations having to subsidise shortfalls using their reserves and other funding sources, as well as reducing overhead costs like staff, and closing or reducing services.

In our research this year, a few organisations mentioned that they had continued to find ways to support women no longer eligible for support via their organisation’s statutory contract as a result of the probation reset. One said:

It’s that assumption that you will absorb. So what we’re seeing is large numbers of women who have stopped, you know, two thirds of their sentence, but they’ve got still multiple unmet needs. Because we know women’s engagement can be very sporadic. It can be difficult to engage. It can be stop, start. But it’s a hard stop [of support under the probation reset.] But then we’re picking up the continued support for those women, because you’ve got nowhere else to refer them, but they’re not counted as part of the contractual requirement into the CRS contract.

A couple mentioned that the lack of uplift in some contracts, combined with the increasing complexity of service user need, was problematic, leaving their organisations ‘stretched’ and ‘squeezed’: one said ‘they want a lot more out of us as a service’.

Last year, one of the emerging themes to come out of our research was this idea that voluntary organisations were being expected to deliver more for less. In our 2023 focus groups, all participants said they were affected by the rising cost of living. Whilst the impacts of these increased financial pressures differed between organisations, many said they were planning to, or had already cut or reduced some services. Others had prioritised those with more reliable or sustainable funding. As this trend of more for less continues, it raises concerns about how long the sector is able to continue providing effective services to the people that need them.

Given this backdrop, in our focus groups this year, one organisation working with community organisations had noticed that some were now applying for two pots of funding for the same work.

Providing Less, or Less Effective, Support for Service Users

A couple of organisations noted that funding uncertainties or difficulties in other services were negatively affecting the nature of the interventions they were able to provide. One noted that, in the area in which they operate, many services are being recommissioned and have stopped taking service user referrals from their organisation because of a lack of clarity about the future. Another described how limited prison budgets had affected their delivery:

We used to have a lot of buy-ins from [prison] settings. We’d provide eight sessions, they’d provide eight themselves from their budgets. Now [because of the budget cuts] we’re finding that it’s just becoming more and more sparse, it’s not happening. I mean that’s reduced by at least two-thirds. So we’re hearing more and more that … they just don’t have the disposable money there. … [So service users] get less support. So it means that the intervention isn’t as effective.

One organisation reported concerns that, as a result of limited funding, they might need to change their staffing model in a way that would be detrimental to the quality of their delivery.

Another described how delivering commissioned services made it more difficult to retain capacity for frontline work:

The more we [have] commissioned services, rather than … being grant funded. The more that we are commissioned, we become part of [a] system problem ourselves, and it’s probably our biggest challenge and takes people away from delivering and supporting people whilst they are dealing with all the system stuff that they have to.

In 2023, we also heard for the first time about a shift in the approaches that some organisations were taking to their service delivery. This saw some cases were the services organisations were delivering were being driven by funding, rather than by the needs of the people organisations were looking to support.

In our focus groups this year, we also heard evidence of this shift. An organisation decided against applying for a contract to work in some prisons, despite feeling they would be well-placed to deliver it, because the application process and funding requirements were too complex and prohibitive. Other organisations highlighted funders’ interests in project work or new services meant they always felt like they had to extend themselves from their core work to access funding, even if it was at a detriment to that core work.

Conversely, some smaller organisations chose to not apply for any or some statutory funding because they were worried they would have to change their approach to service delivery to meet funding criteria.

Together this raises an important question: whose needs are driving the services delivered by the voluntary sector? Is it the needs of the people organisations are set up to try to help, or is it the Government, other statutory agencies, and trusts and foundations who determine where money, resource, and access is distributed across the voluntary sector? When organisations discussed how others can help them moving forward, one of the things that was highlighted was that they should be treated as a meaningful partner to the statutory sector. This was also a theme that we saw in 2023, when organisations said they wanted a new government to utilise the knowledge and expertise of the voluntary sector, listen to it about the approaches that work well, and support it to continue to deliver for people in need. This partnership between the statutory and voluntary sectors, as well as with trusts and foundations, needs to be an essential part of the landscape moving forward, to ensure organisations are best placed to meet the needs of the people they support.

Destabilising for Service Users

A few organisations noted that short-term funding was problematic for service users who might access a service for a time-limited period and then no longer have support, or be moved to a different service provider. Organisations had addressed this by not applying for this type of funding or by using other funding to continue to support service users. Similarly, late decisions about whether continuation funding would be available were unsettling for service users who felt unsure about whether the support they were accessing was going to end. These uncertainties were felt to be particularly problematic for the vulnerable service users organisations were working with.

Organisations Less Inclined to Work Together

In a couple of our focus groups, organisations discussed competition between organisations for funding, and the existence of specific contractual requirements, making organisations less likely to collaborate. Some argued that this had increased in recent years. However, some other organisations described effective partnership working with other charities and others had plans for more work in this area.

These conditions that drive less collaboration between voluntary organisations raises significant concerns. Last year, we saw partnerships raised as one of the key ways organisations were looking to change to ensure their financial sustainability, with over half (54%) of survey respondents saying they envisaged delivering more services in partnership with other voluntary/private/statutory organisations to secure long-term financial sustainability. Moreover, partnership working with other voluntary organisations was also highlighted by over half of the survey respondents (58%) when asked how their organisation was responding to the overall level, complexity, and urgency of need of the people accessing their services.

Given this important role of greater partnership working in both supporting service users and helping organisations secure their financial stability, it is essential that funders consider this issue. Funders and the voluntary sector together need to explore how the funding of the sector can be done so that it promotes and fosters collaboration and partnerships, rather than driving greater division and fragmentation.

Funding for Particular Types of Work