Funding and Income > Alternative sources of income
Alternative sources of income
Most of the income that voluntary organisations in the criminal justice sector receive comes from government grants and contracts, as well as grants from trusts, foundations and other charitable bodies. While relatively few organisations rely on corporate fundraising, charity shops or other types of trading, these alternative sources can provide significant income. Some organisations also receive donations from the public, though this is fairly uncommon, especially compared to the UK-wide voluntary sector.
Clinks' most recent state of the sector report found that in the current climate, smaller organisations are feeling less confident about their long-term financial sustainability. When asked what steps they would take to secure long-term financial sustainability, some organisations planned to hire dedicated fundraising staff. Others said they intended to expand trading activities and diversify in other ways, to raise income.
Here is some more information on the most common alternative sources of income. Note that some of these sources provide more that one type of income:
Corporate funding means any type of financial contribution an organisation receives from a private sector business. Corporate funding includes donations, sponsorship and sometimes contracts. Voluntary sector organisations that host ticketed events (such as theatre or music performances, or sports matches) might consider corporate sponsorship, from a business with aligned values. There are lots of legal, regulatory and operational considerations for organisations thinking about corporate funding. Read the Chartered Institute of Fundraising’s guidance to find out more.
Donations from the public are an essential sources of income for many charities, though criminal justice voluntary organisations are significantly less reliant on donations from the public than the general charity sector. The NCVO website includes helpful guidance on the different ways organisations can fundraise for donations from the public. The Chartered Institute of Fundraising provides more detailed, practical information and the Code of Fundraising Practice sets out the regulations that organisations must comply with when receiving donation funding.
Investments are any type of purchase, or commitment of funds in the present, made with the goal of generating income or appreciating value of time. Common types of investments are shares, property and unit trusts. While criminal justice voluntary organisations do receive some income from investments, again they generally receive a smaller proportion of income from this source than the general charity sector. Investing carries risk and you must take advice before investing organisational assets. NCVO provides guidance on investing charity assets.
Legacies are financial gifts that people leave to an organisation in their will. Some larger charities receive a significant amount of income through legacy gifts, and employ specialist fundraisers to organise these. As with other donations from the public, criminal justice voluntary organisations receive significantly fewer legacies than the general charity sector. Again, organisations that intend or expect to raise funds through legacy gifts will need to ensure they comply with the Code of Fundraising Practice. The NCVO website provides a really helpful overview on receiving legacy gifts and the Chartered Institute of Fundraising covers all the essential considerations in detail.
Membership fees are sums charged to an individual or organisation, to provide them access to information, activities and community. Membership fees can provide vital income to infrastructure organisations, community centres, clubs and societies – but bear in mind that charities which charge for services or facilities will need to ensure that the cost does not exclude anyone from accessing these. Organisations that charge membership fees often do so on a sliding scale, proportionate to the income of the member, to ease the burden on smaller organisations and ensure they remain accessible to all individuals. While membership fees can provide valuable income, organisations should do a careful cost benefit analysis as part of their research into this source of income. Collecting fees can create a significant administrative burden. Find out more about the legal requirements for charities charging membership here.
Social investment is the use of repayable finance that enables voluntary organisations to increase their impact on society. It can provide working capital, allowing the organisation to deliver a contract or buy necessary assets. Social investments are not the same as grants or other types of donation. A social investment is repayable, often with interest, so it is not suitable to every organisation. The Good Finance website has lots of useful information for organisations that are considering seeking social investment.
Trade income is earned income received through trading activities – selling products or services. Running a charity shop is a type of trading activity, because it involves selling donated goods to the general public. Renting out space is another fairly common type of trading activity for voluntary organisations that have a physical premises. They can receive income by hiring out parts of the premises when these are not being used for their own activities. An organisation that is considering raising trade income, will first need to understand whether their constitution allows for this. Charities have a limited ability to trade, because making money is not in itself a charitable purpose, even if it is done in order to enable charitable activities. The NCVO website has a helpful overview of trading, and the Charity Commission also provides detailed guidance for organisations interested in generating trade income.
Loans are sums of money borrowed from banks or other financial institutions, which the borrower agrees to repay over a set period of time. Generally, lenders require borrowers to pay interest on loans – interest is a fee paid to the lender for the use of their money. Loans are a form of debt finance and therefore a higher risk form of income. For this reason, they are an uncommon form of income for small, voluntary organisations and will not be suitable for most criminal justice voluntary sector organisations. The NCVO website provides further detail on the risks associated with loan finance and the necessary reporting processes.
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