The Scottish Council for Voluntary Organisations is the membership organisation for Scotland's charities, voluntary organisations and social enterprises. Charity registered in Scotland SC003558. Registered office Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB.
Part A: The funding challenges that voluntary sector intermediaries face
The complexity and diversity of Scotland’s voluntary sector raises difficulties in summarising the big issues and challenges faced by voluntary sector intermediaries that cover so many areas of public life. However, some clear themes surfaced during SCVO’s interviews with senior leaders of voluntary sector intermediaries, with the main challenges being that of year-to-year funding, untimely decision making and payments, static levels of funding, inconsistent relationships, and a lack of flexibility. This section details what senior leaders said on the funding challenges their organisations face.
Year to year funding
Most voluntary sector intermediaries interviewed face an annual cycle of uncertainty when it comes to the funding they receive from the Scottish Government. This short-term public funding creates a situation where organisations can struggle to deliver projects and plan their workforces. Not only this, but organisations are wasting resources by chasing short and repetitive funding cycles.
Where organisations are receiving ‘multi-year funding,’ this is usually rolling annual funding based on annual decision-making. This is a difficult situation for both leaders and their staff, and for all the talk around moving to longer-term funding, adequate progress is clearly not being made across the whole or indeed most directorates of the Scottish Government.
Voluntary organisations said:
“The annual cycle of funding presents difficulties in the management of people and giving staff certainty in their jobs. As someone who has been in this position before, it’s scary not to have job security.”
“We’ve been offered 3-year funding, but this is to be reviewed annually. Even when a rolling agreement is in place, changes can be made at short notice that have a huge impact on the organisation.”
“The Scottish Government have a good narrative around moving towards human rights budgeting, but it’s not reflected in how they manage funding.”
“This is ultimately about government’s expectation that it can shift financial risk onto third sector partners who are in a worse position to manage this risk.”
“Year to year funding is a problem. A longer funding cycle would mean that it feels less stark to challenge government on other matters.”
“We need to manage financial risk for now, but we also need to be able to look ahead – we need to be able to focus on risk management, strategic planning and so on.”
“We’re on a three-year rolling agreement, but there’s no real planning horizon out of this. Money is still annual and therefore there is no long-term financial security for us.”
“All our funding is year on year, but it is better when we at least receive a written policy to continue funding over a set, longer period. This feels safe, but multi-year funding is needed.”
“We’ve seen lots of changes in how we’re funded. We’ve been on one year funding, multi-year funding, had funding extended for six months while decisions are still to be made. Our aim is for a 3-year cycle.”
“Other funding comes from membership subscriptions; we cannot rely on this income to plug gaps in government funding because our members are struggling too.”
"Despite receiving year to year funding, we’re relatively confident that we would get funding. For staff, this is psychological when we’re only getting an extra six months or a year at a time.”
“Given the size and complexity of funding applications and the fact that these are annual, it’s impossible to take any time off to recharge and take a break from work.”
“The annual funding cycle results in uncertainty – we just do what we can do, but we don’t have a plan.”
Untimely decision making and payments
A key element of the annual uncertainty caused by year-to-year funding is the time that those organisations interviewed must wait to learn whether their funding will be continued next year. They are left only to assume it will. The lack of straightforward and timely processes in decision-making by the Scottish Government presents a significant barrier to the planning and delivery of projects and services and supporting the workforce.
When decisions relating to funding are made, this can often slip into the new financial year. Organisations must chase the Scottish Government for decisions, and they feel as though it is a constant battle to secure a timely decision. Even when a decision is made, organisations are often left waiting months for the payment of funds to reach their accounts, meaning that those unable to dip into their reserves or other income sources are left in extreme difficulty.
Voluntary organisations said:
“An immediate issue to be solved is timing of decisions. Every year, it’s a battle to get a decision out of them. This year has been better – we got a decision in March and got full payment in first week of April. A change of civil servant may have made the difference.”
“We get year to year funding. Last year, we didn’t get confirmation until well into last April. Letters of comfort and positive conversations are helpful and ease our concerns, but year to year funding is a challenge.”
“It was better this year as we received notification and confirmation of funding early in January, with funds received end of March. Previous years, funding has not come through until July, meaning we must delve into our reserves. We’re lucky we can!”
“The delay in the UK budget last year had a knock-on effect last year. The Scottish Government used this as an excuse – even once we had our funding agreed, it took ages to get finance to send the money through.”
“We’ve only just got our letter of confirmation of funding (June) – most years, we do not get written confirmation of money for the next year until at least March. Usually, we must chase this.”
“It was the same story again last year, first due to Brexit and then due to COVID. Organisations were offered three months additional funding to cover the gap into next year, but we still haven’t seen it!"
“Payment to us was delayed for several months. The explanation given to us was around Scottish Government internal finance mechanisms. However, we know other organisations got their funds in April.”
Static levels of funding
Voluntary organisations interviewed explained that they often do not see any adjustments for inflation, making it challenging to meet cost-of-living increases and rising costs while being expected to deliver the same services or more with static funding. Many of those interviewed have received the same level of funding for many years, in some cases five or six. Concerns are taken onboard by the Scottish Government, but this often does not result in any meaningful change.
These voluntary organisations face a unique challenge in the sense that they do not want to pull money away from those organisations they represent. They recognise that in most cases, the entire sub-sectors they operate in are underfunded, and the challenges they encounter are often similar to those of their members. While core funding from the Scottish Government is extremely appreciated, a significant challenge is securing core funding from other sources, meaning adequate government funding is even more essential.
Voluntary organisations said:
“We’ve had the same level of funding for many years and it’s simply not enough. I probably didn’t apply for enough. I should have been more ambitious, but I was worried about Scottish Government rejecting the whole thing.”
“Three-year funding sounds good, but even then, it doesn’t go up at all. It remains at the same level."
“Our sector faces huge challenges – it’s an underfunded sector in general, and we are part of this underfunded sector. That’s reflected in terms of Scottish Government funding.”
“There are very few core funding options available to us other than the funding we get from Scottish Government. Funders don’t want to fund the core part that we rely on. The challenge is knowing where else to go for funding.”
“We’re always asking for more funding for the sector and for ourselves. In fairness, it is taken on board, and they are reviewing policies and strategies, but there’s just so little money for us.”
“It’s difficult to get core costs from grants and foundations – you might get a nominal contribution for management costs but that’s it.”
“We would struggle without this core funding from the Scottish Government. We are so grateful, but it is still not enough. Even with reserves and other funding sources, we would not survive.”
“When asking for funding, we do not want to step on toes of organisations we are there to support. We don’t want to take money from the front line – we need and want to do more, but we struggle with resource and capacity and not wanting to draw funding away from others. We maintain our values by asking “do we need that funding and is it essential.”
“We have no core funding commitments from the end of March next year. Beyond then, if there’s no further commitment made, we can only operate for another six months.”
“We’ve noticed that because we are doing well in other areas, it is much harder to get investment because we’re not struggling.”
“The biggest challenge we face is that there is never an uplift in our grant offer. We’ve had the same money from year one, and that’s many years ago.”
“Our income from the Scottish Government hasn’t changed over the past five of six years. It means that staff have received no pay rises in that time to meet the changing costs they face.”
Inconsistent relationships
Those interviewed explained how important relationships with the Scottish Government are and that in many cases these are positive. Unfortunately, this does not always translate into the funding experience. There is also a fine line when being a critical friend given the annual uncertainty surrounding vital funding from the Scottish Government.
Voluntary organisations said:
“Our relationships with the Scottish Government and funding intermediaries are mixed. It’s usually good but is so often down to individuals. It’s difficult when there are so many changes in people and turnover.”
“It’s all about relationships, but we have so little time to do this. As a CEO of a relatively small organisation, I need to do everything. It’s difficult to form those relationships.”
“We have a very good relationship with Scottish Government. We are on lots of working groups. Unfortunately, this has not translated in grant funding.”
“We must cultivate strong relationships in government, but I’m nervous about this. I went to our board this year to ask to get stuck into a political engagement plan to engage with the Minister and Scottish Government contacts, but that’s a challenge in itself.”
“We’ve not experienced any issues in our relationship with the Scottish Government just yet. It’s carefully managed by our board, but there will be upcoming conversations.”
“We’re meant to be a critical friend of the Scottish Government, but do they need a critical friend? Do they see the need of a critical friend? It’s a fine line when it comes to funding relationships.”
“Difficult conversations with government in relationship to members’ funding – we’re aware of how far we can push it. We must hold the reputation for sector; if we break it with a part of government then it’s lost with others.”
“We know relationships with government are so important. So much so, we’ve used some funding to bring in expertise to support with this, but only because we’re forced to look at damage control.”
A lack of flexibility
Those interviewed stressed the importance of unrestricted core funding for voluntary organisations as opposed to funding often restricted to specific projects and outcomes. Unrestricted funding would enable them to feel more secure and plan for the long term while responding quickly to a changing environment, as we have seen during the pandemic.
Voluntary organisations said:
“We’re now using our funding for a different reason. We’ve explained this to government, and they haven’t argued and have accepted it, but it’s always a challenge with planning and making up our minds. It’s by chance most of the time.”
“The lack of flexibility is so frustrating. We have an annual agreement, a strategic plan and deliverables agreed, but it doesn’t allow for the adapting that needs to happen. It’s been better this year, perhaps due to COVID.”
“When something new comes up or we must address a new development, it’s difficult for us to tackle it – it’s difficult to get funding that allows for this flexibility.”
“We need additional security as well as ability to adapt, but this is tricky when we must report on what we said we would do. Relationships help, but it’s still a mixed bag.”
‘We often work with consultants to manage projects. We must agree in advance our pots of funding with a particular consultant knowing we might need to use it in the financial year. However, it would be better to use the funding when needed, rather than feeling forced to spend because we might not get it back next year.”
“The inflexibility makes it a challenge to be strategic in what we fund ourselves and how we use money.”