Children, Young People, Families, Early Intervention and Adult Learning and Empowering Communities Fund evaluation: baseline report

Financial sustainability and funding

This section focuses on the financial sustainability and funding of the third sector organisations supported by the CYPFEI & ALEC Fund. It presents baseline findings from the self-assessment survey plus a summary of relevant issues raised during consultations with the sample of funded organisations, Policy Officers and stakeholders.

Third sector survey respondents rated both their awareness of additional funding sources and how well equipped they are to apply for these sources highly at 7.1 out of 10. They rated their success in securing external funding at a similar level (6.9). However, respondents were significantly less positive about the financial sustainability of their organisation rating it at 4.9 out of 10 and this was the only question on the survey to be rated below 5.

On a scale of one to ten, please rate…	Average rating
Your awareness of alternative sources of funding for your organisation's work	7.1
How equipped your organisation is to apply for alternative sources of funding	7.1
The extent to which your organisation has been successful in securing external funding to date	6.9
The financial sustainability of your organisation	4.9
Overall	6.5

CYPFEI & ALEC funding

Many respondents expressed their gratitude to the Scottish Government for their ongoing commitment to fund third sector organisations, specifically the fact that this is one of the few funds supporting core services and infrastructure (as distinct from project funding). Numerous third sector organisations expanded on what CYPFEI & ALEC funding enables their organisation to do including support for business management functions and providing staff time/capacity that in turn allows them to identify and access other funding streams, undertake policy work or explore new partnerships and projects.

"Securing [this] contribution to core costs has made a significant impact on our ability to draw in funding for front line services". (Third sector funded organisation).

"[This funding] enables us to add value to the other sources of funding, as other funders tend to be more open to providing funding if core [Government support] is in place". (Third sector funded organisation).

"[This funding] brings with it the capacity to sustain our high quality front line services and the opportunity to test out new approaches to achieve greater impact". (Third sector funded organisation).

"The funding provides us with some security and takes some of the pressure off fundraising… I can spend that time working with the team". (Third sector funded organisation).

"It provides a bit of stability to plan ahead. For us it helps with co-ordination and support costs that nobody wants to pay for. It provides and protects the quality of our work. It's just really helpful. The flexibility is the magic thing about the Fund". (Third sector organisation).

"It is a brilliant fund that allows us to do the back office support that [in turn] allows us to continue helping young people". (Third sector funded organisation).

"It gives us the capacity to network and you can't underestimate that as its through such links that collaboration comes". (Third sector funded organisation).

Several umbrella bodies and 'secondary' service providers (who often support primary or frontline providers) also commented on the lack of alternative funders for their work.

"Our particular problem is that we are second tier, one step removed from people actually providing frontline services. Practitioners say we are crucial but funders often aren't interested, they would rather support project activity". (Third sector funded organisation).

In the absence of this funding many felt that their organisation's work, including front line service provision, would be likely to suffer. This included a number of organisations using CYPFEI & ALEC funding to support core services and infrastructures previously supported by the Scottish Government via the Third Sector Early Intervention Fund ( TSEIF) or Strategic Funding Partnerships.

"Without this funding we would have had to make redundancies". (Third sector organisation).

"What would not be possible is the support to ensure partnerships are forged, skills are increased, work is delivered as cost-effectively as possible, practice is transformed into data to help influence/inform policy. In short the core funding enables us to be greater than the sum of our parts". (Third sector funded organisation).

"We would have a much less consistent and unsustainable model of individual centres seeking smaller grants for local use, and we would lose the significant benefits, in terms [of] consistency and reach, of our current structure". (Third sector funded organisation).

"Infrastructure funding is different from project funding; it is not about added value or impacts, but survival". (Policy Officer).

A number of third sector organisations suggested that the multiplier effect of the Fund would be very high for example one suggested it would help them secure up to five times the value of their grant. Another organisation highlighted the benefits in securing funds from private sector donors:

"Private sector donors are interested in our ability to bring in public sector funding. This funding allows us to present a public-private funding model [and] helps us to attract private sector funding". (Third sector funded organisation).

One of the third sector organisations commented on the paradox they face with well-resourced infrastructure thanks to the CYPFEI & ALEC Fund, while at the same time facing severe financial pressure with their service delivery. They acknowledged however that over time the infrastructure support should strengthen the organisation including their ability to source alternative sources of funding. Other organisations also commented on the increasing difficulty they face securing project funding, particularly from public sector sources.

Two consultees questioned the requirements attached to the CYPFEI & ALEC Fund, including the need for organisations to evidence a need and set outputs and outcomes for funding related to core services and infrastructure. One stakeholder stated the third sector had raised concerns about this via the Short Term Working Group that informed the development of the Fund and there was therefore some disappointment that it had been retained. Target setting was seen as particularly difficult for umbrella/representative organisations that seek to promote issues and/or the interests of their members, and a small number of consultees felt it inappropriate.

A small number of consultees questioned the Fund's criteria, and subsequent decisions, that supported the continuation of existing core services but did not support proposals for new services despite similarities between the two (existing and new services).

Financial sustainability

The third sector survey highlighted concerns around financial sustainability and the consultations confirmed this as a considerable challenge for the third sector organisations supported by the CYPFEI & ALEC Fund. A number of consultees stated that third sector organisations are facing financial pressure in the context of reduced public sector funding at the same time as facing an increasing demand for their services. There was a consensus that funding for core services and infrastructure relieves some of the financial pressure they face and will help the organisations to focus on strategic issues and funding for service delivery.

The commitment to three-year funding, subject to annual review, was also welcomed by many consultees as it allows the organisations a degree of stability, although others commented that the lack of a firm commitment in years 2 and 3 was problematic. Some consultees also highlighted that the funding is time limited which makes it difficult to plan for the future.

"As long as the organisation delivers and works towards agreed outcomes … there should be reassurance of core funding over some period of time. The more secure and stable an organisation is then the more it is able to develop, reflect, and have the confidence to try new or more creative ways of working". (Third sector funded organisation).

"One of the organisations said they were focussed on sustainability and reducing reliance on SG funding as budgets continue to tighten. Lack of money in general is an issue, especially as the level of funding in years 2 and 3 is not guaranteed". (Policy Officer).

"Financial sustainability is a mantra but it's very difficult. Stability is important". (Stakeholder).

One consultee also noted that the Scottish Government had previously supported a number of organisations via TSEIF or Strategic Funding Partnerships and they regarded the CYPFEI & ALEC Fund as providing some temporary financial stability rather than long term sustainability. There were a number of requests for the Scottish Government to confirm arrangements for the continuation of the Fund beyond April 2019 at the earliest opportunity as this would ensure effective planning.

Alternative funding

One third sector organisation stated they had specifically tapered the funding requested from the CYPFEI & ALEC Fund to ensure they focused on alternative sources of income. In addition, there were examples of how the Fund was directly assisting grant holders to source alternative funding:

• One organisation explained that part of their CYPFEI & ALEC funding was contributing to the cost of a fundraiser who was tasked with securing additional funds.
• Another organisation explained that the Fund will allow them to gather and share evidence-based learning from their activities with the aim of sustaining it via other sources including the public sector.

The benefits of the Policy Officer link-up were demonstrated by one funded organisation that received support on financial planning from their Policy Officer and information on additional funding sources from Lloyds TSB Foundation for Scotland. Another Policy Officer explained how they are working with one of their funded organisations that supports families that have suffered child bereavement to build on their success in selling services to financial institutions and to identify additional income sources. Another Policy Officer had discussed alternative funding options with one of their funded organisations following a CYPFEI & ALEC Fund award that was less than the amount requested. It was noted that some funded organisations receive funding from other Scottish Government budgets and we are aware that the Scottish Government is working towards a joined-up approach to funding where possible.