Non-profit organizations encounter many difficulties trying to secure core funding . It is not uncommon to find an NGO with a good reputation ,required skills ,and networks unable to implement a project due to lack of core funding.
What is core funding?
Core Funding refers to financial resources needed for an organization to sustain its operations .It covers basic organizational and administrative costs for an NGO, including training & retraining, volunteer recruitment, office expenses, salaries for non-project staff, consultants, equipment, etc. Other names used to describe core funding include indirect funding, administrative costs, cost recovery, overhead or unrestricted funding.
For an NGO to function fully (whether or not any projects are being implemented), it must be able to cover its core costs.This enables it to improve sustainability, flexibility and project quality.
Donors have specific rules covering funding for core costs. While not all donors provide core funding, those who do have strict guidelines on how core costs should be reflected in the budget and spend. Thus, it is very important to understand each donor’s rules and regulations.
What are the benefits of core funding?
Acquiring funding for core costs is one of the biggest barriers experienced by NGOs .Lack of core funding impacts an organization’s ability to implement programs. Some benefits of core funding include:
- It addresses an organization’s basic needs, so as to enable it to be successful in delivering a wide range of projects.
- It provides an organization with financial stability and security, thus enabling it do more .The organization is able to to train its staff, thus improving its capacity to deliver high quality projects.
- It enables an organization to plan well and be prepared for unplanned events.
- Provides financial stability,hence the ability to act fast during emergencies.
- It enables an organization to develop by building their internal capacity .An organizations is able to invest more in monitoring and evaluation (M & E) ,leading to improved implementation & reporting ,and safeguarding of donor investments.
- It enables an organization to further develop its existing projects so that they have more impact.
- It strengthens an organization’s independence, thus buffering it against unexpected hardships and giving it time to strategize.
How do you get core funding?
NGO’s use three main ways to fund core costs. These include:
- Unrestricted grants: These grants are given on the basis that they will be spend in accordance with furthering an NGO’S objectives. They give the NGO the freedom to allocate the funds in the way they think is best, without restrictions from the donor.
- Restricted grants: These grants are given specifically to cover core costs, implement projects or monitoring & evaluation activities. The spending decision lies with the donor.
- Full costs recovery: These are given to fund the full costs of a project/service as well as direct costs of delivery and a proportion of overhead costs.
Not all donors provide core funding. Some prefer to pay only for the project costs, shifting the burden of funding core costs to other donors and the NGO. Some allow for core funding to be included as specific budget lines (e.g. a portion of utilities) or as an overhead percentage.
There are various strategies you can follow to get core finding.These include:
- Asking your current donor for core funding: You are more likely to get core funding from past donors if the project was successful and you met their requirements.
- Identifying and applying to donors that provide core funding: When researching donors, check in the donor websites whether they will provide funding for core costs .If there is no information provided, you can ask the donor about their policy on core funding.
- Providing for core costs in your project budget: When preparing your project budget, you can include core costs as an overhead percentage of the total budget.It is important to know the amount of core costs you will need. You can do this by dividing your annual core budget by the annual organization’s total budget. For example, if your annual budget is $ 500,000 and your core cores are $ 25,000,your average annual core funding percentage will be 25,000/500,000=0.05 (5%).You can then include at least 5% or more core costs in your project budget.
- Developing a funding proposal : You can develop a grant proposal and apply for funding from organizations that focus on organizational development and sustainability. By creating a sustainability project, you will be able to attract flexible funding from some organization that focus on developing organizations capacity.
What do you do if a donor is not willing to pay for core funding?
Where a donor is not willing to pay for core funding, do not shy away from pushing the donor to include core costs directly related to the project .Let them know the importance of core costs to the success of the project.Having adequate core budget will ensure you meet the donor requirements. The projects will have impact hence good value for money invested.
What are the consequences of lacking core funding?
Lack of funding for core costs can slowly suffocate an NGO, making it impossible to implement and sustain projects. When an NGO lacks funding for its core costs:
- Making strategic plans is very difficult.
- Some of the project funds are diverted to cover core costs, leaving inadequate funding for the main programs.
- The NGO lacks stability, continuity and flexibility, and wastes a lot of time applying for funding elsewhere.
- The NGO may be forced to delay, cancel, suspend or scale back on development plans.
- The NGO may be forced to spend its reserves on core funding( if it has any).
- It may not survive ( or may close).
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