Here we set out the principles of Fair Funding that we have developed with Scotland's voluntary sector. This version of the principles includes asks of Scottish Government, and can be read in conjunction with asks for local government and other actors developed by the TSI Scotland Network based on the Fair Funding principles.
After years of underfunding and upheaval, the pandemic and cost-living crisis are the latest chapters in a longer story of instability and unpredictability in voluntary sector funding.
The cost-of-living crisis has, for many organisations, increased demand for the essential services and support the sector provides while organisations, like households, struggle with rising costs.
This increasingly unsustainable situation intensifies SCVO’s calls for a fair funding approach to voluntary sector funding, developed in collaboration with organisations across the sector. Fair funding – a long-term, flexible, sustainable, and accessible approach to funding – is central to a sustainable voluntary sector which can offer Fair Work, support volunteers, meet demand, and delivery quality outcomes.
In December 2022, the Deputy First Minister announced as part of the Scottish Budget that the Scottish Government would adopt fair funding principles in investing in the voluntary sector during the coming year. This paper focuses on the actions that the Scottish Government could take to ensure that funding arrangements with voluntary organisations are fair. The fair funding actions we encourage are also relevant to funders across the statutory and independent sectors.
Fair funding is central to a sustainable voluntary sector in Scotland. It includes, but is not limited to, longer-term funding of three years or more, flexible unrestricted funding, timely payments, more accessible application processes, sustainable funding which incorporates inflation-based uplifts, and transparent approaches to monitoring and reporting.
In Scotland, the many benefits of multi-year funding are understood and recognised by the Scottish Government and parties across the Scottish Parliament. However, there has been little progress implementation. Flexible, sustainable, and accessible approaches to funding are less well understood.
To support Scotland’s vital voluntary sector to adapt to current and future societal and economic challenges, and to address years of poor funding practices, fair funding that incorporates the following is urgently needed:
Short-term funding significantly impacts on the effectiveness of the voluntary sector by creating ongoing uncertainty and insecurity on a scale unparalleled by any other sector. Voluntary organisations:
Annual funding challenges also distract from providing the services people and communities across Scotland rely on. Similarly, the Scottish Government dedicates significant time and resources to annual processing and decision-making when often there is little change year-to-year.
Ensuring that organisations can secure funding for all the costs involved in running a project or service, known as full cost recovery, is central to sustainable funding. Similarly, a lack of inflation-based uplifts creates an unsustainable environment with organisations expected to provide the same support – or often, more support – with less. SCVO has spoken to many organisations who have not received an uplift for many years, including one who reported no uplift for 13 years, a 27% cut in real terms.
A lack of uplifts, which is a common feature across the funding landscape, is unsustainable and unfair for organisations, staff, volunteers, and the communities they work with.
Unsustainable funding for the voluntary sector also undermines pay security. Without inflation-based uplifts in voluntary sector contracts and grants, organisations can be unable to uplift wages. In the current context, rising inflation and the resulting cost-of-living crisis are exacerbating this issue. The Scottish Government’s plans to extend the Fair Work First criteria to include the Living Wage, while welcome, has the potential to put further financial pressure on voluntary organisations. Annual inflation-based uplifts are essential to support organisations to meet the rising costs of staying open, uplift wages, meet and pay the new Living Wage rate, and support volunteers and their expenses.
Voluntary sector funding is often restricted to specific projects or outcomes. SCVO consistently hears from organisations who successfully secure funds for specific projects yet struggle to meet core costs for bills and vital roles. For those that do secure core funding, often it only covers a fraction of what is needed.
Funding should, wherever possible, be unrestricted to allow organisations to flexibly meet their key objectives and adapt to the emerging needs of the people and communities they work with. Unrestricted funding offers voluntary organisations greater stability, the ability to plan for the longer-term and respond quickly to social and economic changes, and the capacity required to seek additional funds or generate their own funding.
Flexible funding should also take a flexible approach to targets, which often measure the value of an organisation through numbers or outcomes. Better communication and stronger relationships between funders and organisations would also lead to better recognition of the sector’s value.
Across the Scottish Government and wider funding landscape, inconsistency leaves organisations committing capacity, which is often already limited, towards navigating different and difficult funding applications and approaches. A series of changes to the way funding processes in Scotland are administered would alleviate the funding burdens faced by voluntary organisations:
The approach to applications, assessments, monitoring, and due diligence needs to be streamlined and simplified to ensure that no organisation is disadvantaged
Providing clearer guidance and a more structured format at the application stage would support organisations to provide the most relevant information, resulting in less chasing for missing information
Applications and monitoring should be proportionate to the size of grant or contract awarded and the type of work being delivered to avoid creating unnecessary barriers and financial costs.
Providing organisations with timely communication and prompt payment of funds would help to prevent funding gaps and uncertainty
Transparent monitoring and reporting are also central to accessible funding. Funding transparency enables the voluntary sector to work more effectively with the Scottish Government and local government to assess the positive, negative, and neutral impacts of potential or agreed spending decisions, and will allow a better understanding of how the sector is funded.
SCVO will be monitoring the progress that the Scottish Government and other funders make to deliver on our calls for a fair deal on funding. We will do this by listening to the experiences of voluntary organisations across Scotland. The Scottish Government can play an active role in supporting improvement by adopting our calls on budget transparency.
To enable colleagues across the voluntary sector to understand spending decisions and assess their impact, the Scottish Government should work towards developing a transparent approach to monitoring and reporting which:
In 2021, Scotland’s voluntary organisations had a combined annual turnover of over £8.5 billion and employed over 135,000 staff, while 1.2 million people volunteered.
For most people in Scotland, voluntary organisations are a part of everyday life. They are critical to Scotland’s wellbeing, prosperity, and success. Voluntary organisations:
A sustainable voluntary sector in Scotland is central to these contributions but, to be truly sustainable, the sector urgently needs Fair Funding.
Sheghley Ogilvie, Policy and Public Affairs Officer
Jason Henderson, Policy and Public Affairs Officer