Tag Archives: grants

Gift economy

Amongst last week’s UK social enterprise news was this story in The Shetland Times about the difficulties encountered by Shetland-based social enterprise, COPE. The company, which provides training, support and employment opportunities for people with disabilities, is in the process of working out how to deal with “the loss of more than £100,000 of core funding” from the local council.

In the story, COPE’s chairman, Jimmy Smith, explains: “Luckily we have a grant from the charitable trust, and that covers the rental of our building and some of the administration staff, but it does not cover any of our participants or our support workers.”

Smith goes on to talk about the success of COPE’s businesses, which include a soap company and a pet supplies shop saying: “We actually cover more than 50 per cent of our costs with what we sell to the general public, though there are bits of that which we think we can do much more efficiently.

The position on grant income within UK social enterprise is a fraught and ambiguous one. That’s not because there’s a major dispute over the core principles. Umbrella-body Social Enterprise UK(SEUK)’s new membership criteria for social enterprises state: “Social enterprises are businesses so they must aim to generate the majority (more than 50%) of their income through trade (rather than from donations)“.

Elsewhere, in the booklet Why Social Enterprise? – a guide for charities, which I wrote for SEUK and Pilotlight, the Salvation Army’s Social Enterprise Development Manager, Steve Coles, talks about “a spectrum of social enterprise” and says that for his organisation a social enterprise is: a market-led venture, aiming for profit but achieving at least 70% of income from trading, while striving to achieve social impact for those furthest from the labour market.”

While they’ve often been (and will inevitably continue to be) the subject of much heated debate, the percentage figures mentioned here are not the key point. The key point is the fact that a social enterprise is widely acknowledged within the sector to be an organisation that aims to generate as much of its income as possible through trading but which, based on its attempts to deliver wider social impact.

The 2011 State of Social Enterprise survey, Fightback Britain, showed that 32% of social enterprises responding to the survey were earning 75% or less of their income through trading, with 17% earning less than 50%.

It also showed 17% of relatively large social enterprises, those with a turnover of £250,000 – £1million, reporting that grants – either from the public sector or Big Lottery/grants trusts – were their major source of income.

Unfortunately, one of the more interesting question about social enterprises and grant income is one that’s simultaneously disadvantageous for social enterprise supporters to ask and potentially both disadvantageous and difficult for social enterprises to answer accurately.

That’s the question of the extent to which receiving a grant (or not receiving it) is the key factor in whether a social enterprise continues to exist – either at all or whether it continues to exist while delivering a positive social impact.

Knowing the % of grant income received as part of an organisations overall turnover doesn’t necessarily tell us that much about the relationship between grant income and viability. It depends what that grant income is paying for.

For example, if social enterprise A somehow manages to run a commercially viable cafe that breaks even (or better) by selling tea and cakes but gets a grant – equal to 30% of its income – to put on exhibitions of local artwork in the cafe, 30% of its turnover comes in grants but its core business is not grant dependent.

On the other hand, if social enterprise B runs a cafe that loses money on selling tea and cakes, and receives a grant equal to 10% of its income to subsidise its running costs, it only receives 10% of its income in grants but its core business is grant dependent.

The only thing these two situations really have in common is that the social enterprise movement hasn’t yet worked out how to talk about either of them. We’re very comfortable talking about start-up grants, which many businesses – including entirely private-owned businesses working in socially useful sectors – receive to help them get up and running.

We’re uncomfortable talking about grant-funded activities – such as social enterprise A’s art exhibition – because accepting that they exist means accepting that the traditional charity model both still exists and remains a good way to fund stuff that’s social useful but doesn’t generate any income.

Social enterprise B’s subsidy makes us even more uncomfortable. How can we, on the one hand, promote social enterprises as a fundamentally better, more sustainable way of doing business while, on the other hand, drawing attention to the fact that many social enterprises will go out of business if they lose grants towards core costs? 

What we definitely shouldn’t do is continue to avoid the issue while trotting out the usual platitudes about how social enterprises make profits and reinvest them in the community. A few of them do, and that’s great but far more operate in efficient business-like way while delivering social good at relatively low annual cost to the council, grant-making or larger organisation that’s subsidising.

Rather than pretending social enterprises don’t receive subsidies, we should be concentrating on finding to better ways to explain and demonstrate the social impact that those subsidies pay for.

In challenging economic times, many social enterprises face having subsidies reduced or cut.  In some cases these decisions may be justified, some subsidies are just a waste of money.  In other cases, social enterprises are delivering fantastic value for money by generating significant social impact for the people they exist to serve at the highest possible level of commercial viability, and in doing so they’re ultimately saving the state huge amounts of cash in benefits and other costs.

As a movement that prides itself on being both principled and pragmatic, we shouldn’t let dogma around trading prevent us from making the case for subsidy.

 

 

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Opportunities knocked

In addition to all the other challenges currently facing the Prime Minister, comes the news that his attempts to promote volunteering don’t seem to be getting very far. Third Sector reports that The Department of Communities and Local Government’s latest Citizenship Survey reveals that 26% of the population are now regularly involved in formal volunteering, compared to 28% in 2003, 29% in 2005 and 27% in 2007-2008.

On the basis that you are what you do, I obviously do think volunteering’s important. I first became a charity trustee at the age of 19 and carried on doing that for over 7 years. Now, in addition to the day job, I am currently a non-exec director of one not-for-profit company and also take part in what the Citizenship Survey would label ‘informal volunteering’ for at least five arts and civic organisations on an ongoing basis.

There’s no doubt whatsoever that volunteering as an activity freely entered in by organisations and individuals can be a positive experience for all concerned – whether it’s small, entirely voluntary groups operating at a local level or large national operations such as CSV. What I’m less clear on is the sense behind the government’s attempts – prominently backed by Gordon Brown himself – to artificially stimulate volunteering by the creation of ‘volunteering opportunities’ and their particular focus on the volume of voluntary activity.

Surely a meaningful volunteering opportunity is created either by a social need or the desire of some people to do something, and ideally both of these things. I’m not arguing that the ‘volunteering opportunities’ created through funding such as the government’s flagship youth volunteering Quango ‘V’ – set up with the aim of involving 1 million new volunteers – are necessarily not responses to local need or volunteers’ desire to take positive action but the focus on the volunteering opportunities rather than social outcomes of what the volunteers seems to be more geared towards positive press releases than positive social action.

It may not be a complete coincidence that while failing to increase the % of people volunteering, the government and its partner agencies have also failed to make a coherent case for why a numerical increase in the number of people ‘taking advantage of volunteering opportunities’ is a good thing in itself. Rob Greenland has written sensibly on some of the issues for social enterprises to consider when deciding about how to work with volunteers.

Neither those points or mine are a case against volunteering. I have benefited a lot from volunteering opportunities. My social enterprise wouldn’t exist now if I didn’t have the contacts and experience I’ve gained through volunteering. My social enterprise wouldn’t function effectively now without the work of both formal and informal volunteers.

My position is clear. The government and its partners should stop promoting volunteering as an end in itself. They should put their cash and energy into supporting socially beneficial community activities and let the people running and benefiting from those projects worry about how many volunteers are needed and what kind of ‘opportunities’ they need to offer to attract them. That doesn’t mean that there shouldn’t be organisations promoting and facilitating volunteering but it means that they should be far more focused on social outcomes and far less focused on numerical targets for numbers or percentages of people volunteering.

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Borrowing the future

A seemingly disingenuous intervention into the loans vs. grants debate through a report commissioned by the Adventure Capital Fund (ACF) who claim that “Organisations that use loan funding to develop social enterprise grow faster than organisations financed through traditional grant-giving”. ACF, who as the managers of a massive government loan scheme are obviously not disinterested participants in this discussion, claim that their report “found that its investees’ income had grown by 160 per cent over six years, compared with an average of 19 per cent for other similar-sized charities.”

According to Stephen Thake, ‘author of the report and a reader in urban policy at London Metropolitan University,’ this shows that “by engaging in social enterprise, community-based organisations can become more sustainable.” The detail of the report may or may not show that but if the headline news reflects the full contents then it shows nothing of the sort. It shows that community organisations that are running projects that have the potential to be viable businesses – whether they call them social enterprises or otherwise – can use loan funding to develop those businesses and achieve increased income.

This is positive news but it tells us precisely nothing about the most sensible ways of approaching uneconomic activities that do not have any clear potential to be sustainable without some ongoing grant subsidy. Does ACF reckon that all community activities that cannot be made into businesses should just stop? ACF’s position also appears to suggest that its axiomatic that the best way for a charity to improve the lives of its beneficiaries is to deliver year-on-year growth in the charity’s turnover – as opposed to doing stuff that meet the needs of beneficiaries, possibly in partnership with other organisations. These seems remarkably similar to the approach to economics that’s just catapulted us into a global slump.

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Taken for granted

Social Enterprise is not about getting grants. I know this because I’ve read Business Link’s advice and I’ve been to lots of social enterprise conferences. At some conferences you’ll have one speaker telling you that social enterprise is the best way for charities and community groups to avoid the uncertainty of grant dependency, another speaker saying that groups have no choice because in a few years there’ll definitely be no grants at all, and a final speaker introducing the government’s latest part-grant/part-loan scheme designed to create social enterprises that can sustain themselves without applying for grants.

Aside from the part-practical, part-philosophical question of whether you can turn a charity into a social enterprise – or, in fact, whether many charities are already social enterprises in the first place – the general expert spin on grants is a bit silly. The recession does mean that 2010/11 will be harder than 2008/9 but, in a general sense, the reality is that the current climate for grant funding in UK is extremely good when compared to 20 years ago when The Big Lottery Fund, for example, did not even exist.
I’d be very surprised if there’s ever been a better time for not-for-profit community organisations – which is what most social enterprises in the audience at conferences actually are – to be applying for either one-off project-based grant funding (funding provided to do a specific thing, achieving specific outcomes) or start-up funding for new projects.

What has changed over recent years is the political situation regarding funding ongoing local provision. Where once you might have been able to get £40,000 a year’s funding just for being the Bloggs Street Community Centre and doing good things, you now won’t. If you have a day centre where people with mental health difficulties just turn up, chat, have dinner and go home, you’re now unlikely to get the funding from your local PCT to pay for two workers to supervise this. If you want the council to fund your community centre then just leave you alone to get on with community activities, or you want your PCT to fund your day centre to just be there and provide dinner, you’re now out of luck. Rightly or wrongly, all major political parties are now actively hostile to this approach but that doesn’t necessarily mean that the answer is ‘trading activities’.

There may be sound reasons for the Bloggs Street Community Centre to open a healthy café for local residents. The may even be sound reasons to turn a day centre into a social firm producing hand made designer hats. But neither of these operations are likely to be sustainable in the long-term without being subsidised by some outcome based grants.  And, in both cases, it highly likely to be far easier for the organisation to raise project-based grant funding for activities similar to what was being done in the first place and not start the businesses at all.

None of this is an argument against starting social enterprises – if they really are businesses benefiting the community through both their products and their processes, then the additional positive impacts are clear  – but it is a suggestion that the idea of social enterprise as a way of directly replacing disappearing grants is one that needs to be challenged.

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