Institute for Philanthropy urges funding for core charity functions

Donors 'underestimate administration costs'

The effectiveness of charities is being hindered by the reluctance of foundations and major donors to make grants to support their core functions, according to a new report from the Institute for Philanthropy.

The report, Supportive To The Core, which is published this week, says the administration, fundraising and IT functions of charities are under- resourced because funders want to support specific projects rather than infrastructure development.

It says the idea that low overhead costs are an indicator of an effective charity is a widespread misperception that can be "extremely counter- productive".

The report urges donors and foundations to be less specific about how their money should be spent.

"Core support grants allow organisations to concentrate on how to accomplish their goals in the best possible way, not on how to make their work attractive to funders," the report says.

Jessica Sklair, director for research at the institute, said the report would be given to trusts, foundations and individual philanthropists to encourage them to consider funding charities' core costs. She said it would also be sent to charities so they could use it as a tool to communicate their needs to donors.

"As a general rule, low overheads often mean inadequate infrastructure, which can make a charity ineffective," she said. "But donors underestimate how big charities' overheads are."

A spokesman for the Institute for Philanthropy said: "A lot of charities are struggling with this issue, but they find it difficult to ask their donors to change their priorities. We hope this report will give their requests a bit more clout.

"A lot of foundations in the US are shifting towards core funding, and we would like to see this trend catching on in the UK."

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