The difference between project, core and capital funding
There is a variety of funding out there and applying for the wrong type can make you seem inattentive to the criteria or inexperienced. This article aims to cover these different types of funding.
Before we begin, we need to examine the difference between restricted and unrestricted funding:
Restricted funding is attached to a specific project, building works, salary or costs. If you raise funds for this you cannot spend it on another project for instance.
Unrestricted funding can be spent at the discretion of the organisation. You can earmark it for a particular project but then switch it to something else if the need arises. Unrestricted funding is highly sought after and the number of opportunities can be quite limited. Many donations given to a charity or nonprofit would be classified as unrestricted if it was not raised for a particular purpose.
The three primary categories of funding are project funding, core funding, and capital funding. Let’s look at each of these closer to make sure you understand the differences.
1. Project Funding:
Project funding is allocated for a specific initiative or ‘project’ with defined objectives, deliverables, and timelines. Project funding is project-specific, with funds intended solely for completing the designated project. They cannot be used for other purposes without the explicit consent from your funders. Project funding is a restricted type of funding.
Characteristics:
Funding is earmarked for a defined project or programme such as research or community outreach.
Funds are allocated for a predetermined time frame until project completion.
Organisations must account for fund utilisation and demonstrate progress related to project goals.
Examples: Research grants, community development and educational initiatives are supported through project funding.
2. Core Funding:
Core funding, also known as general operating costs, is essential for daily operations. Unlike project funding, it is not tied to a specific project, providing flexibility for resource allocation. Core funding often pays for things like salaries, rent, energy and utilities, insurance and general overheads. Core funding is a restricted type of funding.
Characteristics:
Allows organisations to allocate resources based on evolving priorities and challenges.
It supports core functions like administrative costs, salaries and basic infrastructure.
It contributes to the organisation's long-term stability and sustainability.
Examples: Raising funds for a project manager, mentor or delivery of a project.
3. Capital Funding:
Capital funding is directed towards long-term investments enhancing an organisation's capacity, infrastructure or assets. It aims to create lasting value through significant capital expenditures. These can be seen in refurbishment projects, construction, or purchasing equipment for the future. Capital funding is also considered restricted funding.
Characteristics:
For acquiring or upgrading physical assets like buildings, equipment or technology.
Intended to have a lasting effect on efficiency, productivity, and effectiveness.
Often used to expand physical and/or technological needs for growth and development.
Examples: Construction of facilities, major equipment purchases or technology upgrades are common capital funding initiatives.
While project, core, and capital funding serve distinct purposes, they are interrelated within an organisation's long-term ambitions. A balanced funding strategy considers immediate needs, long-term sustainability, and the ability to undertake innovative projects. Organisations leveraging a combination of project, core, and capital funding are better positioned to navigate financial complexities and achieve overarching goals.
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