Need for survival can lead to mission drift, says new report

Finance | 1 Jul 2007

New research into the ability of third sector organisations to access finance has found that the majority of third sector organisations (TSOs) are focusing continually on organisational survival, which can lead to mission drift.

Commissioned by the Office of the Third Sector (OTS) the qualitative research's key objective was to acquire further understanding of the current and potential future demand for external finance to support the development of third sector organisations. It reviews four areas: current understanding and use of finance; support available; future demand and barriers; and how demand changes.

Released at a time when the sector faces 'a significant transitional period whereby many TSOs are moving from grant reliance to contract based funding sources' or more independent financial arrangements drawing on 'organisationally generated reserves and debt finance', the report identifies a predominant need for 'working capital to cover the short term cost of delivering services, and to contribute to operating costs'.

Despite the formation of specialist finance institutions such as Community Development Finance Initiatives to meet the needs of organisations excluded from accessing commercial funding, it was found they were not filling the gap because TSOs either face a structural inability to consider debt finance, or because the relatively high cost of borrowing exacerbates the difficulties TSOs face in considering debt finance, rather than easing them.

Directory: Office of the Third Sector

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