Financial sustainability does not come simply from increasing the number of funding sources, securing a large grant or running a successful fundraising campaign. A charity may appear to have several sources of income, while in practice relying on the same audience, season or platform for much of its funding. It may also generate substantial income, most of which is restricted to specific projects and cannot cover other needs.
A funding portfolio helps a charity see its resources as a whole: where they come from, how stable and flexible they are, what they cost to secure and manage, and what risks might arise if they are delayed or withdrawn.
A balanced portfolio does not mean dividing income equally between grants, donations, waqf and earned income. It means having a funding mix that suits the charity’s needs, capacity and risks.
A Portfolio Is Not a List of Equivalent Funding Sources
A charity should first classify its funding across several dimensions, because funding terms do not always describe the same kind of relationship.
| Dimension | What it shows | Examples |
|---|---|---|
| Funding source | Who provides the money? | Grant-maker, company, major donor, the public |
| Collection channel | How is the funding raised? | Crowdfunding platform, direct fundraising, event |
| Type of income | What form does the resource take? | Grant, donation, earned income, return from a waqf asset |
| Conditions of use | What can the charity spend it on? | Project-restricted funding or flexible support for the charity’s purposes |
| Collection pattern | When and how often is it received? | One-off donation, regular giving, contractual instalments |
| Dependencies and risks | What could affect the resource? | A single funder, audience, platform or season |
These dimensions can overlap. Crowdfunding is a channel for collecting donations and may generate one-off or regular donations. A major donor may contribute to a waqf or make a project donation. It is therefore misleading to treat all these terms as mutually exclusive categories or compare their shares as if they described the same thing.
What Makes a Funding Portfolio Balanced?
There is no ideal funding mix that suits every charity. One charity may rely on a small number of sources while understanding its risks and having flexible resources and a plan to manage them. Another may have many income streams but remain exposed because they all depend on the same funder, audience or season.
The question is not simply “How many sources do we have?” A charity should also ask:
- What proportion of our income comes from our largest source?
- Do different sources depend on the same funder, audience or season?
- What share of our income cannot be directed to other needs?
- How much does each resource cost to secure and manage?
- How certain are we that expected income will be received?
- Does the charity have the capacity to meet the commitments attached to each source?
The UK’s National Council for Voluntary Organisations (NCVO) advises charity boards to consider income stability, reliance on a small number of sources, the proportion of restricted income, and the cost and return of generating income. These questions can also serve as a useful reference for charities elsewhere, subject to local rules.
Assess Each Resource Using Evidence
A charity can maintain a single funding-source register and update it regularly. For each source, it should record:
| Indicator | How to assess it |
|---|---|
| Income received | The amount actually received during the period, separate from expected income or applications still under consideration |
| Share of income | Income from the source ÷ total income received |
| Concentration | The share provided by the largest funder or a group of related sources |
| Flexibility | How far the income can be used for different needs under its conditions |
| Net contribution | Income after the cost of securing and managing it and meeting its conditions, calculated on a documented basis |
| Regularity | How often it is received and the likelihood of delay or withdrawal |
| Capacity required | The staff time, systems and expertise needed to manage it |
| Suitability | How well the source and its conditions fit the charity’s mission and priorities |
These indicators should be considered together. High income does not necessarily mean a high net contribution; expected income is not the same as money received; and a regular payment is not guaranteed to continue.
A high proportion of restricted income is not automatically a problem. It should, however, prompt the charity to check whether its available resources can cover commitments that the restricted funding does not support.
What Role Does Each Source Play in the Portfolio?
Different sources serve different purposes. A charity should not add them simply to increase the number of funding streams.
- Institutional grants may fund programmes or capacity-building, but the charity needs to assess their conditions, payment schedule, reporting costs and what happens when the grant ends.
- Major individual donors may provide substantial support, but reliance can increase if the charity makes commitments it cannot sustain without that donor. The purpose and boundaries of the relationship should be documented, while the charity’s independent decision-making is protected.
- Crowdfunding is a channel for reaching the public and funding a defined appeal. One successful campaign does not guarantee the next will succeed, and multiple campaigns to the same audience may not reduce the charity’s underlying dependency.
- Regular giving may make income more predictable when forecasts are based on actual receipts, retention and cancellation rates—not just the number of people who have signed up.
- Waqf may support a long-term purpose, but requires a suitable asset, governance and management. Its returns should not be treated as guaranteed income, nor should the waqf asset be treated as unrestricted operating money.
- Earned income may provide revenue from a service or product, but requires proven demand, full costing and suitable operational capacity. Gross income may be high while the net contribution remains small.
Academic research on nonprofit income suggests that spreading reliance across income sources can help reduce revenue volatility. However, this does not happen simply by increasing the number of sources; the composition of the portfolio and the degree of shared dependency also matter.
Turn the Analysis into an Action Plan
A charity can organise the work in five steps:
- Map income received: Record what was actually received over a suitable period, its source, conditions and costs.
- Identify dependencies: Find the largest funder, collection channel, audience and season on which several sources may depend.
- Match resources to needs: Show which income funds projects, which can cover shared or operating needs, and which can only be used for a specified purpose.
- Choose a development priority: Decide whether to improve the terms of existing funding, broaden the donor base, test a new source or reduce reliance on a particular source.
- Set and review indicators: Monitor them regularly and assign responsibility for action when income or risk changes.
A charity does not need to launch several fundraising initiatives at once. Improving the timing of grant payments or increasing collection efficiency may be more appropriate than starting a new campaign that takes staff time but reaches no new audience.
Worked Example: More Sources Do Not Always Mean Less Risk
Suppose a charity receives the following income over one year:
| Source or activity | Income received | Cost of securing and managing it | Initial assessment |
|---|---|---|---|
| One institutional grant | SAR 700,000 | SAR 35,000 | 70% of income; restricted to a project ending within a year |
| Crowdfunding campaign | SAR 150,000 | SAR 30,000 | Depends on the charity’s audience during a particular season |
| Regular donations | SAR 100,000 | SAR 15,000 | Donors may overlap with the campaign audience |
| Paid training courses | SAR 50,000 | SAR 45,000 | Gross income is much higher than its contribution after costs |
| Total | SAR 1,000,000 | SAR 125,000 | Initial contribution after these costs: SAR 875,000 |
These figures are hypothetical and for illustration only. They may not include all indirect costs. The charity should use documented, reasonable methods when allocating the cost of managing each source.
The example reveals several points:
- The grant represents 70% of income, making its end a significant risk to the portfolio.
- The campaign and regular donations appear to be different sources, but may depend on the same audience. The charity should check whether their donor bases overlap rather than assuming they are independent.
- The courses generate SAR 50,000 in income, but their costs leave a limited contribution. The charity may need to review the price or delivery model, or stop the activity if the results do not justify the effort.
- Restricted grant and campaign funds do not become flexible operating resources simply because they have reached the charity’s account.
The charity’s priorities might be to negotiate suitable cost coverage and payment timing for the next grant, forecast the period after the grant ends, examine how much the donation audiences overlap, and review the economics of the training before expanding it. The charity does not need to take every action at once; it should prioritise according to cost, capacity and expected impact.
Include Reserves in the Plan, but Do Not Treat Them as Income
Funding-portfolio analysis is connected to cash-flow forecasts and the reserves policy, but reserves are not an income source. They can help a charity manage risks or temporary gaps; they do not resolve lasting dependency on one grant or a recurring deficit. The funds used as reserves must also be available for that purpose under their conditions and local rules.
The Charity Commission for England and Wales advises charities to link their reserves policy to income stability, financial risks and planning. It does not set one level of reserves for all charities. Its guidance applies to England and Wales; charities elsewhere must follow their own local requirements.
Conclusion
Building a balanced funding portfolio does not mean finding the largest possible number of sources or dividing income equally between them. It begins with understanding where the money comes from, how it is collected, what conditions govern its use, what it costs to secure, and what risks may be shared across sources.
When a charity analyses these dimensions, it can distinguish genuine diversification from the appearance of it, match each resource to the needs it can support, and identify commitments that require confirmed funding.
A good portfolio is not the one with the most sources; it is the one that helps the charity meet its commitments and continue its work when a funding source changes.
