Funding challenges for small charities in the criminal justice sector

Last summer, the Foundation funded NPC to map and explore the implications of statutory and philanthropic funding flows to the criminal justice voluntary sector. One of the main purposes of this was to identify ways the challenges facing voluntary sector organisations working in the criminal justice sector and explore how funders can work better together.

This blog shares key findings from the final report, which launched this week, about how small charities fare in this landscape and recommendations for how funders can better meet their needs.

Statutory funding: a disproportionate distribution

The analysis shows that 94% of statutory funding for charities working in the criminal justice sector (CJS) goes to charities with annual incomes above £2 million. By contrast, charities earning under £500,000 receive just 1.42% of statutory funding. This pattern reflects a wider trend in the voluntary sector, where larger organisations are more likely to receive larger government contracts - but this funding gap particularly stark in the criminal justice space.

This disparity could, in part, be due to the underrepresentation of micro-charities working in and around the criminal justice system — those with annual incomes below £100,000 make up 46% of the sample used, which is significantly lower than their 80% share in the broader voluntary sector.

The role of philanthropy for small CJS charities

Philanthropic funders are the main source of income for small and medium-sized charities, particularly those earning between £100,000 and £1 million. Smaller organisations interviewed and surveyed as part the research cited positive experiences with philanthropic funders such as simpler application processes, more proportionate reporting requirements, and more flexible funding arrangements.

There are also differences in the types of work supported. Philanthropic funders are more likely to support activities related to systems change — such as advocacy, campaigning, and influencing work — whereas statutory funders are seen as more cautious in this area, often due to concerns about perceived conflicts of interest.

Barriers to statutory funding

The research identifies a range of challenges that can make it harder for smaller charities to access statutory funding, including:

• Complex procurement processes and high due diligence standards can be difficult to meet without dedicated staff or infrastructure.
• Statutory contracts often do not cover the full cost of delivering services, requiring organisations to find additional income to make up the shortfall.
• Delays in payments are not uncommon, which can create cash flow pressures—particularly for organisations with limited financial reserves.

Larger organisations may be better positioned to manage these issues, sometimes through subcontracting arrangements, which may not provide long-term sustainability for smaller delivery partners.

Impact on smaller organisations

Taken together, these challenges affect not only access to funding, but also how small charities view their financial future. The report finds that many smaller organisations report low financial confidence, particularly those heavily reliant on short-term or uncertain funding sources.

Nevertheless, many of these charities play a key role in supporting people who have experience of the criminal justice system, often working with groups who are less likely to engage with larger services or statutory systems.

Recommendations for funders and policymakers

A key aspect of the research was to identify ways for statutory and philanthropic funders to better meet the needs of organisations working in the criminal justice system, including how they can work together more to make a greater impact.

For small charities, the key recommendations for funders and policy makers include:

• Increase access to multi-year and flexible funding, especially for organisations with lower incomes or limited reserves.
• Ensure that statutory contracts reflect the full cost of delivery, including overheads and compliance.
• Simplify application and reporting processes, making them more proportionate to the funding awarded.
• Expand support for advocacy and systems change, recognising the role this work plays in long-term reform. This is crucial role for philanthropic funders.
• Improve coordination between funders, helping to fill gaps and reduce duplication across funding streams.

Please send any comments and queries to Suzanne Perry, Research Associate at sperry@lloydsbankfoundation.org.uk