What's the Difference Between Project and Core Funding?
Project funding is restricted money that can only be spent on a specific programme or activity. Core funding (often called unrestricted funding) covers the costs that keep your organisation running: staff, rent, utilities, admin, and the systems that make your projects possible.
Grants that cover programmes but not people? Here's why you need core funding to thrive.
Many not-for-profits face a common challenge: grants restricted to programmes leave critical costs uncovered. Project funding is essential, but without core or unrestricted funding, organisations struggle to pay staff, cover overheads, and plan for the future.
Why isn't project funding enough on its own?
You've secured funding for a programme, but:
You can't pay a project manager
Rent, utilities, and admin costs aren't covered
You're juggling multiple restricted pots just to keep afloat
Project-only funding means short-term fixes. Without core funding, your organisation struggles to:
Pay staff
Maintain infrastructure
Plan for long-term sustainability
What does core funding cover?
Core or unrestricted funding:
Covers overheads and operational costs
Gives flexibility to respond to changing needs
Supports strategy, leadership, and growth
How should you categorise project and core funding in your accounts?
Track restricted and unrestricted funds separately
Ensure project spend is coded correctly
Highlight overhead allocation to funders transparently
How do you ask funders for core funding?
Use clear language: “This grant supports not just projects, but the people and systems that make them possible.”
Explain why core funding strengthens impact
Show funders how it enables better programme delivery
How can you cover core costs within project grants?
Even when a funder will only fund projects, there are often ways to make sure the grant contributes to the costs of running your organisation. Here are two we use regularly with the not-for-profits we work with.
1. Ask for a core contribution. Some funders are open to a core contribution charge being added to their grants, sometimes called an overhead or management charge. This varies from funder to funder, but we typically see between 10% and 20% of the project budget. It can make a real difference in supporting your organisation's core costs. Check the funder's guidance, and if it does not mention a core contribution, ask.
2. Bring specific core costs into the project budget. Some core costs can be isolated and built into a project's costs where they are specifically connected to that project. For example:
Legal costs, such as drawing up a contract or partnership agreement the project needs
A share of a manager's time spent overseeing and supporting the project
Finance or admin time spent on project reporting and grant monitoring
These costs must be broken down clearly in the budget you give the funder, showing what each cost is, how it has been calculated (for example, one day a week of a manager's salary) and why the project needs it. Keep records such as timesheets to back it up, and make sure the same cost is not charged to more than one funder. Done properly, this can be a way of making sure the right costs are covered so the project can go ahead.
What changes when you have core funding?
With core funding:
Staff and infrastructure are secure
Planning and strategy are possible
Your organisation thrives, not just survives
Understanding the difference, categorising funds correctly, and communicating your needs clearly to funders can unlock the flexibility and stability your organisation needs.
Frequently asked questions
Is core funding the same as unrestricted funding?
The terms are often used interchangeably. Both describe money that isn't tied to a specific project, so you can use it where it's needed most, such as staff, overheads, and the systems that keep your organisation running.
What is restricted funding?
Restricted funding can only be spent on the purpose the funder has agreed, usually a specific project or programme. That's why it needs to be tracked separately from unrestricted funds in your accounts.
Can project grants include overhead costs?
Yes, often. Some funders accept a core contribution charge, typically 10% to 20% of the project budget, and many will fund core costs that are directly connected to the project, such as a share of a manager's time, as long as they are broken down clearly in the budget.
Why do I need core funding if my projects are funded?
Projects can't run without the people, premises, and systems behind them. Core funding pays for those foundations, so your projects can be delivered well and your organisation can plan beyond the next grant.
How can Moneypad NFP help?
Let us know if you have any questions around project and core funding! The Moneypad NFP team helps not-for-profits track restricted and unrestricted funds clearly and make a confident case to funders, get in touch. Follow us on Instagram for more tips.
