Why 70% of Charity Leaders Are Anxious About Funding

In 2025, Neighbourly surveyed more than 1,500 small charities about their relationship with AI and digital capability. One finding stood out:

70% of respondents said they believed a lack of AI knowledge was already affecting their ability to secure funding.

That is not a hypothetical concern about a future risk. It is a present-tense assessment from the people running small and medium charities right now. And it connects to something broader that the sector has been grappling with for several years: the relationship between digital capability, governance credibility, and funding competitiveness.

What the Anxiety Is Actually About

When charity leaders say they are anxious about funding, they are rarely describing a single problem. The anxiety usually clusters around three things.

Funder expectations are changing

Funders, particularly institutional funders and government grant-makers, are increasingly asking questions about digital capability, data governance, and AI use as part of their due diligence. The questions range from the basic "how do you store beneficiary data?" to the more sophisticated "what is your organisation's position on AI?". Organisations that cannot answer these questions credibly are at a disadvantage, even when their programme work is strong.

The gap between large and small charities is widening

Large charities have dedicated digital and data teams, small and medium charities typically do not. The pace of change in the technology landscape and AI in particular is exacerbating this gap. Organisations that lack the internal capacity to keep up with what is changing, and what it means for their governance, are at risk of falling behind in ways that affect their fundability.

The compliance risk is becoming more visible

ICO enforcement against charities is not new but its visibility is increasing. When a charity is fined or issued a public reprimand, the story appears in the sector press, in Charity Commission records, and sometimes in the national press. Funders read these stories and the reputational consequence of a compliance failure now extends well beyond the immediate regulatory action.

What This Means for Your Digital Strategy

The organisations that are best positioned for funding in the next three years share a common characteristic: they have moved from reactive digital decision-making to something more intentional. They know what they have, they govern it properly, and they can talk about it coherently with funders.

That does not require a large investment, it requires a clear picture of current reality, what systems you use, what data you hold, what your AI use looks like and a documented approach to managing the risks that come with it.

The starting point is almost always the same: an honest assessment of where you are, before any decisions are made about where to go next. Organisations that skip the diagnosis and go straight to solutions tend to invest in the wrong things. Organisations that understand their current position first make better decisions, faster, with less waste.

The Questions Funders Are Beginning to Ask

Not every funder is asking these questions yet, but the trajectory is clear, and the organisations preparing now will have an advantage when they become standard:

• How do you manage the personal data of the people you support or your donors?

• What is your organisation's approach to AI?

• How does your board oversee digital and technology risk?

• How do you ensure that the digital tools you use are appropriate for the people you work with?

For most small and medium charities, the honest answer to at least some of these questions is "we are working on it." That is not necessarily disqualifying, funders understand that governance takes time to build. What is more problematic is not knowing that the question is coming, or not having thought about the answer at all.

A Practical Starting Point

If the funding anxiety described in the Neighbourly survey resonates, the most useful first step is a structured conversation about your digital foundations, not a technology audit but a governance conversation. What do you have? What are you doing with it? Who is responsible? What does the board know?

That conversation usually takes less time than people expect. The gaps it reveals are usually fixable. And the confidence that comes from being able to answer funder questions clearly, maybe not perfectly, but definitely with some certainty is worth considerably more than the anxiety of not knowing.