Grants from charitable trusts and foundations provide around 15% of charities’ income from voluntary sources, but what motivates their spending decisions are often unclear. Cathy Pharoah explains some of the key influences…

Often of high value and with few restrictions, grants are highly sought-after but fundraisers generally tend to feel powerless when it comes to the crucial funding decisions as it is the funders who are in the driving seat.

So it is salutary to remember that trusts and foundations are subject to external pressures and influences from government, the regulator, trustees and founders. A key element of successful fundraising, therefore, involves paying attention not just to what your charity needs, but to what the funders need to keep their own stakeholders on board.

These are some issues currently influencing the approach of grant-making foundations, and which in turn influence their grant decisions, what they offer and what they demand:

 1.      High point in grant funding

The good news is that there has been growth in grant-making over the past three years. Philanthropic foundation spending reached almost £3 billion in 2015/16, its highest level ever according to Foundation giving Trends 2017. The growth was achieved largely on the back of growth in the value of their assets, which also hit a record high in 2015/16, at £60 billion. This has added around an additional £558 million to spending (though two-fifths relates to the Wellcome Trust’s grants).

Strong asset growth may keep grant-making high in 2017 and possibly 2018, as high returns in any one year tend to be translated into the subsequent year’s spending. As foundations usually pass any increases in income or wealth to beneficiaries quite quickly, there is better fundraising opportunity at present than we have seen for some years, following the credit crunch.

 2.      Drive for greater quality and fairness

Recent political divisions have brought home the huge regional, local and community differences in access to wealth and other resources in the UK. The disparity is often reflected in lower levels of grant applications from more deprived areas with less capacity, sometimes of poorer quality. Many foundations are concerned to redress geographical disadvantage, and are particularly welcoming applications either from underserved areas or from national organisations clearly seeking to be more inclusive and to help build local capacity.

 3.      Growing expectations of impact reporting

An emphasis on effectiveness and value for money has dominated over the past few years, whether hard-pressed governments re-appraising spending priorities, business sector donors and trustees applying performance management to charities, or a social investment funding culture focusing on measurable returns. Impact has become a sector mantra which few organisations can afford to neglect. Fundraisers are experiencing increased funder demands for outcome evidence.

This is partly because funders themselves are expected to demonstrate impact. Impact assessment is neither cheap nor easy (if not virtually impossible where complex social issues with multiple problems are being addressed). It must be addressed in grant applications today, but promising impossible targets just to ‘please the funder’ should be avoided as many foundations understand the challenges.

Fund-seekers should, however, be crystal clear about their aims and how they are to be achieved, acknowledge difficulties in measuring impact honestly, while ensuring outcomes are monitored where feasible.

 4.      Providing core support

With local authority grants falling each year, there is a decrease in the funding available for core ‘back-office’ or administration but nonetheless vital charity functions. Some foundations are recognising that they can no longer rely on others providing the core support which allowed them to cherry-pick funding for added value projects. They are extending funding priority to include core functions.

The ‘Invest’ fund of Lloyds Bank Foundation, for example, provides ‘longer-term core or delivery of work funding’, renewable over several terms. Garfield Weston Foundation’s website highlights its support for core and unrestricted funding, and is encouraging fund-seekers to aim at full cost recovery in their applications. Amid greater awareness of the importance of core cost support, grant applicants must provide detailed and accurate costings, abandoning ‘finger in the wind’ estimates or second-guesses about what funders will accept.

 5.      Funding ‘plus’

Growing challenges face the sector if it is to achieve greater financial or social sustainability, and a more powerful role in social change. This is leading many foundations to recognise a role in building sector capacity and offer more than project funding but also resources for organisational development.

This can come in many forms, including support for additional finance, fundraising or business development posts, specialist consultancy, pro bono or hands-on advice, contacts and so on. It is up to applicants to identify the resources they really need to deliver better outcomes, and make a convincing case for them.

 6.      Imaginative partnership

Foundations are increasingly seeking to maximise their impact through working with multiple partners who bring a range of expertise and resources to the table. Partnership applications with promise to tackle issues in ‘joined-up’ or innovative ways are very attractive to funders.  

A good example is Heads Together, a multi-charity and foundation campaign funded by The Royal Foundation of the Duke and Duchess of Cambridge and Prince Harry. It brings together Best Beginnings, CALM – The Campaign Against Living Miserably, Contact (a military mental health coalition), Mind, Place2Be, The Mix, YoungMinds, and The Anna Freud Centre to challenge the stigma and silence still surrounding mental health issues.

Partnership approaches mean defining common goals and values, and tackling the barriers between funders and service-delivery charities. They may require more time to pull together, but will be well worth the investment.

7.      Strategic priorities and social investment

Grant-makers are facing unprecedented levels of need and demand, as government budgets suffer the cumulative effect of annual reductions, and household incomes fall. Many have been revising their strategic priorities. Some are increasingly including social investment, providing loans and other kinds of repayable finance, alongside their grant funding to address pressures on resources.

Social investment is not for everyone, but most foundations will look for evidence that applicants at least have a policy towards future sustainability. The environment for raising funds from foundations fundraising remains highly competitive, and the need for applicants to be up-to-date with funders’ grant strategies, to fit funder priorities and submit well-crafted applications is greater than ever.

Cathy Pharoah is Visiting Professor at Cass Business School