To fund core costs & existing projects….
or not to fund core costs?
That is the question….. that I’m asking on today’s blog!
I’ve had this topic in mind for the subject of a blog long before the Covid-19 pandemic reared it’s head.
Prior to this, I would definitely say that there was a reluctancy among a significant proportion of grant funders to fund what are usually termed as core costs and overheads. Even existing successful services or projects can be overlooked if they are not constantly rebadged & reinvented. Grant funders often require details of projects to be funded, with measurable activity targets against which they can judge the impact the funding has made. This makes it easier for the grant funding organisation to report what their achievements for the year have been and looks good, if they can align themselves to providing sparkly new services or equipment.
I would however like to provide some argument against this approach to the funding of charities…!
If you don’t trust an organisation you’re funding, why are you funding them?
Some grant-making organisations have quite onerous grant application forms and a rigorous process of assessment for awarding grants and monitoring and reporting against any funding provided. As an accountant, I would argue that if a grant-making organisation has undertaken considerable due diligence and assessment of the charity as a whole and deemed that they are a charity who has met the standard required to receive funding, then that should be justification enough for funding the charity and allowing them to allocate funds where they would be most effective. This approach won’t work for all grant-funding organisations i.e. where a grant-funder has very specific objectives they are trying to meet and only part of the work of an applicant charity aligns to these objectives. However, constantly requiring charities to generate new projects to attract funding is not always an effective use of their resources either. Sometimes what is tried and tested works best and is efficient, without having to reinvent the wheel.
A well managed charity is much more likely to successfully deliver on activity targets and have well thought out long-term strategies.
We want our charities to be capable, professional, effective and trustworthy. We want them to operate to the same professional standards as commercial organisations. Core costs for management and administration are required to make this happen. However, more often than not for small charities, attracting funding for these functions within the organisation is pretty much impossible and so the result is volunteers or perhaps employees find themselves thrown in the deep end, having to be a jack-of-all-trades, taking on roles which do not match their skill-set, knowledge or expertise. It, therefore, isn’t any wonder when things fall between the gaps, are missed or completely overlooked. Unfortunately, charities who do drop the ball when it comes to governance affect the public’s perception of the sector as a whole, reducing confidence and trust in the good work that so many charities are doing. We do charities a disservice expecting them to function as well rounded organisations, without any funding to support the core costs and overheads which bring stability, consistency and can drive an organisation forward
Dare I say some of this is even an argument for ‘unrestricted’ grant funding, rather than restricted funding!
In 2019 The Peter Cundill Foundation announced a shift to providing partners with unrestricted funding. In a twitter thread, John Rendel, Director of Grants for the foundation said
“It’s about total impact, not our impact as a funder. So who cares if our money ends up in a reserve or funding the CEO’s salary, as long as we feel the organization is working to prudently maximize the long-run impact of every dollar received,”
Research by nfpSynergy, published in March 2018 showed that charities valued unrestricted funds twice as much as restricted funds for a £100k grant. This is definitely food for thought… can and should we be doing things differently?!
I will say, that as a result of the Covid-19 pandemic I have seen a shift in Emergency and Survival funds being more willing to fund core costs, without which so many charities would be lost in the current economic climate. One positive outcome of these strange times would be to see more grant-making organisations being dynamic and challenging existing approaches to funding, working with the sector to find new approaches that work for both sides of the funding relationship!
Sources referred to in this blog: