Daniel

Daniel Ferrell-Schweppenstedde

Policy and Public Affairs Manager

Charities Aid Foundation

Why modern grant-making comes with core funding

19 July 2021

Recently we attended the book launch of ‘Modern Grantmaking – A Guide for Funders Who Believe Better is Possible’ by authors Gemma Bull and Tom Steinberg. Both have years-long experience working for and for charities, and know the funding landscape from multiple sides.

You can listen to a Giving Thought podcast episode with the authors, where host Rhodri Davies dives into the content of the book but also discusses a wider range of topics around the future of grant-making and how it could (should) change going forward.

As part of the launch we learned about a set of five core values which should be at the core of every funders work: humility, equity, evidence, service, diligence. The book also presents a set of no-brainers tied to these values – things that funders should do in order to live those values in practice.

There is a really great range of hands-on tips in the book which can’t be covered in a short blog. There is no hierarchy in these ‘no-brainers’ and they cover a wide spectrum of improvements that can be made in the grant-making process and challenges to overcome. Ultimately, all of the tips in combination can help funders become better at grantmaking by avoiding things like mission drift, wasting of time and resources, taking away intellectual property without compensation or acknowledgement, or simply ineffective grant-making.

But one particular tip to highlight is making most grants unrestricted. This has been a mantra for a long time in the world of grantmaking, and we have seen increased focus on the idea of unrestricted (or ‘core’) funding during the pandemic. There are potentially reasonable arguments as to why some funding should not be unrestricted, and unrestricted funding can also come in different varieties be combined with other types of funding and investment. But overall there seems to be an agreement that a far higher proportion of grants should come in the form of core funding.

To those who move in philanthropy policy circles it is easy to assume that this is a discussion all funders are involved in or a ware of. However there is a vast range of people, organisations and vehicles worldwide that are grant-makers or work as funders in different ways – traditional institutionalised trust and foundations, corporate funders, donor-advised funds, family offices, individual philanthropists etc. Assuming awareness of the debate, let alone collective alignment on the issues across this vast diversity of players is probably naïve.

That’s why reiterating the message of the value of funding core costs is so important (as the book makes clear). Just to give an example. CAF’s Resilience programme looked into what funders can do to support the resilience of smaller charities. One of the findings was that they can help small charities to focus on their organisational strengths. Allowing them to spend time to understand what the root causes of their needs are (for example by using a skilled external facilitator) should come before offering specific funder plus support or restrict funding. This can be done by backfilling senior staff or paying core costs and non-delivery staff’s salaries. This is just one of the many ways in which core funding can be used to help a charity to deliver its mission and in a way that fits its organisational needs.

One of the points often made by funders who have adopted an unrestricted funding approach is that ‘if you would not trust your grantees with unrestricted funding, why would you fund them in the first place?’ That basic trust in the ability of a grantee to deliver outcomes and be aligned with the funder’s mission is essential to making a positive decision on a grant. Restricting the funding (in an excessive way) therefore looks like a step back in terms of trust in the grantee.

During the pandemic funders many funders have moved to a more flexible, agile, responsive, trust-based and transparent way of funding in order to be able to react to the vast and emerging needs in the charitable sector due to the pandemic. Many important pledges were issued and signed by many funders which set the tone for what best practice looks like on the side of funders when supporting civil society in the wake of the crisis (for example the pledges hosted by London Funders signed by 350 funders and Dafne/European Foundation Centre). Making more unrestricted grants as part of the financial flexibility element were a big part of that picture.

Now that many countries are emerging out of the crisis and moving towards recovery, it might be time to take stock and assess how we can make the most of positive changes in funding practice made in response to the short-term necessities of the pandemic in order to drive longer-term changes in funding norms. An increased use of unrestricted funding should be part of this process, as it is a key part of funders (both individual and institutional) becoming ‘modern grantmakers.

If you like to learn more about how philanthropy is adapting to a changing world read on here:

Philanthropy is at a turning point. Here are 6 ways it could go | World Economic Forum (weforum.org)

Philanthropy questions itself to stay relevant (cafonline.org)

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