How to achieve the greatest impact with grant funding

Grant funding is a unique and highly valuable source of income for charities, allowing them to innovate and collaborate. What’s more, the independence of charitable trusts and foundations enables them to take risks, support marginalised causes, fund long-term solutions, and work with diverse partners.

 

Most of the funding used by charities and community groups from inside the social sector comes in the form of grants. But, according to a report by Pro Bono Economics, there are still opportunities for grant funding to reach its full potential and, in turn, enable charities to maximise the impact of their services.

 

In this article, we explore the report, ‘Making it count: Overcoming the barriers to better grant-making’ to uncover how grant-makers can achieve the greatest impact to UK communities with their funding.

 

 

Offer multi-year, unrestricted grants

 

Some grant-making organisations feel under pressure from trustees or donors to offer short-term, restricted grants to charities. Others offer these types of grants because they don’t have expertise about the types of funding needed. Funding managers may not always have experience in the charity sector or in specific areas of funding, and grant-making organisations do not always feel empowered to invest in internal skills and capacity.

 

But a lack of access to long-term, unrestricted grants means that charities have to deprioritise reaching their missions in the longer-term in favour of delivering narrowly conceived projects in the present. A lack of funding for “core costs” means charities are less equipped with skills and capacity to make a difference, including in grant-funded projects.

 

Short-term grants of a year or less mean that charities are less able to plan for the future as they don’t know what their financial situation will be. They mean that charities have to complete an “endless roundabout” of funding applications and reporting, which is an inefficient use of their already squeezed resources.

 

Pro Bono Economics say that offering multi-year, unrestricted grants benefits both grant-seekers and grant-makers, with both being able to be more confident in developing and delivering on long-term strategies. This would ultimately increase the benefit of charity to the country’s communities.

 

 

Optimise processes around grant-funding

 

Problems with awareness, capacity, skills, and strategy in grant-making organisations can mean that processes such as grant application and monitoring are expensive and cumbersome for all involved.

 

In 2022, charities spent around £900 million a year applying for grants, with costs being disproportionately higher for small- and medium-sized charities, who spend around a third of total raised funds applying for grants. These processes also negatively impact grant-makers, as around 46% of grants have been estimated to cost more than they are worth.

 

Other problems with grant-making processes mean that funding does not necessarily go to where it is most needed, or where it will be put to best use. For example, donors can seem to prefer “new and bright and shiny and innovative” work, as opposed to work which has been proven as effective. Most drastically affected by this are groups run by and for ethnic minority communities.

 

According to the report, optimising processes means grant-makers and charities can be more effective and efficient at making a difference.

 

 

Change the approach to social inequalities in grant-making organisations

 

Wider social inequalities exist within grant-making organisations, too, meaning that some groups are disproportionately affected by problems in grant-making and funding does not always go to those who need it most.

 

Grant-seeking organisations run by and for ethnic minority communities disproportionately struggle to access grants. Some report that they are held to higher standards than their white counterparts and are made to feel that their applications are worse due to structural racism in the sector.

 

One large funder told Pro Bono Economics, “black- and brown- led organisations are more likely to face harsher due diligence, because fraud is found in those organisations, but that’s often because people look for it more.”

 

When there are gaps in cultural competence in grant-making organisations, ethnic minority-led organisations need to do more work to help grant-makers understand their applications. This looks like having to explain basic concepts relating to their cause to make them understandable to grant applications’ predominantly white, middle-class readers. A large funder told the researchers, “you’ve used up all your allotted words before you’ve even talked about what you’re doing with the project, because you have to almost train somebody in understanding”.

 

Grant-making organisations can be led by trustees who lack expertise in the areas they fund and the radicalism necessary for cultural change. Awareness, training, and engagement with grant-seekers, and an emphasis on trustee diversity, can help these problems to ensure grants make the greatest impact possible across the UK.

 

 

Make an impact with digital through grants

 

Echoing these overarching themes, the Charity Digital Skills Report 2024 saw charities overwhelmingly highlight the need for funders to recognise that digital costs are integral to service delivery. The costs of digital devices, licences, infrastructure, and staff time are core costs to making an impact today, which charities find hard to fund.

 

In addition, charities have asked funders to improve application forms to be more inclusive of digital costs and funding needs.

 

 

Tackle barriers to greater impact in grant funding

 

Many grant-makers have started to take bold steps to achieve a greater impact with their grant funds, and even small grant-makers have been able to achieve large changes with little investment. But of those organisations who have had difficulty implementing the above goals, four underlying barriers are clear:

• A lack of internal awareness and appetite for change
• Trustee and donor control over strategy
• Limits to capacity and capabilities
• A lack of engagement with grant-seekers

Working to break down the above barriers can ease change. That could include, for example, providing training to staff and trustees on the issues the organisation is aiming to address through its funding, as well as the benefits of changing funding processes. It might include involving people with lived experience of the funding areas in developing funding strategies. It could mean investing in internal skills and capacity to be able to help funds go further.

 

To help achieve the greatest impact, the Association of Charitable Foundations’ Stronger Foundations page helps grant-making charitable foundations identify and pursue ambitious practice, using 40 “pillars” to help them use their resources for public good.

 

You can also read the report by Pro Bono Economics here.

 

 

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