Are we over-reliant on trusts and foundations?
Too many eggs in one basket?
Welcome to the Nest Egg!
Whether you’ve been reading our stuff since 2019, or are new here - you are welcome!
Today’s article
…has been a labour of love (across many months) and we couldn’t be more excited to share it with you today.
We are enormously grateful to Ali Lyons who has written this article after a discussion with Caroline where the seed of an idea sprung into this bold assessment of charity structures / finances.
You’re gonna need biscuits for this one.
Ali Lyons is a charity consultant and strategist who writes things on LinkedIn that we were all thinking but maybe didn’t have the courage to say out loud.
In her own words:
“I am passionate about social justice, equality, and inclusion and working with organisations that genuinely want to change the way things are done to create a fairer society for all.
My 20 years in the charity sector have taught me the importance of centering the voices of people charities exist for, ensuring continued clarity of purpose, effective distribution of power and collection action are critical to impact, resilience and achieving real change”.
Please follow Ali on LinkedIn - send her a message and some appreciation for her brilliant article.
Comments are open for all this week - this is a really important discussion so do share your thoughts.
Have a great week,
Caroline and Tony
There’s a part 2 coming later this month so keep your eyes peeled for more from Ali.
Are we over-reliant on trusts and foundations?
by Ali Lyons (with sweary bits by Caroline Danks)
I was asked recently if I would recommend grant fundraising to small charities.
With 20 years’ experience under my belt, I said I wouldn’t.
#micdrop
Why you ask?
Three reasons.
1. It is increasingly competitive, and an unfair playing field for smalls.
2. It is more complex than we often think. It isn’t a simple ‘fill in application form, receive funding’. It comes with so many conditions and adds so much complexity to our finance and operations. The impact of this is often undermined.
3. It is not sustainable income. You are always on a grant funding cycle, which can limit how you deliver your mission.
The role of grant funding
To understand, lets step back and understand what a grant actually is.
In other realms of life, grant funding is transitional and is designed for a particular moment in time to help something be achieved to enable longer term success.
It is (typically) restricted, project-based income.
Examples include:
Whilst you learn and can’t earn (those of you born before 1975 may remember those mythical-to-the-rest of us things called ‘student grants’).
To develop your marketing to boost your business.
To purchase a piece of equipment that will make it possible to earn more.
Grant funding for charities is a little more complex for a couple of reasons.
1. Earning money is simply not possible
For many, there is no ‘earning’ model. A grant may help you establish a project or service, but the opportunity to ‘earn’ in a transactional way simply doesn’t exist. So you will always have to fundraise.
2. Varied models of giving
Grant funding is so incredibly varied and incorporates lots of giving models. It is not clear cut restricted, project-based income.
Some will offer unrestricted income (but not enough) in recognition of the absence of an earning model.
Some will give to the same charity for years with no process required.
Some operate more as major donors – identifying who they want to support through their own research rather than inviting applications.
Some grant funding does operate on this transitional model. Government grant funding in particular.
Then there’s seed funding, or capacity funding where the expectation is that with this support, you’ll be able to move away from a grant funded model in the future.
Many funders ask the dreaded sustainability question.
But we never really take the hint (and arguably, neither do they…).
And they seldom fund the work it takes to develop other forms of fundraising. Fundraising ALWAYS has costs additional to delivery and running the charity. But that is rarely understood by funders, let alone the general public.
Why isn’t it working?
The role of grant funding in the non-profit and charitable sector is simply not clear anymore.
It is not designed for small charities, and practices can be detrimental to them even when they can access it.
There is less funding in the wider system which small charities used to benefit from (government and statutory).
A quick history lesson…
A few recent trends which are impacting this area of work:
1. Value of government contracts reducing
Statutory Grant funding used to be a mechanism for Local Authorities (LA’s) to fund charity partners addressing local need. It recognised the value of those partners and gave LAs flexibility to work with those they trusted in the system.
This ceased as we shifted to a procurement model, which is highly competitive and saw the loss of so many small charities. And now, Local Authorities simply don’t have the same cash available. They still want to work with those local charities. But they don’t want to pay for it.
New Philanthropy Capital’s recent sector study backed this up, discovering that 62% of charities believe that they do not receive the full value it costs to deliver a public sector contract, with the average charity contributing 35% the value of a contract.
You can read the full report here.
2. Cost of living crisis
Thanks to the infinite idiocy of Liz Truss and wars in Ukraine and now Gaza, inflation has risen but salaries have not. As a result, people can’t afford the basics and so we have the Holy Trinity clusterfuck of:
Increased need for charitable services
Increased costs to charities
Individual giving declining
This is in addition to the point above about Local Authorities no longer able to contribute in the way they once did.
What a mess.
Pass the gin.
3. Pandemic hangover
The pandemic and lock downs saw income dry up overnight for so many charities. And suddenly grant funding was one of the only sources available. Covid-19 set an unhealthy precedent for reliance on trust fundraising. Trusts were giving away more and new charitable organisations were entering the market.
Covid relief grants are no longer available, but Trustees don’t seem to be adjusting expenditure budgets to match the reality.
4. A racist awakening
We’re starting to see changing practices from grant funders as they recognise that practices are rooted in colonial, racist, white supremacist origins.
Some are slowly adjusting, bringing in more unrestricted funding, delivered over longer periods with more open and transparent application processes. Others are winding up completely, ensuring that reparations are made.
But without partnership with the sector to ensure that the impact of this change is managed, there will be casualties.
Thank you for reading part 1!
Stay turned for part 2 where I explain about the charity wealth gap, explore mission creep and try (in vain) to find answers…
Now tell us what you think?
Do you think we’re ove-reliant on trusts and foundations?
If yes, then what could we do instead? How can we manage this before we implode?
I think you are just reiterating what everyone already knows which is just producing the feeling of hopelessness and is not helpful in my mind. I did not read what you wrote and think it was a problem solving piece, I felt it was a bit of a rant without structure. I think there is already collective understanding that things are difficult, especially after a pandemic and with two major wars going on...and my experience of funders during the pandemic was that they adapted processes very quickly to help charities out (especially small ones). I think it would be more helpful if you focused on some solutions, ways small charities can deliver what funders need so that they can unlock this area of funding without it causing them lots of extra work and yes of course, work in partnership to feedback on what is happening on the ground and how this affects charities. If you keep focusing on the problems, all that will happen is people will feel overwhelmed and then feel they are unable to do their job which is not what charities need at the moment. So yes please, some problem solving would be very welcome, throw some light on the problem not doom and gloom.
Very thought-provoking, which is what I always expect from you!
I agree with many of the arguments but also agree with Caroline Lucy Campbell in her question: if not trusts, then just WHERE are small charities supposed to turn?
The small charity I run and fundraise for (and clean venue floors before a performance and replace the toilet rolls, etc, etc) gets only a small amount from individuals in comparisons with trusts. We do a Big Give appeal each year as we can manage that - and have a few others donors. But no individual gives more than 3K a year and, to be frank, I like it that way. We're an arts charity and, having worked for bigger arts organisations, and seen how major donor giving can skew artistic content.... well, it ain't pretty.
So with our charity, I model our individual giving approach on The Guardian (sadly, minus the Scott Trust): small amounts of individual giving which enables us to maintain our independence. It's just that we are small, so we aren't talking the kind of small monthly amounts that The Guardian or say, Oxfam can count on!
The other thing that I think is implied but not quite unpacked in the article is about capacity and skills - in a small organisation, specific skills and capacity are everything. In our team of 2 part-timers, I have lots of trust and statutory experience - so unlike any other similar organisations of our scale (just over £100K pa income), we raise much more money from trusts than you might expect.
Yes, reporting to trusts is time consuming and challenging for a small organisation, but it is the ONLY solution for the very precise kind of org we are and the very precise kind of skills we have. It short, it's so hard to make generalisations as there are always going to be people who punch above their weight.
And punching above your weight (and being able to articulate how and why you punch above your weight) is, I believe, part of what good trust fundraising is about. With that, trusts are a viable solution - in a short-term hand to mouth kind of way.
Ali Lyons has it right about the unsustainable short-termism of grant cycles. But from a Trust's point of view, I also understand that that makes sense for them and aren't we always taught to try and stand in the funder's shoes? I mean, what else can they do?
I look forward to reading part 2 and am hoping there is a viable solution for us all!