A good chunk of a Grant Manager’s (GM) time is devoted to trawling through annual reports and management accounts. Usually this is done with a tinge of dread, willing there to be nothing untoward in the accounts that would trigger further investigation.

As uninteresting as it may be, the financial and governance due diligence is the first hurdle for charities to jump over on the funding journey. Essentially, this is boiled down to the question of trust: can the keepers of money (the Trust or Foundation) trust the charity to use its money effectively?

As with much of the accounting world, this was often more art than science. 

The process starts with the basics: does the charity have enough unrelated trustees, are the accounts submitted on time, are they considered a going concern if externally audited?

​Very few charities succumbed to these checks, so normally it was straight on to more subjective matters, such as reserves, governance, and deficits.
 
The thorny issue of reserves got the Trustees going if they were too high (why should take OUR money when they can pay for it themselves?), and worried Grant Managers if they were too low (are they risky for a multi-year grant?).

Generally, my view was that these concerns could be assuaged with a decent policy and reasonable commentary in the annual report. Unravelling what was actually free cash and not tied up in buildings wasn’t always straightforward, even with the SORP requirements.

Anything outside of 3-9 months of expenditure was generally investigated, though I rarely saw anything approaching a year from place-based, community driven charities. A nice problem to have if so.

Unexplained issues with reserves are not helpful and should be avoided, as anything that adds time into the due diligence process lessens the attraction felt by the GM to your organisation. GMs are generally aware of the tightrope charities tread regarding reserves, so a clear explanation on the current predicament is all that’s needed.

As for deficits, these pose different issues.
 
One former colleague was adamant that no charity with a couple of years of deficits should be funded as it was ‘throwing good money after bad’.

Putting aside this view for a second (as it doesn’t take into account how effective the charity is at delivering its service), clearly there are a myriad of reasons why a charity might have logged deficits: deliberately to run down high reserves, an unexpected legacy dropping the year before, loss of a government contract, or not least that fundraising is increasingly like trying find needles in moving haystacks.

I always checked in with the charity if there were unexplained multiple deficits as I wanted to avoid the Barbara Streisand effect associated with highlighting any financial issues with a charity: i.e. the Trustees wouldn’t know it was there until we highlighted it, but once we did they wouldn’t think about anything else.

Once again, financial commentary within the annual accounts, or within the annual accounts can give the GMs confidence that the charity is going to be around for all or most of the grant duration. There seems to be more of an opportunity for charities to explain anything unusual in the accounts within funding applications now. This is a good use of time, as otherwise GMs could be using out of date information.
 
On the rare occasion that charities were honest about their existential crisis, it didn’t land well with Trustees. The old adage of ‘dependency’ still looms large, Trustees didn’t want to be ‘saving’ charities as what would happen when the Trusts funding came to an end and the Trustees head was turned in another direction?

The world of charity closures is complex, and not one I will go into here (instead check The Decelerator) but it suffices to say that unless they have a deeply personal connection (ever the caveat to process), your average Foundation Trustee won’t be pounding the table for funding to be granted to a charity on its last legs.

Generally, these are where decisions are finalised and minuted. These minutes rarely escape the building, only to be seen by Grants teams and the occasional auditor (there are of course exceptions, such as the excellent City Bridge Foundation, where you can attend meetings and access their minutes).

These meetings are often held in surroundings incongruous with the subject matter discussed, which only adds to their surreal nature. At one funder, the meetings were followed by a lavish three course meal with drinks.

​In theory, most of the work has been done before the meeting; these gatherings are the final scrutiny and sign-off for the release of the funding.

The pre-meeting processes are generally a variant on a theme. Applications come in, Grants Managers (GMs) assess them against the organisation/fund criteria to make recommendations to the Committee. Any contentious or particularly large grants will generally be discussed with the Chair before the meeting.

​Sometimes the grants which are ‘recommended for decline’ will be simply listed, sometimes they will have the same level of detail as those ‘recommended for approval’. GMs will produce one-to-two page summaries, including a brief introduction to the organisation, key financials, where the money will go and commentary/recommendations.

So far, so good: the process is generally as you would expect. 

What the Committee sees is the tip of the iceberg of the GMs, who would have checked, read, and written much more only to be distilled into a couple of pages. In my experience, the percentage of these documents actually read before the meeting is variable, and sadly lower than you’d expect.

GMs have to accept this and be ready to have a clear ‘pitch’ for each charity, and to prepare for any likely questions.

Committee Members are often families or people who are very familiar with each other, and are often very busy. Often, they will cram a few meetings into one day, with the Grants Committee relegated to the second or third meeting of the day.

GMs go into the meetings prepared to the hilt, with in-depth knowledge of each bid, but they cannot account for Committee members who may have sat in lengthy, tense meetings with patience wearing thin.

This weariness can manifest in various ways; annoyance at perceived jargon terms (‘Theory of Change’ being a particularly contentious term with many trustees), changes of heart, or temporary amnesia of the strategic objectives. In short, the decisions made here are made by humans, who may not be at their best. 

Committee Members generally have a trusted network, many of whom may run or be trustees of charities. I’ve assessed many applications that have no bearing to the strategy, but have been personally recommended, so unless you discover a major issue, the grant will sail through.

One extreme example saw a Committee member attempt to discredit other applications because their personal application was recommended for decline (because it targeted a completely different demographic).

This is rare, but the most asked questions from Committee members (if they have questions) are generally around whether we trust the individual at the helm of the charity. Either that, or "do they really need our money?" if the charity dares to build up anything like a reasonable reserve.

These questions are generally easily answered by GMs, but problems come when the Committee starts diving into how the charity operates or understanding its role; this is when the dreaded "I’ll find out more and get back to you" occurs, leading to more work for a potential decline. 

In saying all of this, generally Committees accept the GMs’ recommendation, especially after a few meetings together building up trust. The key currency in the meetings is trust; effectiveness of a charity is rarely discussed (the Committee is more likely to debate as to whether the organisation is suitable for its funding). If the Chair keeps to the agenda, these meetings can be simple affairs, as recommendations get nodded through.

​The flipside is when a grenade is chucked into a meeting and affairs turn volatile and unpredictable – such as differing personal view, a preference for another charity, or a questioning of strategy – often unravelling months of work from the GMs.

In short, there is only so much the GMs can control, and the reasons for a declination might not be clear cut. Often feedback is euphemistically put to the charity, whereas the real reason is that a Committee member has had a bad experience with that charity or doesn’t think they are ‘worthy of their money’.

If I was going to offer one piece of advice, it would be that clarity is key.

Your funding bid is often relayed to trustees second or even third hand, so absolute clarity on the need, issue and your approach is vital. You can provide clarity by using plain language, using a summarising introductory paragraph, using bullet points, and getting a second pair of eyes on the application to ensure the ask is clear (if this isn’t possible, then at least re-reading with the sole purpose of checking whether a reader can understand it first time).

Oh, and make sure that there is nothing that could give the Grants Manager or Committee an easy out: no late accounts, an up to date website, and a clear explanation of reserves is a good start.

​Make the life of a GM easy, and hope the Committee isn’t too tired or upset. Control the controllables and hope for the best. It’s the power balance in action, and unfortunately, it’s the game charities are increasingly forced to play. ​