Cuts to the core – why do so many funders restrict their funding?

Welcome to the Secret Grantmaker, published by Lime Green Consulting. These blogs are designed to give fundraisers and charity folk insights from "the other side", cloaked in anonymity.

The Secret Grantmaker has spent six years working with various funders. They've been privy to countless discussions with the people who make the decisions and hold the purse strings. Their experience in no way reflects trusts and foundations as a whole – there’s a huge variety of practice in the sector. We merely want to give some warts-and-all access to the processes and practice that rarely get aired in public.

In this edition, the Secret Grantmaker delves into one every fundraiser's perennial frustrations...why won't more funders give core funding?!

As every good grantmaker should do, we’ve listened to voices in the sector and responded accordingly (at our own pace).
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Someone calling themselves the Secret Fundraiser wrote an excellent piece recently on the need for core funding and the frustrating lack of money meeting this need. As the Secret Grantmaker, it's my role to take you behind the velvet curtains to shed light on what’s stopping Trustees from handing over cash without the strings...

Why do funder trustees baulk at the thought of providing core funding?

Some Trustees on the boards of trusts & foundations see themselves as guardians of history: their role is to carefully manage a legacy to ensure money is not ‘mismanaged’, and remains available for future Trustees to spend wisely for centuries to come. This creates a risk-averse mindset – rather than imagining how the money can address societal issues – embracing failure in the name of progress.
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Trustee baulk at the thought of any reputational risk to their historic institution, the most damning of which would be some extravagant misuse of funds by a charity. The scenarios of a charity throwing lavish lunches or adorning a Chief Executive with a hefty bonus are, of course, playing out in the minds of Trustees rather than grounded in reality (If I had a pound for every mention of the Kids Company in my tenure, I would have around £17).

In practice, this ensures that Trustees are sceptical of charities they don’t know, until proved otherwise. Put simply, they don’t always trust charities to use ‘their’ money in the way the Trustees would like. Restricting the money is their way of abating those fears.
 
In my experience, the reason Trustees turn up to meetings is that buzz when they hear that ‘their funding’ has helped provide food and clothes for homeless people, or has paid for 50 iPads for impoverished children, or has built a new hospice wing.

They like the straight line of “we gave the cash, and this cash directly improved people’s lives” (even for a short while). Deep down, they are more comfortable tackling symptoms rather than root causes of the issues they seek to address.

​This, in part, is down to the fact that many have enjoyed the fruits of the current system structures, and therefore don't wish to dismantle it.​

Trustees that I have worked with get very uncomfortable when the ‘p-word’ is mentioned (politics, not poverty). It’s therefore easier/more comfortable to instruct charities what to do with their money, in a way that fits with their world view.

The glorification of low overheads

Of course, there may be some more reasoned arguments to restrict funding. For example, the overlap between a funder’s strategic objectives and the charitable applicant may only be a specific project. In that case, it becomes a no-brainer (from the Trustees' perspective) to restrict the fund.

​In this instance, Trustees will (sometimes) accept funding ‘core costs’ as part of the budget, but will recoil in horror if this figure approaches 20%.

This, I believe, is all about framing and the glorification of low overhead rates. Trustees have been conditioned to see 10% as the benchmark, with little to no grounding in truth.

The reality is that every charitable member of staff is working towards resolving a complex social issue, regardless of whether they are ‘directly delivering’ or filing accounts. However, actively giving to ‘non-direct’ facets of a charity doesn’t fulfil two of the main aims of Trustees: to put historical/family money to ‘good’ use or to get the warm glow of attributable outcomes.
 
There may also be conflation of what many Trustees see as the bloated, inefficient public sector when looking at core costs for charities. This is largely ideological led, with little evidence aside from a few examples to confirm their bias. They throw charities in with their life view of flabby local government parties, to the detriment of both.

​Many Trustees have an unwavering commitment to the market and sneer at anything not returning a profit. The irony is that many Trustees sit on investment boards where they would not dream of restricting an investment to a company. As ever, it comes down to trust – they trust the companies to make them profit, not the charities they seek to fund.

So, how can charities shape a different narrative on core costs?

To me, being clear, straightforward and transparent about the true cost of improving lives is key. Sure, it might put off some old-fashioned funding, but as with all movements, the hope is that they become the outliers.

​I would certainly warn against any meaningless statistic like ‘100% of your funding goes directly on delivery’ or any other celebration of ‘leanness’. It just plays into the views of the Trustees and keeps them comfortable, which ain’t going to change anything.

​Obviously, the fact that the onus is on the charities to change this narrative is objectively not right, but that’s the power imbalance in action.