Uneven Foundations: Are charitable trusts failing to match supply with demand?

I attended the launch last week of the Directory of Social Change’s dsc logonew UK Grant-making Trusts and Foundations report. This attempts, perhaps for the first time, to present a picture of the scale and pattern of funding by grant-making trusts and foundations in the UK.

 

Given that recent NCVO figures suggest that grants from charitable trusts now represent a more important source of income for the voluntary sector than government grants, this is a timely look at a previously under-researched topic. Although there has been plenty of information about individual charitable trusts aimed at grantseekers, there has not been much in the way of a comprehensive look at the overall picture.

 

There is a lot of interesting info in the DSC report, so I certainly recommend hunting down a copy (you can access a bit of it here, but FYI the full report is a paid-for product). I just wanted to highlight a couple of key things that jumped out at me, and which relate to issues I am particularly interested in.

 

The first one is the mismatch between demand and supply in philanthropy. I have long wanted to try and produce a comparison between the supply of individual donations – in terms of their size and the causes they are aimed at – and where the greatest levels of need are, both in terms of cause and in terms of geography. My suspicion is that there would be some pretty massive disparities; with donations channelled towards a narrow range of causes and geographic areas that don’t necessarily correspond to where the most pressing needs are.

 

The good news for me is that this report goes some way towards realising my ambition, by producing just such a comparison of supply and demand. OK, it is restricted to foundations rather than philanthropic giving more broadly, but it still gives a good impression of where the disparities lie. (And given the challenges of producing good data on individual donations, a comparison based on foundation spending is probably about the best we could hope for). The findings seem to confirm my hunches: grants are concentrated in the South-East of England (particularly London) and focus on a narrow range of causes, which don’t particularly reflect public spending priorities.

 

One important conclusion to draw from this – particularly at a time when further government cuts are putting a greater onus on the voluntary sector to meet needs – is that whatever philanthropy may be, it is not a substitute for public spending. Not only do the amounts not match up (for instance, NHS spending in 2012 was £123bn, whereas the total income of the voluntary sector from all sources was £40.6bn), but the profile of philanthropic support is totally unlike that of public spending (See CAF’s most recent UK Giving report for a breakdown of how much money goes to various charitable causes). It is crucial that politicians and policymakers remember this, and don’t fall into the trap of thinking that philanthropy and charity can pick up the pieces when public spending is cut back.

 

Another important lesson is for charitable foundations themselves. Strategic_BarnstarGiven that this report suggests that, at a macro level, foundation spending is not meeting needs particularly effectively, should foundations change the way they work? This might each foundation taking individual action, in terms of using the information to inform their own grantmaking strategy; or it might mean collective action, in terms of the foundation sector as a whole coming together to work out whether it can operate more effectively. I suspect the former is more likely (and certainly easier!) but even the suggestion of the latter should provide food for thought.

 

One other fascinating set of stats from the report was to do with feedback. Despite the fact that only 1 in 5 grant applications are successful, nearly two thirds of foundations do not offer feedback as a matter of course. And of those, while just under half will give feedback if specifically asked, the rest never offer feedback. This creates a huge amount of inefficiency, as the voluntary sector is then littered with organisations that spend time and money on preparing grants which turn out to be unsuccessful, but receive no feedback on where they went wrong, and thus have no opportunity to improve and develop.

 

The report makes it clear that the main reason for the paucity of feedback is simply capacity: only a fifth of respondents to the DSC feedbacksurvey had any paid staff, and many of the others rely entirely on volunteers. It is probably unsurprising that these organisations do not feel able to provide feedback to unsuccessful applicants, given that it is often a struggle simply to stay on top of making grants to successful applicants. However, while this is a fair enough explanation, it might not be a feasible excuse in the longer term.

 

One of the accusations most often levelled at foundations (sometimes here in the UK, but even more so in the US) is that they lack transparency. transparencySome people feel that they can be frustratingly opaque about who funds them and who they make grants to, and argue that because they receive tax advantages (and are therefore indirectly supported by the public purse) they have a responsibility to be more open. This is a more pressing issue in the US, where the rules on funding political organisations are much less strict and the amounts of money in play are far greater, but it is not something that we can simply ignore in the UK.

 

In this context, the fact that many trusts do not offer feedback may add to a sense that they inhabit a secretive world and are a law unto themselves. Even if this is unfair, and the reasons for not providing feedback are simply pragmatic ones to do with staffing levels, it is something that the foundation sector should be aware of and do its best to address. Perhaps the answer is to establish a centralised feedback mechanism that smaller foundations could use in order to overcome their own capacity issues?

 

The central takeaway for this report for me is a reminder that trusts and foundations are an important source of funding within the voluntary sector, but whilst many individual grantmakers do an amazing job, this does not necessarily add up to a coherent whole in terms of a strategic approach to funding which covers all causes and geographic areas. Quite how that problem is to be overcome, I don’t know, but realising that there is a problem is a crucial first step.

 

 

Rhodri Davies

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