Stop funding projects.

… start funding organisations.

Reimagining Philanthropy is our philanthropy digest bringing you the latest insights, ideas, and discussions about innovative ways we can reimagine our sector; supporting and platforming the communities who can drive real change for a fairer, more sustainable, and stronger future.

This week’s issue explores whether project funding should be on the way out in favour of adopting unrestricted funding models, enabling organisations more freedom in directing their programme priorities, as well as providing greater financial security and organisational stability.

Stop funding projects.

The pressure is on for non-profit organisations. Charities are always at the forefront of responses to the impacts of economic and social difficulties. In the UK, charity income has been affected by the recession and cost-of-living crisis, having knock-on effects on income and rising operating costs. At the same time, the need for charitable services is as great as ever. Further afield, the UK government is not the only one to have announced cuts to overseas aid – the US, Germany, France, Belgium, and the Netherlands have as well.

Where grants are available, we need to ensure they are as impactful as possible. So, it might be high time to discuss why funders should consider prioritising their relationships with organisations and investing in their long-term missions over short-term project-based funding.

Common issues with project-based funding

 Despite funders largely agreeing that we want to see our own and our grantee partners’ visions of a safer, fairer, more sustainable world last in the long term, the project funding model tends to focus on short-term change and often undermines organisations trying to build long-term stability and sustainability.

·      Mission creep: Funders driving the work rather than local organisations

When funders choose to fund projects based on their objectives rather than organisations, and seek narrowly defined outcomes such as project completion with quantifiable metrics, it means that strategic direction is not only defined by small time windows, but that it is being driven by an organisation which is removed by at least one degree from the actual impact, rather than the organisations on the ground themselves.

·      Lack of core costs: Leaders are unable to invest in improving operations

Due to funding restrictions, organisations are limited in how much they can invest in the vital ‘keep the lights on’ costs such as staff salaries, which can lead to high turnover, undermining the key relationships needed to have meaningful community engagement, as well as other costs such as lost investments in training and building up technical or specific skill sets, inconsistently held relationships with policy makers, and the time investment needed for recruiting.

Organisational leaders are also restricted in how much they can invest in improving the efficiency of their operations (such as upgrading technical equipment or investing in up-to-date software) when grant funding is so focused on projects and measuring impact. Another important consideration is often a lack of reserves, which keep an organisation afloat when they lose funding unexpectedly, as many organisations are currently facing given withdrawals of government aid.

·      Never-ending cycle: Valuable time taken up by reporting and fundraising

On top of these issues, project funding is, by its nature, a shorter funding cycle. This means that organisations must constantly keep the grant application-reporting cycles turning in order to keep operating, which is a huge cost, particularly to smaller organisations, as it often takes key staff away from their programme work. This lack of long-term security also has a heavy toll on the well-being of charity leaders.

Shifting the focus from projects to organisations

An alternative to the project funding approach, which begins to solve some of these issues, is for funders to focus on the organisation they want to fund, their vision, and lifting their requirements for short-term achievements in favour of strengthening the foundations for long-term impact.

There are many perceived risks around the unrestricted approach, but several organisations have been developing trust-based funding and relationship-focused grant-making, and their insights can help advise us as we move our sector towards more impactful philanthropy.

Subscribe to this newsletter to ensure you read our next issue ‘Busting the myths around unrestricted funding’.

If you enjoy reading this article, please consider signing up for our emails to receive our newsletter Synchronicity Stories and our full digest Synchronicity Recommends, which are alternated on a monthly basis.