Evidence shows that unrestricted funding can bring “a range of benefits” to charities, research has found.
Analysis by IVAR, a charity research institute, says that funders should listen to “arguments for change” in how they back voluntary organisations at a time when many grants are still tied to specific projects.
The recommendations are made in IVAR’s report Why Restrict Grants?, a review of evidence on the subject published yesterday.
Summarising the arguments made by funders in favour of restricting grants, the paper says that donors believe “they are well positioned to take a holistic perspective, determine effective strategies and allocate resources to the highest impact activities”.
But the researchers warn: “As funders determine priorities, funded organisations may deviate from their original mission and manipulate their programmes to match funder preferences.” This sort of “mission drift” is “widely regarded as a malign force”, the paper says.
It also says there is evidence that restricted grant-funding can help charities achieve greater social impact, but for programmes that “often focus on indicators of achievement that are short-term, project-based and quantifiable”.
At the same time, the analysis argues that unrestricted funding can help charities innovate more, saying: “Research has found how unrestricted funding can help funded organisations engage in more research and feasibility testing.”
The paper cites studies in the United States that found this greater flexibility was especially important during the coronavirus crisis. It says: “The recent Covid-19 pandemic highlighted the value of unrestricted funding.
Organisations receiving unrestricted funding were able to react quickly and adapt their activities to cope with drastically different circumstances.”
Writing in the introduction to the report, Ben Cairns, director of IVAR, said that the foundation staff and trustees working with his organisation “all recognised that it takes thought and care to unpick long-established ways of working and find the right way forward.
“But none had any doubt about the importance of action, identifying unrestricted funding as a critical question about how to do a better job and support better outcomes”.