Why grants are great, but not enough

Olof Williamson was a Senior Consultant at NCVO, looking at the latest thinking on funding, finance and public services. Olof has left NCVO and his posts have been retained for here for reference.

Someone asked me the other day: why bother with other types of funding when grants are the best? They give you money to deliver what your organisation does anyway, and once you’ve won the bid then it’s yours to use as you wish on the services that your community needs.

At the time, I handed a copy of our income spectrum (link below) to them and left it at that.  But they did have a point. After all, why bother with the fiddly business of generating other types of income when a grant can do it all?

Gripes about grants

Well the trouble is that grants are not always as great as all that.  While we voluntary organisations have a long tradition of securing grants for our work, from both government and non-statutory sources (like trusts and foundations), it may not be the most sustainable solution.

Grants tend to last for a set period – you get used to accessing a particular grant and then it finishes, often abruptly. While you usually know the end date well in advance, it doesn’t always prevent a shock to the system when they do go.

Also, they are not “free” money.  To secure a grant you need to go through an often lengthy application process, and then keep your funder happy through monitoring, reporting and updates.  While this can be a very useful process for both the funder and funded organisation, if the paperwork is overdone it can get ridiculous.  Did your bid include two days a week for reporting, monitoring and filing? Often they do not. Of course grants should be monitored to ensure quality of delivery, but this is a cost you need to consider.

A further problem with grants is that they are generally restricted income, meaning that they have to be spent exactly as agreed at the start.  While this is not a problem if the grant is for exactly what you wanted to do anyway, it can become a dilemma if your priorities or aims change, or if the grant wasn’t a great match from the start. As funding gets more and more tight this “mission drift” is a real danger for many voluntary and community groups as they compete for different funds.

So while grant income serves a useful purpose and remains an important source of income, its benefits can be limited by coming in chunks, piling on the paperwork and pulling you this way and that.

Grant me out of here!

There are alternatives to grants, and thousands of voluntary organisations are already using other types of income to develop and further their work.  What’s more, some of these other income streams are better than grants.

For example if a community theatre company sells tickets to its shows, it is earning income from trading.  This trade helps the performers see the value of their work, encourages the paying customers to value the performance, and brings in unrestricted income that can be used however the theatre company chooses.  All good stuff relating to the type of income.

Raising money through donations also has special benefits. A small organisation that we worked with this year has got their volunteer mentors involved in fundraising through challenges and community events.  This has helped build team spirit among the volunteers and helps them contribute even more to a great cause, and they learned new skills too.  And of course it brought in much-needed income and was a buffer against falls in grant funding during a challenging year.

What these organisations have understood is that diversifying your income can bring benefits, reducing dependency on one fund and one funder.  And diversifying for them meant accessing different types of income as well as grants.

Other income options

If you want to diversify, start by checking out these further resources:

• The Income Spectrum – use it to work out how diverse your income is
• Raising Donations – The Gift Economy
• Trading and Enterprise – The Open Market

And to search a database of thousands of grants, contracts and loans use the free website Funding Central, which has a full Support and Advice section as well.

• Funding Central – register for free and search for funding