The Hard-to-Ignore Benefits of Unrestricted Funding

In March of 2023, the Institute for Voluntary Action Research (IVAR) released a review of the importance of providing support through unrestricted funding. With their work focused on strengthening communities across the UK through action research, Evidence Review: Why Restrict Grants? investigates the hard-to-ignore benefits of removing the rigid restrictions on the use of funds for charities, foundations and public agencies.

Through the exploration of common obstacles facing the twelve organisations included in the review, IVAR has highlighted the hard-to-ignore benefits of unrestricted funding and has drawn the following conclusions.

Unrestricted funds create a space for strategic choices
Various research studies have shown that this type of unrestricted funding provides greater autonomy for the organisation receiving funding, allowing them to choose what to focus their funds and efforts on. One research participant described that receiving this type of funding places the receiving organisation 'in the driver's seat'. Ultimately, it allows for strategic planning to take place internally and places the power of putting the charitable mission of the organisation front and centre in all efforts. 

Furthermore, with the relief of pressure from funder-dictated focuses, organisations can better base these strategic decisions and long-term plans on the needs and feedback of the communities they serve, creating a more equitable guide through providing support to the communities they serve.

Strengthens the organisation's internal structure
The Ford Foundation's Build Program recently found that 87% of funded organisations in their funding programme reported that working with a multi-year, flexible funding model had a largely positive impact on the structure of their organisation. With access to unrestricted funding, organisations can counteract many funders' unwillingness to invest in covering enough of the organisation's overhead costs for improvements and adjustments to be made as deemed necessary by those working within them. Having access to unrestricted funding allows the organisation to invest in a wide range of management and administrative processes, from financial accounting to IT management systems, to improve the employees' experience and the organisation's security. 

Allows space for creativity, innovation and collaboration
​Allowing the organisation to invest in research and development allows more space for a creative approach to problem-solving and community involvement. The research shows that unrestricted funds enable organisations to bridge the gap between concept and implementation. Recent studies of conservation organisations have demonstrated that collaboration relies heavily on staff capacity; organisations without access to unrestricted funds struggled to find the ability to participate in collaborative efforts over organisations with access to unrestricted funds who were able to delegate funds to explorative collaboration practices.

Builds more trusting relationships 
​Funders who begin funding relationships with unrestricted funds do so as they hold a level of trust and belief in the organisation's focus and end goal, a secondary outcome of this is that this begins the relationship with confidence and strength. This creates a level field and allows a strong sense of communication between the funding organisation and the organisation being funded; according to a study conducted by the Dutch Postcode Lottery, funders are aware of the relationship this structures and forges an equal power dynamic from the beginning.

Reduces overall cost of fundraising and grant management
Grant management requires applying organisations to invest time and resources in preparing applications and meeting necessary obligations. The annual cost of UK organisations applying for grants from trusts and foundations is estimated to be £900 million, with project-based organisations needing to prepare bespoke applications for each. These costs can be significantly reduced with the option to submit one application for unrestricted funding and requiring an overall organisational performance report, reducing the hours needed to manage funder restrictions and freeing resources to focus on meeting the organisation's end goal.

The research mentioned above is a continuous process. It is being updated and expanded as more focus is placed on the stark differences experienced by organisations receiving unrestricted and restricted funding. 

We know that gaining access to funding for many charitable organisations is becoming increasingly more complex, even more so for Black-led organisations with less access to unrestricted funding than their white-led counterparts, as shown in Common Call's recent article The Funding Difference: What We Can Learn from the United States. Based on the findings above and those within the above-linked article, Common Call believes that change can only be achieved with continued light being shone upon the stark difference in the funding landscape and shared support for the organisations we run.

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