PART 1: Grant Funding-Fundamentals
When COVID-19 hit last year, many NGOs and charities were severely affected in their ability to keep operating smoothly and acquire new funding. Many institutional funders (grant) donors switched to focusing on fighting Covid and its related consequences, severely hurting organisations who were overly reliant on this stream of income.
Other organisations who were reliant on donor income were also negatively effective as supporters reduced their donations in fear of a global recession (a fear that the public still has today).
So if both institutional income and donor income suffered what is the solution? Well having a balanced income portfolio of both and ideally other sources is key to the stability of your organisation.
Too many people think that getting a grant is the answer to their financial woes; this is not the case and if you are not careful can even exacerbate them.
These ‘12 fundamentals of institutional (grant) funding’ has doubled from 6, as I have added more and more fundamentals over the years to address the common misunderstandings and errors people make when trying to access funding.
In this guide, I will focus on introducing institutional funding for new organisations and fundraisers and try to dispel the common misconceptions and miss understandings that many of my clients have about institutional (grant) funding. These 12 building blocks should provide the foundation to understand and applying for funds suitable to your organisation in a balanced way, which will allow your organisation to grow sustainably. Used correctly institutional funds can be a great way to grow your organisational impact, free up unrestricted income for further fundraising campaigns and catapult you to the next stage of development of even being able to hire more staff. However used incorrectly, as I have seen many times in the past, will cause you to waste many of your precious resources, overextend your organisation, cost you money to manage the grants which cannot be recovered and even bankrupt organisations.
The idea of this guide is that it will be informative, increasing your submission success rate, ensure you approach this topic rationally and help save you time and a lot of emotional stress wondering if your application will be successful or not.
This year, 2022, has started out rocky for many small and newly established NGOs and some still might not survive to the end of the year. Now is a good time as ever to get in the driver’s seat and decisively act to make your organisation stand out to institutional donors whilst managing the risk and ensuring you are being realistic in your expectations and applications.
Start by learning and understanding these 12 fundamentals!
Introduction to Key Terms (What is Institutional Funding?)
Institutional funding is an encapsulating term that covers all grant funders;
- Trusts funds (The Welcome Trust)
- Foundation funds (e.g. Bill & Melinda Gates Foundation)
- Cooperate Social Responsibility funds (Takeda CSR Grant)
- Organisational funders (e.g. BCAF, UN, WHO etc.)
- Gifts-in-kind (Donations of items to your charity)
- Local Cooperation Funds (e.g. embassy and delegations)
- Research funds (e.g. NIH, university and institutional funds)
- Governmental funds (e.g. UNSAID, FCDO, DEFCO, CANAID, KOICA)
- Bilateral and Multi-lateral funds (e.g. country-to-country or country-to multiple countries)
Quite confusingly, these institutional funders are also collectively referred to as ‘donors’ which are distinct from regular individual/ public donors. I will try to make the distinctions clear in my writing by referring to ‘institutional donors’ and ‘public donors’ to make this clearer.
As a generalised definition- an institutional funder is any ‘donor’ to which you have to write a formal application for funding and are required to document and submit how the funds were allocated.
So what is it the main difference between institutional funding and regular donor funding?
Apart from the source and method of securing funding, institutional funding is what’s know as ‘restrictive funding’ meaning you are bound by an agreement on how you can spend the money. Sometimes individual donors may also request how you spend their donation, but in the majority of cases donor funding is ‘unrestricted funding’.
Restricted Vs unrestricted funding
Institutional funding has a low financial-utility for organisational growth and development. What this means is you cannot (usually) spend it on core costs, staff salaries, office costs etc., instead it has to be allocated in part or entirely to the project in the application. Because of this, within the development sector institutional funding is often considered not as valuable as donor funds, for every $1 of donor funds, institutional funding is only worth $0.30 to your organisation (at most!). You should be sure to build up your unrestricted income before you look to try to manage institutional funding, not only is this a requirement for almost every funder, but managing institutional funding takes time and effort and often requires financial investment itself.
That being said, institutional funding can help expand your organisation if done in the right way. The reason why you should build up donor funding first, is institutional funding can be used to expand an organisation very quickly- as a grant to cover your program cost, then frees up all your unrestricted donor income. Here is an example to better illustrate:
- Charity X- with a program called ‘Ecological Education’ based in Scotland provides educational tools and support for farmers around the word to adopt less harmful and even sustainable farming practices. The project cost $40,000 a year which Charity X funds from there publicly raised donations. By accessing a grant from the Green Climate Initiative for $15,000 this frees up, $15,000 of unrestricted funding that would have gone on program running costs, allowing Charity X to hire a part time fundraiser.
Summary of the 12 fundamentals when starting-off with Institutional Funding
- Data & Evidence driven story telling is they key!
- One size does not fit all- but you can tailor your application to each donor!
- Institutional funding is NOT suitable for new organisations!
- Remember the 30% (maximum) rule!
- Do not get too overextended with institutional funds!
- Adopt a flexible programmatic approach – fit the mould don’t break it!
- Institutional funding is ‘restrictive funding’ so Cost Recovery is a must!
- Don’t be fooled, grants are (usually) not useful to grow you organisation!
- Keep It Simple Stupid (KISS)! Cover the basics and know your Audience!
- Invest (time) in grant management – its free so use it!
- Make multiple submissions, as only 10% of good proposals are successful!
- Build your grant-portfolio by watering plants before planting new seeds!
I hope you have enjoyed this newsletter. Look out for my upcoming videos and webinars to help grow your organisation and learn more about fundraising and the charity, development and humanitarian sectors more generally.
Click the link to read our detailed analysis and recommendations in Part 2 of this institutional funding Blog.
Regards,
Dr. Samuel Davies
Professional Fundraising Consultant
International Development & Financial Management Services
