A guide to charitable funding

Funding and Income > A guide to charitable funding

A guide to charitable funding

In recent years, an increasing number of organisations have come to depend on grant funding from charitable trusts and foundations.

While overall, funding for the sector is fairly evenly split between government and non-government sources, larger organisations are much more likely to receive significant income from government grants and contracts than smaller organisations. In this context, charitable grant funding is an essential source of income for many voluntary organisations.

Charitable trusts and foundations explained

The terms ‘trust’ and ‘foundation’ are often used interchangeably, because they do share a lot of similarities. However, there are also some important differences between them. It’s helpful to know about these when seeking grant funding from charitable organisations.

A charitable trust is a specific type of legally entity. It is formed when the owner of certain assets (for example, land, cash or investments) transfers legal ownership to trustees, who hold the assets ‘on trust’ for a charitable purpose. Confusingly, some charities that have ‘trust’ in their name, are not actually grant giving trusts (for example, the National Trust).

Foundation is a more general term. A foundation can be a trust or a company. Most foundations are also registered charities, though some aren’t. Some charitable foundations run charities or other organisations that they fund with income from their assets, but many disperse their funds into other charitable organisations.

Most trusts and foundations that are also registered charities have a sustainable, tax exempt income from an endowment which they use to fund their grant giving. Their board of trustees decides which organisations will receive their grants, based on their funding priorities. In some cases, the activities and locations within their remit may be very broad, in other cases, they can be very restricted.

A relatively small number of well known, nationwide charitable grant givers provide a significant proportion of the charitable funding that sustains voluntary organisations working in the criminal justice sector. Access further information about these charitable trusts and foundations, as well as resources to help organisations searching for funding for a specific area of work here.

Different types of grants explained

There are a variety of types of grant funding that charitable trusts and foundations offer:

Capital grants provide funding for an organisation to purchase capital items, such as buildings, vehicles or equipment.

Revenue grants provide funding to contribute to an organisation’s running costs, such as salaries and utilities. Revenue grants are often time limited.

Core grants are a type of revenue grant. A core grant contributes to the basic running costs of the organisation, including its overheads and administrative costs. This is a type of unrestricted funding.

Project grants provide funding to cover costs associated with a specific project. Project funding usually covers items within the project budget, including a revenue component to cover the salaries of those carrying out the project activities. Project grants sometimes also include a contribution towards core costs. Short-term project grants (up to three years), are a popular way for charitable trusts and foundations to further their charitable aims by directly supporting specific activities within an organisation’s programme of work.

Some funders may distribute grants that provide a mix of capital and revenue funding. For example, kickstart grants are a type of project grant designed to support an organisation to get a new or pilot project up and running. Mixed grants will normally have specific limits to the capital element of the funding.

As a general rule, charitable trusts and foundations don’t like to be an organisation’s sole funder. Even charitable trusts and foundations that provide kickstart grants, are likely to want the grant recipient to have a clear plan for how they intend to continue the project at the end of the grant period , without further support from the funder.

The application process

In general, charitable trusts and foundations have simpler grant application processes than public sector funding bodies and agencies.

That said, most funders have their own criteria, processes and timelines for applications, so applying for grant funding from charitable trusts and foundations does take time.

NCVO offers an excellent overview of the grant application process, including information to help organisations understand whether grant funding is right for them.

The funder relationship

Confusingly, charitable funders often require their grant recipients to enter a contract before receiving the funding. While this will generally be more straightforward than the documentation accompanying a grant from a statutory body, a charitable funder’s grant contract will likely oblige the recipient to account for their expenditure. For a project grant, the recipient will likely also be required to monitor their progress (and budget) against milestones throughout the project, and evaluate the outcome in a final report at the end of the grant term. However, while the grant recipient may have such contractual obligations, once the grant funding is distributed, the funder generally does not have any power to control how the money is spent, or claw it back if the recipient does not meet expected milestones.

Perhaps it is this element of acceptable risk, that generally enables grant funders to show a greater degree of flexibility than contract funders.

More on this topic:

• Notable charitable trusts and foundations

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