Nine considerations for foundations responding to rising demand
26 November 2024
By Jim Cooke, head of practice
Across the UK, charities are seeing rising demand for their services, escalating costs, and major income sources – from government funding to public donations – severely squeezed. We regularly hear heartbreaking news of front-line charities and infrastructure organisations closing in financial difficulties.
Trusts and foundations make a relatively small, but increasingly vital contribution to the voluntary sector’s overall income. The largest 300 UK foundations increased their grant-making in real terms by 13% during Covid-19 and a further 3% in 2022-2023. Despite this, they cannot come close to meeting all the needs they are presented with.
Foundations tell us they are being “pulled in every direction”, with many ACF members reporting increases in applications of 30% or more over the last year. This is putting significant strain on their operating models.
We recently brought together representatives of more than 100 of our members to explore the impact of this rise in demand and how they are responding.
We heard that, despite the widely reported pauses of some foundation grant programmes, the majority of ACF members remain open to applications as usual. Those who have paused some or, in a small number of cases, all of their grant programmes have also taken a range of steps to mitigate the impact of these decisions.
How are foundations responding to rising demand?
We identified the following nine approaches that are helping foundations to adapt and respond to rising demand. Each of these is explored in depth in a new resource for ACF members. This includes a practical tool that foundation staff or trustees can use, individually or as a team, to consider any further steps they could take.
1. Making additional funds available
Foundations’ financial independence allows them to take the ‘long view’ and often gives them considerable flexibility to determine their levels of spending from year to year. This brings with it a responsibility to carefully balance present and future needs.
2. Clear and timely communication
Foundations publishing clear information helps potential applicants make informed decisions about whether and how to apply. This can reduce the number of ineligible applications, while taking care to avoid discouraging those whose applications are more likely to be funded.
3. Streamlining application and assessment processes
Ensuring that application and assessment processes are relevant and proportionate is good practice for foundations at any time. Faced with rising demand, many foundations are increasing their focus on early ‘filtering’ to ensure that only those with a higher chance of success are required to complete a full application process.
4. Giving and seeking feedback
Giving unsuccessful applicants the opportunity to receive feedback can help them learn, and improve the quality of future applications. Foundations can also seek feedback on their funding practices from applicants and grant-holders in ways that mitigate power imbalances.
5. Refocusing priorities
Some foundations are managing rising demand by reviewing their criteria. This requires careful consideration of trade-offs, potential knock-on effects, how any changes are communicated, and how to balance strategic reviews with ongoing grant-making activity.
6. Funding flexibly
Rising demand is prompting many foundations to reconsider their approach to funding specific projects, supporting organisations’ core work or giving unrestricted funding.
7. Working collaboratively with other funders
Each foundation’s grant-making is part of a wider ecosystem of support. Awareness of other funders who have similar interests can lead to opportunities for more efficient grant-making, whether through informal co-ordination or more formal collaborations such as pooled funds.
8. Investing in operational capacity
Foundations need to consider the balance between the funds they distribute as grants and what they spend on their own operations. Investing in staff or technology, while it has a cost, could help some foundations respond more efficiently and effectively to rising demand.
9. Influencing the wider context
Trusts and foundations alone cannot solve the voluntary sector funding crisis. Consequently, many are considering how they can influence the wider context, whether through their grants, using their voice directly, or contributing to collective sector-wide influencing work.