What happens now the money has run out

By John Copps 5 December 2011

It has almost become a cliche to say that we are living in “interesting” times – even though when I hear this said about the charity world it usually means something else.

But where it is a fitting description is when speaking about trusts and foundations. It can rarely, if ever, be a more interesting time to be giving grants.

Last week I heard NCVO’s Sir Stuart Etherington comment how during the last decade foundations seemed to lose their way, overshadowed by the glut of public money coming into the sector. Now, as government cash has dried up, their time as the primary agents of change seems to have come round again.

I’ve always believed that trusts and foundations are a vital part of the DNA of the charitable sector. Not least because they can use their resources to do things that no-one else can. To take an obvious example, NPC wouldn’t be where it is today without their support. I remember the day when we secured our first grant – it was an exciting moment, not least for the sense of validation for a fledgling research programme. Since then there have been times when we haven’t always seen eye-to-eye, but this is the tension that makes the sector such as lively and creative place to be.

As the axe falls on public spending, I think foundations are in position to become more important than ever before. But if this renaissance is to happen, there are formidable challenges ahead.

Most urgently, foundations will have to find new ways to sustain their impact. The dominant model in grant-making over the last decade has been to pay for start-up costs and then look to government to provide continuation funding. There’s a generation of professional grant-makers brought up to think that this is the way grants end. In a world of less generous government, it may no longer be a reliable exit strategy.

To find alternatives, grant-makers will have to be imaginative. I can think of four possible solutions to the problem of exit: (1) forging alliances between foundations that together can commit to long-term funding; (2) focusing on ‘voluntary’ organisations, where the future can be sustained through volunteering; (3) setting up surplus-generating businesses, that commit to having a social impact; and (4) investing in the emerging (and experimental) social impact bond market (which will be, in fact, backed up by the guarantee of government money).

The third and fourth possibility encompass the much-hyped new field of ‘social investment’ – which you can read more about our views on here. (I’ve omitted other forms of social financing – such as loans – because they are only an option if there’s a flow of cash to bank against. So in the context of an exit strategy they will buy you time but not solve the problem.)

I think that finding new exit strategies is the greatest challenge foundations face if they are to reassert themselves and continue to sustain their impact. It is no certainly no exaggeration to say that we live in interesting times.