Charities which receive grants from the Community Fund will face greater scrutiny over the outcomes of projects if recommendations from a report are followed.
The fund is already carrying out pilot projects where recipients of grants have to assess the outcomes of projects and report back to the Community Fund.
But a study, commissioned by the fund from independent consultant David Carrington, recommends introducing a new "investor
approach to funding.
This would mean that grant givers would seek to get a clearer picture of the return on their "investment
by finding out what changes have been made thanks to their funding.
The expected outcomes for specific projects are agreed by the funder and recipient before the grant is made. Outcomes are then tracked by the recipient during the life of the project.
The recommendations are in line with the fund's strategic plan for 2002-2007, which calls for recipients to demonstrate the impact of their projects.
The Community Fund's approach is likely to have a significant effect on the policy of grant givers more generally. However, Nigel Siederer, director of the Association of Charitable Foundations, warned that smaller grant givers may not have the capacity to deal with sophisticated evaluation of grants.
In the report, Carrington stresses there would be several challenges in implementing an outcome funding framework. Carrington suggests the system should be measured using a variety of approaches, each appropriate to different kinds and sizes of organisations.
However, many recipients may not have good enough information systems to be able to report outcomes effectively and so the Community Fund will have to look at providing recipients with support.
The fund should also avoid using short-term results as "the final judgment
of a project, said Carrington, given that a clear impact may not emerge until long after the grant has been spent.
Kevin Ashby, corporate policy officer at the Community Fund, said pilot schemes had so far generated a favourable response. "Whether that's because they're pleased with the outcome approach or the increased contact they're getting with grant officers is not clear,
He added the extra work of tracking outcomes would not negatively affect recipients. "We're encouraging recipients to include any extra costs, such as carrying out questionnaires, in their applications,
Luke FitzHerbert of research group the Directory of Social Change said there was a real need for more assessment of outcomes but that this work should be carried out in a broad context.
"The worst thing would be if inappropriate short-term measurement of supposed outcomes were used to decide whether a particular project received further funding,
"The best result would be applicants considering the evidence of what approaches were found to have worked before making their application because most applications are not well informed.