It’s a time-honoured process that has served both charitable foundations and their beneficiaries well. The foundation puts out a call for grant applications and charities apply for funding. The foundation then chooses who receives the money.
But the Paul Hamlyn Foundation, which awards about £30m a year in funding to organisations that tackle disadvantage, has decided to think outside the box for its latest funding stream, the Backbone Fund. Instead of asking charities to apply for funding in the traditional manner, the PHF has approached organisations that it believes are doing highly important work and asked them to apply for long-term funding.
Moira Sinclair, chief executive of the PHF, admits it is an unorthodox approach, but says it is all the more "precious" for being so. "One of the things we've started to hear with austerity biting is that it's increasingly hard for organisations to raise money for their core activities," says Sinclair. "So rather than design a new programme, we are going to give them enough to fund a core post or part of a core post."
The idea boils down to trusting people to get on with the job. It could mean money for a policy officer or the chief executive's salary, or even cleaning, Sinclair says.
Nor is the money for front-line organisations alone: some will go to umbrella bodies, membership organisations and policy groups. Sinclair sees them as "connectors, advocates and enablers" that are vital to the sector and among the hardest hit by austerity.
"If the third sector is to deliver services to disadvantaged people, it needs its industry bodies," she says. "The private sector has those bodies all over the place, and nobody questions why you'd want to have that ability to network, speak and convene on behalf of the sector."
Under this year's scheme, seven organisations will receive between £30,000 and £50,000 a year for upto five years. Another five to seven charities will receive funds next year, and the same the year after. It might carry on beyond that – no final decision has been taken yet, says Sinclair.
The seven recipients this year are: Clinks, which works with charities that help people in danger of entering the criminal justice system; What Next?, an umbrella body for arts organisations; the Centre for Youth Impact, which looks at the effectiveness of youth work; the New Economy Organisers Network, which connects social and economic justice movements; Liberty, the well-known campaigning body on human rights; the Cultural Learning Alliance, which helps give young people access to culture; and Clore Social Leadership, a programme to help develop community leaders.
Five out of seven organisations are existing PHF grantees, but two – Liberty and the New Economy Organiser Network – are not. As a rule of thumb, the new fund will target groups that are already supported by the PHF or those that have strong links to existing PHF grantees. "We know our sectors and we're already in relationships with the organisations that we've approached," Sinclair says.
She adds that the organisation created Backbone because continuity is sometimes as important as change. The funding will give the seven chosen charities the space to "think, plan and make long-term connections", she says, which will ultimately help them to improve the impact of their work.
"The things that get cut are training and development, any policy function, any community function and anything that is not about the service to the front line," says Sinclair. She believes the funding will prove to be a "strengthening mechanism for the whole sector".
"It's taking all the boats up on the tide," she says.
The fund, she says, is about helping "great people who've got good ideas about how to support the sector", and doing it in a fairly light-touch way.
The new fund will not radically alter the foundation's wider approach. Sinclair says it will continue to focus on its key fields: migration and integration, arts participation, young people, showing that the arts make a difference, and education and learning.
There have been growing calls for UK foundations to spend more of their endowments. In the US, trusts and foundations are required by law to spend a minimum 5 per cent of the value of their net assets each year. Sinclair says the PHF approach is to maintain the value of the endowment, which stands at £750m, and to generate a return to grant-making of, on average, 4 per cent.
"The amount we distribute can vary from year to year, depending on the grant-making opportunities and investment returns. Because the endowment has done well in the past few years, and because trustees see the need as acute, I anticipate that we will spend a little over 4 per cent in 2018/19, which would represent a significant step up from the previous year."
This will amount to about an extra £3m in grant spend, she says.
A key issue is how to distribute more funding without needing to increase the foundation's administrative base, she says.