Wherever There is Money There is Influence: Exploring BIG’s Impact on the Third Sector, which was part funded by the BLF, says the organisation has always played down its formal links with government.
But a combination of coalition policies, the transfer of BLF responsibility within government from the Department for Culture, Media and Sport to the Cabinet Office and the delivery of non-lottery programmes were increasing fears about independence, it says.
"Collectively, these changes are contributing to a concern about the ability to maintain the distinction between the BLF and government," says the report, which analyses how the BLF’s relationship with the sector has evolved since it began in 2004.
Its findings are based on interviews with BLF staff, government officials and third sector leaders, an online survey of more than 1,500 successful and unsuccessful applicants for BLF funding and analysis of BLF’s database of England-based applicants.
It suggests the BLF could allay anxieties by doing more to position itself closer to foundations and away from government, and by being more explicit about the political constraints it works under.
It says the BLF, which has distributed £4.6bn since it was launched in 2004, of which £3.4bn has gone to the third sector, has evolved from being a "cash machine" to an "intelligent funder".
The report identifies some problems in its relationship with the sector, including the fact that some charities feel it is bureaucratic and a select circle of organisations exert too much influence over decision-making.
Questions are also raised about the BLF’s level of transparency, particularly around how funding decisions are made.
The report identifies a number of positive impacts BLF has had on the sector, including saving a number of small organisations, developing skills and encouraging partnership working.
It also highlights the BLF’s wider impact on funders, saying it has encouraged full cost recovery and a move towards emphasising outcomes over outputs.
The report says that the relationship between the BLF and the sector has moved from the honeymoon stage, when funding was plentiful up to 2011, into a "mature relationship" characterised by spending cuts, new policy directions and a cap on administrative costs. "While the relationship is likely to remain strong, it may become more challenging," the report says.
Peter Wanless, chief executive of the BLF, said: "We are shortly expecting our new policy directions from the Office for Civil Society," he said. "This research, along with our new policy directions and our refreshed strategic framework, will help inform our work and future investments."