Unrestricted funding ‘should be the starting point’, foundations told

18 May 2023 News

All funding offered to charities should be unrestricted unless there is a particular reason for it not to be,  researchers have argued.

Institute for Voluntary Action (IVAR)’s briefing says that grantmakers tend to prefer offering restricted funding through “familiarity, not evidence” and urges their boards to consider making the case for unrestricted funding. 

It reads: “The evidence is clear and compelling: the preference for restricted funding rests on familiarity, not evidence.

“While restricted funding can be the right choice, it has not earned its place as the dominant model. Perceived barriers should not deter a change that presents value to both charities and funders.”

The briefing adds: “We believe that unrestricted should be the starting point of every fund – with each restriction having to justify its place.”

Opportunity for change

IVAR notes it has proved difficult to persuade the majority of funders to move away from restricted project funding, but Covid-19 offered momentum for change.

“There is increasing recognition of the damage that the dominance of restricted funding is doing to the charity sector’s collective contribution both to meeting immediate needs and to delivering longer-term solutions,” it says.

The briefing states that both funded organisations and funders have reported that unrestricted funding helps to level the power dynamic between the two.

Charities have also reported that unrestricted funding enables them to make better use of their resources, to be more forward-looking and to achieve better outcomes in a complex and changing environment, it says. 

“Restricted funding can slow down and even prevent charities from adapting as circumstances change,” reads the briefing.

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