Lack-of-Trusts and Fearful Foundations

Paranoid Governance and Restricted Funding

Take a quick look at the Charity Governance Code. Come back when you’ve read every bit. I’ll wait….

Now take a look at the application form for some of the more, ahem, diligent trusts and foundations - who nonetheless refuse to provide unrestricted funding.

Now, imagine you’re doing both of these at the same time. That crying, sobbing sound - it’s you.

You’ll have heard me talk about about unreasonable expectations of trustees. I go on about the wastefulness of restricted funding all the time. But these two things are massively connected, in a way people seem to rarely consider.

I think it’s time we called many trusts ‘Lack-of-trusts’.

Funders/ grantmakers: we expect that every charity we fund has a board of trustees with rock solid governance. So. Several, up to ten, people all responsible for trust. Extensive financial and fiduciary requirements. Responsible to the charity commission by law to ensure that funds are used for the charitable purposes of the organisation. Extensive policies. Extensive application forms. And then, on top of that we also need restricted funding? How many layers of trust do we need?

The problem, it seems to me is that this is an essentially paranoid structure of thinking: if you fundamentally believe that charities should not be trusted, nothing will make you convinced otherwise. the more due diligence you put in, the less confident you will feel - because your inability to trust is not about that. It’s much more fundamental. Frankly, it is profiundly ideological.

The thing is, when we pay money to a regular company - through a contract, perhaps - our due diligence on the organisation is often substantially lesser. We have no more control over delivery or service provision than is in any contract. So why do charities need even greater regulation both in their governance, their grant agreement, and indeed, on other areas of policy and process?

Some of those inherently toxic power dynamics written into the fabric of the sector perhaps? As Linkedin-er and finance guru Amsel Page von Spreckelsen MIAB said the other day, so much of this is about looking after the money of the very rich. They're absolutely right.

So do we need Boards of Trustees AND restricted funding? Maybe rarely. I like what Nick Addington from the William Grant Foundation says about 'designated restricted'. But if restricted funding is to be used, perhaps that is one way to start funding organisations who are not registered charities - for example, those CICs that we got excited about and then left to twist in the wind 20 years ago?

[Or if we're that concerned, what about simply issuing contracts for delivery of services instead of grants that require that amount of governance? If administered reasonably, and without deliberately driving down costs and making the pips squeak, as local authorities and the NHS often do, could this work? Not least, as I currently work through a grant agreement after an already extensive application process for a major national funder, I see almost no difference between the targets and deliverables in restricted grants and those in contracts. Could 'Patient contracting' much like 'patient capital' be a thing?]

So, this one isn't pie in the sky. It's a matter of that mindset that people like Institute For Voluntary Action Research have been pushing with their 'Open and Trusting' grantmaking, and great funders have been pushing ahead with - although always falteringly.

But overall, my question is: do we need onerous and intensive governance that disadvantages the smallest charities in the most deprived areas? Or do we need restricted funding that locks down every penny? I'm far from convinced we need both.

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