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The malfunctions of funding (Gateshead inquiry)



The Gateshead Inquiry is seeking to understand how learning happens within organisations working amongst severe and multiple disadvantage. Last year, we interviewed 51 people across 33 organisations.  One theme that kept surfacing was funding and the problems it causes.

Like all local authorities, Gateshead Council has had to make repeated cuts due to austerity £170 million since 2010, the seventh highest in the UK. Many services have had their funding cut or closed. For those that haven’t, the threat of cuts is a continual source of stress: “We’ve been expecting a cut to our LA grant for four years.  It hasn’t come yet, but it’s continually hanging over our heads… our funding is only confirmed on a three-month basis.”

Two destructive consequences have ensued. Learning has been deprioritised or cut out entirely (“The severe cuts mean all funding is now put to delivering services rather than investing in learning”) and saving money is viewed as more important than getting people the help they need (“Everyone is so focused on budgets that we’re afraid to get people what they need.  We’re made to feel it’s too expensive to request referrals or to get specialist assessments.”)

Besides its lack, there are also structural problems connected to funding.  One relates to how funding is awarded.  Most funders prefer to fund discrete projects because they (and their donors) want to identify the specific difference their funding is making: “We tend to measure the impact of our grants rather than the impact of the organisations we support.” Funders, therefore, fund projects based on the impact the funder wants to make. An unintended consequence of this is that charities, desperate to secure funding, may spin what they do in order to appeal to funders, or start something new beyond their current expertise because there is funding available:

“There’s a real challenge to the integrity of organisations in our current system.  Organisations will apply for any pot of funding available because they are trying to survive, no matter how much they have to twist themselves to meet the funding criteria.”

Funders and charitable organisations have isolated conversations about ‘how best to support people in need’ and these conversations are rarely joining up. At worse, they conflict with one another. This lack of connection has led to a lack of honesty and trust:

“Responding to funders is so often like having a job interview - you have to present even your weaknesses in a positive light.  We cannot really be honest and share the things that just didn’t work because we know we will be judged and may lose funding.  We’re caught in a system where everyone is encouraged to pretend that everything is fine.”

“At the grant assessment stage, we ask organisations what other support they’d want from us, but we know a number of them tell us what they think we want to hear.”

Some funders are alive to this issue and are trying to adjust their practices: “Our view is increasingly that funders need to do a bit less of deciding they want to do X, Y, and Z as this just encourages organisations to twist themselves to fit the funding.  Rather than imposing our ideas, perhaps we should have a greater focus on identifying innovative and impactful groups and supporting what they do.  We are trying to move towards a more relational form of funding.”

A second problem relates to how funding is managed. In the drive to demonstrate their funding’s impact, funders often require specific measurements or make funding conditional on targets being met. Frequently, these measures refer only to what can be counted rather than actual impact. As one charity CEO put it,

“We’re forced to measure micro-KPIs like attendance at our drop-in, but surely attendance numbers should decline as we help people manage and master their problems. When we’ve reported on having less than 100% attendance, we’ve received snotty emails back saying, ‘Please explain why your KPIs have not been met.’”

These funding structures make it tremendously difficult for any organisation to comprehensively describe the difference they’re making.  As one funder said, “A significant issue with organisations is they tend to lack the skills for telling the story of the impact they have, framing and describing it.” However, one charity CEO sees this differently: “We’re delivering far more than we’re allowed to tell any funder about. At present, if three interventions are funded from three different sources, no funder is seeing the whole picture.”

The fundamental issue here is that each actor – charities, funders, local authorities is focusing on the individual impact they themselves are making. Funders want to know exactly what impact they are having, and so fund discrete projects to keep this disentangled from the activities they don’t fund. Charities creatively link multiple projects together to provide an integrated support offer and so chafe at not being able to tell a more holistic story. They also want to tell their own impact story in isolation from those of other charities working with the same people.

This focus on ‘isolated individual impact’ is a real problem. Systems thinking tell us that individual actors in a complex system cannot produce specific outcomes because outcomes are the product of the entire system. Rather than focusing on isolated individual impact, all organisations need to emphasise collective impact – the difference the entire system is making. Funders and charities need to come together for a single, integrated, and ongoing exploration of how funding in a specific area could be best spent. Rather than focus on KPIs, focus instead on ‘What are we learning together?’ and ‘How are we improving as a system?’

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