Insights: focus on finance

This blog is the first in a series by our Head of Grants, Ella Hingley, where we aim to provide some insights into our assessment process.                                                                                                                                                                                                     

Most of the team at the Dulverton Trust have had fundraising roles before and so we have some firsthand experience of how baffling some requests from grant making trusts can be! We also know from feedback via our anonymous feedback form that we are not exempt; our own requests can feel quite burdensome. This blog aims to provide some insights into our assessment process. We hope it will provide some helpful context on what to expect when applying to us, why we request certain information, and how it informs our decision-making.  We’d also love your critical feedback to refine our approach.

Why do we ask for financial information?

The information we request aims to answer three key questions:

1. Fundraising strategy: What is the case for philanthropic funding and how does it contribute to the applicant’s overall mission?

We are aware that we are one small piece of the fundraising puzzle, and most charities raise funds from many different sources. In our assessments, we look at the availability of other types of funding, as well as the implications of raising money though these different routes. We want to understand the rationale specifically for philanthropic funding: how can our funding meet an otherwise unfilled gap, leverage other forms of support or be used to prove concept for innovative work? In practice, this means that we are open to funding causes which struggle to raise money from the public or pilot projects which seek to establish an evidence base to secure funding from other sources further down the line. We therefore look at sources of income carefully and ask applicant charities about their fundraising strategies as part of our assessment.

2. Financial Stability: will the applicant be able to deliver the work?

As a charity ourselves, we have a responsibility to ensure that our funds are awarded to organisations which can fulfil their charitable missions. We therefore want to understand the likely situation for the organisation over the grant period.

3. Scenario planning: are we assured that the charity has the right information to plan ahead and to make decisions in good time if things don’t go as expected?

This is connected to the above but is more focused on how the charity responds to financial information as much as the information itself. Our Trustees are not risk-averse and an applicant charity having low reserves or a significant balance to raise (to name two common financial challenges) doesn’t mean that it’s an automatic ‘no’ from us. We also understand that things can change quickly, and likely income doesn’t always materialise.

We therefore try to get a sense of how senior leadership and Trustees review possible scenarios and plan ahead.

What information are we likely to ask for?

Publicly available Annual Report and Accounts are helpful, and we will access them on the Charity Commission website where possible. However, annual accounts are by nature backwards looking, and therefore can only give us part of the picture. We need forward-looking financial information to answer our questions fully.

As a minimum, before we recommend a grant to our Board, or recommend release of a multi-year payments, we are therefore likely to ask for:

• Recent management accounts. Our aim with this is to understand the current financial picture. We are particularly interested in the current reserves level (unrestricted and restricted). We are open-minded as to the level of reserve a charity holds – we recognise that different reserves policies are appropriate for different organisations – but generally want to see a clear reserves policy and understand the context if the policy isn’t being met.
• Financial forecasts. With this, we are interested in understanding the anticipated expenditure for the year ahead, the funding secured to date, and the fundraising gap. What does the organisation need to spend to deliver its work and how much has it raised?

The applicant may be fortunate to have a very stable financial situation and we therefore may not require more information. However, in instances where cash reserves are low, we will likely ask for further information, such as:

• If there is a shortfall, how much of the unsecured income is likely and how much is speculative? Is this typical for this point in the financial year?
• A more detailed cashflow forecast. This is important as, even if charities hold other assets, the movement of cash in and out of the organisation is crucial in forecasting its ability to meet its commitments and continue operating. We may ask about the proportion of costs which are fixed vs those which are flexible and identify any ‘crunch points’.

We are mindful that we work with such a variety of charities – ranging from small, volunteer-led groups to large national organisations – with varied financial models. Some applicant organisations will have dedicated finance teams whereas some will have no paid staff and Trustees will hold responsibility for day-to-day financial management. We will always try to tailor our requests so that we only ask for information that will inform our decision and, as a rule of thumb, ask for financial information that we can reasonably expect applicants already have.

Can you help us?

We believe it’s important that we are not afraid to ask questions about finances. At the same time, we recognise our questions absorb precious resources. As far as possible, we want to be supportive and add value with our interactions. We currently refer charities to the Cranfield Trust, which has a wealth of resources on financial management for charities. But can we do more?

We welcome critical feedback and your ideas on what we can do to support charities with their financial forecasting. Please let us know by emailing us on grants@dulverton.org or leaving anonymous feedback via our form.

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