Government fund scores new low for charitable funding

Forty three failures for every success. Is the government’s Social Action Fund – which ostensibly helps charities – trying to challenge the National Lottery for startling low probabilities? It would be funny if only it weren’t tragic and irresponsible. And public money.

The Cabinet Office set up and funds the Social Action Fund to “inspire new social action opportunities, encouraging people to give what they have: time, money, assets, knowledge or skills”. In its first round, it received 700 applications of which it supported just 16. Put another way, it rejected 684, that is, 98% of applicants – only one in 44 applicants. For each of those 16 ‘winners’, forty three other organisations wasted time finding out about the fund, understanding its guidelines and writing an application.

Such a giant rejection rate is, happily, rare. It beats even the current worst case, NatWest’s CommunityForce programme which last year rejected 93% of applicants. Amazingly, the government has just given another £10m to the organisation which distributes the Social Action Fund, called the Social Investment Business.

It’s tragic because all that time spent on unsuccessful applications could have been spent productively. For example, on ‘encouraging people to give what they have’ or indeed on solving social and environmental problems. That time is an opportunity cost: something good might have happened but didn’t because the time was used unproductively. And who bears that opportunity cost? The poor who don’t get served, the school-children or isolated elderly who don’t get supported, and ultimately all of us because our society doesn’t get fixed. The cost isn’t borne by the funder – indeed the funder may not see it or even realise that it’s there. But the cost is real, and since it was created by the funder, is what economists call a negative externality: a problem dumped onto somebody else.

But is the funder responsible if loads of charities apply? Yes. Because any funder which invites applications writes the guidelines: too general or unclear and they’ll generate tons of applications, many more than they need. BBC Children in Need is actively managing this ‘externality’: its Strategy Director Sheila-Jane Malley says: ‘We’re painfully aware that every application which doesn’t get through was work for somebody. As a responsible organisation interested in children, we’ve begun to look systematically at how we can prevent as much of that work as possible.’ It currently rejects three charities for each one it supports (pretty mild against the numbers above), and clarifying its guidelines precisely to prevent inappropriate applicants in order to reduce its rejection rate. It’s aiming for just one rejection per successful applicant.

Even more irresponsible than being vague is actively soliciting loads more applications than you need, which NatWest’s CommunityForce did. Presumably aiming to get its ‘benevolence’ as widely known as possible, it had a sizable PR drive to get applicants each of which had to gather votes from the public. A responsible funder would decide what it wanted to support and minimise the work it creates in finding it.

Both the Social Action Fund and NatWest’s CommunityForce invited applications. It’s a common device, which necessarily creates work because funders seem to keen to have bespoke application processes. If there were some sensible clearing house for applications – as there is for university applicants, say – or even just a common application form, all of this unnecessary, funder-instigated cost could be greatly reduced. Since the avoidable waste from duplicate application processes is estimated at £250m every year, that would produce more social action than any Cabinet Office fund.

NatWest’s programme commits many other sins—>

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One Response to Government fund scores new low for charitable funding

  1. There are plenty of grant making trusts on a similar level – our recent research (to be published soon) showed 44 funding 0% of eligible applications (some having received over 1,500 of them). Average award rate of 47.7% (again of eligible rather than total apps), but some like Jack Petchey Foundation attracting a huge number of rejected applications (funded 200 out of 3,600 eligible apps received).

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