We know from the Almanac 2014/15 that grants to the voluntary sector represent a total of £6.3bn, which is 14% of the total income of the sector. Most granted money (93%) comes from other voluntary organisations (47%) or the government (46%).
Despite its importance to the sector, the proportion of the money given out in grants by government has been decreasing with more funding given through contracts. The transition from grants to contracts has been challenging for many charities, especially the smaller ones.
To understand better the challenges ahead, this blog analyses the grant-making data in our Almanac dataset. By looking at grants by sources, size of recipients and subsectors, I learned five lessons that I’m sharing here.
- A third of the money given by the voluntary sector to charities goes to 42 super-major charities
- 85% of central government grants are given out to charities with an income over £1m
- When it comes to grants size, don’t look at averages
- Different grant-makers reach out to different subsectors
- Almost half of the money spent by local government goes to social, educational and health services
A third of the money given by the voluntary sector to charities goes to 42 super-major charities
About a third of the money given out by voluntary sector grant makers goes to super-major organisations with an income greater than £100m. Only 20% of the sector’s grant money goes to the 129,000 charities with an income lower than £1m.
Similarly, most of government grant money goes to large and major charities. Just over 10% goes to super-major charities while about a fifth goes to charities whose income is lower than £1m.
85% of central government grants are given out to charities with an income over £1m
Just over half (51%) of government grant funding to the sector comes from central government, while 22% comes from local government and 12% from international governments. The remaining 12% comes from other sources such as devolved governments, NHS Trusts, Public corporations etc.
Perhaps unsurprisingly, over 40% of local government grants go to micro, small and medium charities, with an income below £1m, who are more likely to operate locally. Similarly, over 80% of international government money goes to major and super-major charities whose operations are more likely to have international operations. Central government gives out only 15% of its grant money to micro, small and medium charities and 58% to major and super-major charities.
Local government funding has been decreasing for the past seven years. This downward trend is observed in overall funding but also in the amount of money granted. This presents challenges for many smaller organisations that often rely more on local government funding than their larger counterparts.
When it comes to grants size, don’t look at averages
While voluntary sector grant providers give around a third of their money to super-major charities, the vast majority of the grants they give are very small. In our sample, on average, the grants given by the voluntary sector are worth £333,000 but in fact, most of the grants awarded are below £17,000.
All grant makers tend to grant a lot of small amounts. However, grants from local government and from the voluntary sector are more likely to be significantly smaller than from other institutions. In our sample, half of the grants from local governments are smaller than £25,000 which is twice as small as the central government median grant.
Looking at the distribution of grants by source shows that the local government is a source of smaller grants for smaller charities that might not have the capacity to bid for large grants or deliver large public contracts. If the reduction in local government funding continues, smaller charities may seek to fill the gap by applying for more granting funding from the voluntary sector.
The chart below shows the number of grants given by their size from different sources. A spike in the graph means that many grants are of that size.
Different grant-makers reach out to different subsectors
The culture and recreation subsector is the biggest recipient of government grant money, while only 12% of the money given in grants by the voluntary sector goes towards organising providing cultural and recreation services.
International charities receive 38% of the money granted by the voluntary sector and 27% of the money granted by the government.
Social services are the second or third most important recipient for all grant-making institutions but only represent 9% of the money granted from the government and 16% of the money granted by the voluntary sector.
Local and central government spend almost 50% of their budget on culture and recreational activities. One in four pounds granted by local governments goes to social services, which is about twice as much as that given by central government grant. Twelve percent of local government grant funding goes to health and 10% to education. Meanwhile, central government spends less grant money on social services, education and health than on international activities (36%).
More information and data available on the Almanac website.