A guide to funders: Public, National Lottery, Trust and Foundations

Public Funders

Where does the money come from?

Government departments, local authorities and non-departmental public bodies (NDPBs or 'quangos') all operate grant programmes using monies raised through taxation. This includes bodies operating at European, national, regional and local levels.

Public sector funding is a major and growing source of income for the voluntary and community sector, although increasingly public sector funders are contracting services rather than offering funding through grant programmes.

Find out more in our contracts section or by searching for contracts open to tender in your area.

How do they work?

With public sector funds, transparency and accountability are important. Full details about assessment criteria, processes and decisions are usually published. Applicants are often required to abide by standard terms and conditions and their grant may be monitored. Recipient organisations may need to create new policies or systems to meet these requirements, or to produce reports on activity to a monitoring officer.

Public funders’ budgets are subject to government spending rules which can mean grants need to be spent within defined periods. It can also be difficult to obtain grants that run over several financial years.

The Compact is an agreement between government and the voluntary and community sector about how we work together. The Funding and Procurement Code sets out recommendations about funding relationships including grant funding and contracting and can be used to encourage effective funding relationships.

National Lottery

Where does the money come from?

Public sales of lottery tickets provide the funding for the National Lottery.

The Department of Media, Culture and Sport (DCMS) sets policy and guidelines for how Lottery money is spent but all decisions about grants are made by the independent specialist distributors including NESTA , Arts Council England, UK Sport, BIG and Heritage Lottery Fund. Many of these funders also manage Treasury funding and some grant programmes actually merge both types of funds.

Some voluntary and community organisations, especially those which are faith-based, may have ethical concerns about applying for monies from the National Lottery because funds are derived from gambling.

How do they work?

As the public funds the National Lottery through ticket sales, it’s important that money is distributed in an open and accountable manner. After initial criticism that the majority of Lottery funds were going to larger organisations, funders have taken steps to ensure their grant-making processes are accessible to all. This means that there is lots of information and support available for potential applicants. However, as with any public funding, accountability is very important so expect to be asked to demonstrate clearly what you hope to achieve with the funding and be prepared to supply official documentation such as financial records and copies of policies etc.

Each Lottery distributor has its own application form and guidelines – these are available online through their websites. There are many different lottery schemes in existence for amounts ranging from £300 to many millions, and the application and monitoring processes very much depend on the level of grant. For bigger grants, you may receive an assessment visit and be appointed a monitoring officer who will need to be updated about progress and any changes to the project.

Trust and Foundations

Where does the money come from?

There are around 8,800 grant-making trusts and foundations in the UK, providing around £1.7 billion in grants to charitable causes each year.

The terms ‘trust’ and ‘foundation’ are virtually synonymous. A foundation has income from an endowment of land or invested capital. Not all foundations make grants – some use their income to support their own activities. A trust is another word for a charity. Many grant-giving bodies are both a foundation and a trust.

Most grant-making trusts are funded via an endowment – a capital sum given to them from a family, individual or company. This endowment is usually invested and provides tax-exempt income from which grants can be made.

What kind of activity do they support?

Trusts and foundations have a greater degree of independence than public sector funders, or the National Lottery, and can therefore support a wide range of activity and take greater risks.

Often this means trusts and foundations prioritise activities which are innovative in terms of how they deliver activity, or who they target. Some actively seek to support charitable activity which is finding it hard to access funding elsewhere. Activity supported tends to be short-term and project-based, although some trusts do provide core funding and support organisations over an extended period of time.

How do they work?

There is wide variation in how different grant trusts and foundations operate, depending on their size and approach. Larger trusts and foundations may appear similar to public sector funders and are likely to have a website, paid staff, published guidelines and application forms.

Applying to smaller trusts and foundations is closer to fundraising from individuals. They are unlikely to employ staff or have the resources to provide information or advice to applicants. Many ask simply for a letter of application and may not be able to acknowledge receipt or notify unsuccessful applications.

Funding decisions are made by Trustees although in larger trusts, staff play an important role in assessing applications and recommending to the committee which applications to support.

In recent years, some trusts and foundations have begun offering loan finance in addition to, or rather than, grants - read more about trends in grants.

Funding Central provides information on thousands of Trusts and Foundations - you might find our Guide to Trusts and Foundations useful.