If you have decided to use grant as the basis for a financial relationship, you then have the further option of choosing to use a particular type of grant, known as ‘grant-in-aid’ (in central government) or ‘strategic grant’ (especially in local government and the NHS). The key differences are:
- A grant is for financing a specific and agreed activity of a third sector organisation (TSO). A grant-in-aid/strategic grant is for financing a TSO to carry out activities that the TSO chooses within broad parameters agreed with the public body.
- A grant-in-aid/strategic grant is used when there is a high level of trust between the public body and the TSO. Often, the TSO carries out work that might be carried out directly by the State in other countries similar to the UK. For example, grants-in-aid are used in central government to fund bodies such as national museums. At local level, strategic grants are often used to fund bodies such as Councils for Voluntary Service (CVS) and Race Equality Councils.
- Under grant-in-aid, the management relationship between the TSO and the public is deliberately arm’s length. Typically, the public body gives a steer on its priorities once a year. Monitoring and evaluation of the TSO by the public body should be light touch. Accountability arrangements should emphasise the accountability of the trustees (or equivalent).