Grant making

Grant making in the context of the WA Delivering Community Services in Partnership policy

Discover how working with local contractors helped to demonstrate a strong commitment to the community.

01 March 2023

Have you ever wondered what the difference between a service agreement and a grant is? These two concepts are the cornerstone of funding for not-for-profit organisations but are often misunderstood.

In this article we look at some global thinking on the difference between grant making and contracting, and what the Delivering Community Services in Partnership (DCSP) Policy says about Western Australian State Government agencies working with the non-for-profit community services sector.

Are you shopping, giving or investing?

The question of what is a grant and what is a service contract is not a new one. In their 2005 report ‘Working with the Third Sector’, the UK National Audit Office developed an existing idea of Julie Unwin’s that there are three distinct types of financial relationships between public sector agencies and the not-for-profit sector. These are:

    1. Shopping - where the purchaser (the government agency) designs a specification for a service it wishes to deliver, or is required to deliver by legislation. The purchaser then seeks a supplier to provide this service on its behalf, or under its commissioning. In this example the outcome is being articulated by the government agency. An example of this might be the delivery of Family and Domestic Violence support services to teenage women in a particular geographical area.

    2. Giving - where the funder (the government agency) provides financial support (grants) towards a specific project or a not-for-profit organisation’s general objectives. In this case the activities or projects are owned and driven by the not-for-profit organisation themselves. For example, a group may be planning to undertake a public information campaign around healthy eating and seek grant funding to make it happen.

    3. Investing - where the funder provides support towards increasing an organisation’s capacity. The concept of ‘investing’ can apply for not just to investing in individual organisations, but also collaborative initiatives, such as trialling a particular new approach to service delivery and sharing that knowledge throughout the sector.

Delivering Community Services in Partnership Policy

In Western Australia, the decisions regarding which financial relationship to use are governed by the ‘Delivering Community Services in Partnership Policy’. The Policy was first introduced in WA in 2011 and has been reviewed and updated over the years. The key principles underpinning the policy are:

  • Positive Relationships: The policy is based on the idea that there should be genuine and positive relationships between the not-for-profit community services sector and the State Government.
  • Collaboration upfront: The policy emphasises the importance of working collaboratively through planning, stakeholder engagement, co-design of services prior to procurement or grant awarding taking place.
  • Sustainability: The policy provides a commitment to the sustainability of community services and a diverse sector through longer contracting periods and market stewardship.
  • Person-centred: The policy places the needs of the service user (i.e. people) front and centre, and commits to having service users involved and consulted when designing and delivering community services.
  • Reducing the administrative burden: The policy outlines that government should, where possible, streamline funding processes, standardise terminology and reduce unnecessary acquittal requirements.

The Policy also provides guidance on when grant making is the appropriate financial relationship between Government and the not-for-profit community services sector. The Policy states that grant agreements may be an appropriate arrangements when:

  • The grant is linked to a specific purpose and outcomes.
  • An organisation requires one-off subsidies, top-ups, seed funding, or funding for a discrete project, innovative trial, pilot program, research of a non-commercial nature, capacity building project or to introduce a new service.
  • The grant is for a discrete period.
  • The grant does not constitute the entire financial base of an organisation.

This definition draws on the themes of ‘giving’ and ‘investing’. Grant making under the Policy is a time limited gift or investment to achieve a clearly defined outcome for a defined time. It is not an ongoing operational arrangement, the purchasing of a service or commissioning of a product.

Collaboration is what is important

Importantly, the Policy highlights that collaboration and co-design should happen upfront with both service design prior to procurement, and with grant making. It is the focus on emphasising co-design and collaboration that blurs the neat distinctions proposed by Unwin and the National Audit Office of ‘shopping’, ‘giving’ and ‘investing’.

In the purest form of ‘shopping’, the government agency identifies the specification and then goes out to market seeking offers and costings. The Delivering Community Services in Partnership Policy outlines that government should work collaboratively with the not-for-profit sector on the design of the service specification before going to market.

This collaborative approach is how grant making works at Lotterywest and Healthway. We are committed to a developmental approach to grant making where we work with community organisations upfront on their ideas and support them to develop them in an outcomes focused way.

You can read more about the Delivering Community Services in Partnership Policy here.


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Acknowledgement of Country

The Western Australian Community Impact Hub acknowledges and pays respect to the Traditional Owners of the land on which we are based, the Whadjuk people of the Noongar Nation and extends that respect to all the Traditional Owners and Elders of this country. We recognise the significant importance of their cultural heritage, values and beliefs and how these contribute to the positive health and wellbeing of the whole community.