When grants rule: why NGOs design programs for funding opportunities (and not the other way around)

There's a conversation that happens in almost every management team in the third sector. It happens in the hallways, after meetings, in cafes among professionals who know each other well. It rarely happens in public, because we all depend on the same system.

The conversation begins with a question that no one wants to ask out loud: are we designing this program because it responds to a real need, or because it fits the call for proposals that has just been published?

The perverse logic of the subsidy system

The public funding system for the third sector in Spain — and in much of Europe — operates on a seemingly reasonable logic: administrations publish calls with defined criteria, organizations submit projects, and the best ones receive funding.

The problem is what happens between the publication of the call for proposals and the submission of the project.

The calls for proposals have short deadlines, specific criteria, predefined indicators, and budgets that cover certain items but not others. Organizations, which need this funding to survive, quickly learn to read between the lines: what type of project is most likely to be selected, what indicators the evaluator values, and what terms from institutional jargon must be included in the proposal.

And then what happens, happens: the programs are designed to fit the call for proposals, not to respond to the real needs of the beneficiaries.

It's not bad faith. It's a rational adaptation to a poorly designed incentive system.

What this dysfunction generates in practice

The consequences are more profound than they appear from the outside:

• Fragmented impact. An organization working with people experiencing social exclusion needs long-term, comprehensive, and flexible interventions. But if the call for proposals funds "20-hour employability workshops," that's precisely what it offers. The result: 20-hour workshops that are not part of any broader process, lack follow-up, and produce statistics (number of participants, hours of training delivered) without necessarily generating real change in anyone's life.

• Exhausted teams. The bureaucracy associated with public grants is considerable: application forms, technical reports, financial justifications, monitoring reports, audits. For many small and medium-sized NGOs, a significant portion of the team's energy is consumed by administrative management, not direct intervention. I have seen organizations where the cost of managing a grant—in staff hours—represented an alarming proportion of the amount received.

• Discontinuation of high-impact programs. This is perhaps the most damaging and least visible effect. When an organization has a program that works well—one that generates real change, that beneficiaries value, that has taken years to build—but that program doesn't fit the funding opportunities available that year, it faces a difficult decision: either seek alternative funding (more difficult and expensive to obtain), redesign the program to fit (losing what made it effective), or abandon it.

• A proliferation of organizations doing the same thing. The grant system, by rewarding certain types of projects at certain times, creates incentives for multiple organizations to develop similar programs simultaneously and without coordination. The result is a fragmented sector where dozens of NGOs work on the same issue in the same territory with little coordination, duplicating efforts, competing for the same funds and the same beneficiaries, and generating—collectively—less impact than they would if they collaborated.

The problem of times

There is another dimension to the problem that deserves attention: the timing of public subsidies rarely coincides with the timing of social needs or with the timing of real change.

Calls for proposals are published late, decision deadlines are extended, and payments arrive late—sometimes very late. Many organizations have to fund months of work out of their own pockets while waiting for payment of a grant that has already been awarded. For a small NGO, this can mean going into debt, reducing staff, or simply being unable to carry out the project.

And then there's the problem of reporting deadlines: projects have to be closed by the date established in the call for proposals, regardless of whether the intervention process has concluded naturally or not. A support program for people in vulnerable situations doesn't end when the fiscal year ends. But the project itself does.

What nobody says in public

The reason this conversation doesn't happen in public is simple: we all depend on the same system. Organizations can't afford to openly criticize the administrations that fund them. Most administration staff are aware of the dysfunctions but operate within regulatory and budgetary frameworks they don't control. Evaluators apply the criteria they're given. Politicians approve the calls for proposals designed by their staff.

The system perpetuates itself not because nobody sees the problem, but because the individual cost of pointing it out is high and the benefit is diffuse.

This article is not a criticism of any administration or specific organization. It is an attempt to publicly name something the sector has been discussing privately for years, in the hope that naming it will be the first step toward change.

What alternative models exist

We are not starting from scratch. There are experiences — in Spain and in other countries — that point to smarter forms of public funding:

1. Multi-year funding. Some European programs and certain cooperation calls already allow projects of three years or more. The difference in terms of impact is remarkable: teams can build trust with beneficiaries, develop more complex processes, and measure medium-term results instead of immediate outputs.

2. Funding structural costs. One of the great hypocrisies of the system is funding activities but not the organization that makes them possible. Covering the salary of a project manager is considered acceptable; covering the salary of the director who manages the organization is far less so. Some private foundations and certain more innovative public programs have begun to recognize that an organization without a solid structure cannot generate sustainable impact.

3. Evaluation by results, not by activities. Instead of measuring how many workshops have been delivered, measure what has changed in the lives of the beneficiaries. This is more difficult and more expensive to evaluate, but it is the only way to know if public money is generating real value. It requires investing in measurement systems—which, again, clashes with the reluctance to fund costs that are not "direct activities."

4. Trust as the foundation of the relationship. Some private donors—and very few public ones—operate on a model of trust in the organization rather than exhaustive control of every budget item. This requires organizations with strong governance and genuine transparency, but it fosters a much more productive relationship and empowers teams to make the decisions that the realities on the ground demand.

The question the sector needs to ask itself

The grant system isn't going to change automatically. Government agencies have their own incentives, their own timelines, and their own regulatory constraints. But organizations can make some decisions that reduce their dependence on the worst aspects of the system.

The first is the most uncomfortable: being honest internally about when you're designing programs for the sake of the calls for proposals and not for the beneficiaries. Naming it doesn't solve the problem, but it prevents it from becoming normalized as an invisible practice.

The second is to diversify funding sources in a real way — not as a strategic objective in the plan, but as a concrete practice that involves investing time and resources in developing relationships with private donors, foundations and funding sources that allow for greater autonomy.

The third is to cooperate with other organizations working in the same territories and with the same groups, instead of competing for the same funding. Fragmentation of the sector is not inevitable—it is a choice that is renewed every year with each call for proposals.

The system has real dysfunctions. But some of the answers lie within the sector, not outside.