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Good data is consistent in form between different organisations, kept up to date regularly and able to show how trends change with time. Good data should be objective, not open to manipulation and relevant. Good data should not be a burden to produce.
Funders are in a difficult position. They have been given money to serve a specific purpose, but don't have the capability to provide that service on their own. Therefore, they end up giving money to other charities to implement their aims, in the form of grants and contracts. This comes with a lot of risk for the funder.
One way is to do a lot of due diligence on the charities before you fund them, the approach taken successfully by The Fore Trust. This allows you to have more confidence in the people you fund and can improve your relationship with them. However, this can be expensive and hard to do.
Another way is to link the funding up to a contract with defined goals that the charity has to perform. However, this can put charities off applying for the funding in the first place, as they want to avoid the risk of not fulfilling the contract.
The best way is to get good data on the charities. This allows you to know what they are doing and then fund the charities that match your aims - the ones already doing what you want them to.
Getting good data on charities is hard.
The traditional way to do this is to ask the charities they fund to fill out forms and questionnaires. However, these often take a lot of time to complete and there are issues with the data they produce.
It's unlikely that charities will fill out surveys with the data in the same format: one organisation's "Young Person" is another's "Student". A community garden might be classed as "Environmental Protection" or it might be "Mental Health" - it all depends on the context and how different charities record their information.
In addition, due to the time delay in filling out questionnaires, the data they produce is often quite old and unable to show how trends change with time.
All of this means that it requires a lot of effort from the funder to do any sensible analysis on data coming in from so many different places.
Funders need to find a way to know what is going on at the charities they fund without adding undue administrative burdens on them. They also need to find a way to improve their knowledge of the smaller charities in an area. There's been a lot of hype, but in this instance advances in cloud computing and machine learning will offer new ways to collect analyse and pool data on charities of all sizes. Therefore, it is something that funders should be, and are, looking into.
We are obviously not the first people to talk about this topic. London plus have written a good blog post on the subject and Andy Ratcliffe at Impetus has written two really interesting posts too - here and here. Alternatively, if you would like to discuss this further or have anything to add, do get in touch with me by email on firstname.lastname@example.org