Understanding the difference between ‘match funding’ and ‘leverage’
In the current tight public sector funding environment, many funding bodies are increasingly looking for bidders to bring their own ‘match funding’ to a project.
In simple terms, this means that funding bodies only want to ‘part fund’ a project (rather than investing all the money) and the split of the applicants own funds to the awarding bodies is often referred to as the intervention rate. The lower the ‘intervention rate’ (i.e. the more money you can bring into the project) the higher you will probably score in any appraisal process.
Whilst this is by no means an exhaustive list, and individual funds will generally provide their own definitions of what can and cannot be counted as ‘match funding’,
‘Match’ is a contribution of ‘resources’ made to the project by the project sponsor, which can come from a variety of sources, including the sponsors own resources, contributions from the other partners in the project and/or contributions from the project beneficiaries;
‘Cash Match’ is the cash contributions made to the project, which again can come from the project sponsor’s own (cash) resources, partners (cash) contributions and/or beneficiary (cash) which is committed towards achieving the goals of the project;
‘In kind match’ are resource contributions made to the project by the project sponsor, partners and/or beneficiaries, which come in form of donations of time (people seconded to the project), equipment (venues, hardware) etc
In addition to ‘match funding’, people who appraise projects also sometimes look for how much ‘leverage’ a project might deliver. Leverage is effectively the amount of benefit that a project will deliver, for every £1 invested. A project with a high 'leverage' will have a high ‘Benefit Cost Ratio (BCR)’ whilst a project with a low leverage will have a low BCR.
In seeking bidders to contribute ‘match funding’ into a project and deliver high levels of ‘leverage’, funding bodies may ultimately be interested in achieving better ‘value for money’ for the public purse; leveraging co-investment from the market; operating an economic policy which seeks to encourage growth in the market; or all the above.
Ultimately, the need for bidding organisations to include more ‘match funding’ in their bids means they need to think increasingly innovatively about how they secure this funding for projects to happen.
So, what approaches can a potential bidder use in securing match funding?
Well, the easiest model is one which relies solely on using the bidding organisations core resources as ‘match funding’. Whilst the actual approach usually depends on the type of funding being applied for, this approach generally requires the project sponsor to co-invest in the new service being proposed, or donating resources (i.e. staff, office overheads etc.) to the project.
Whilst this approach is particularly suitable for corporate (single organisation) bids, the current pressure on core budgets can make this quite difficult (particularly if you recognise that many funding bodies only want to fund something which can demonstrate ‘additionality’ – i.e. they don’t necessarily want you to apply for funding to replace diminishing government budgets).
Another approach to increase ‘match funding’ into a project is to ask partners in the project to contribute some of their resources. This could be people’s time or funding.
Lastly, another opportunity is to ask the beneficiaries to co-invest in the project – something that can work quite well, if you are offering tangible benefits to third parties (for example a grant to purchase something, which they receive a part subsidy for).
Projects that can secure match from the bidding organisation, from partners and from end beneficiaries clearly have a better chance of achieving a low ‘intervention rate’ and scoring higher in the appraisal process.
That said, in our experience, not enough appraisers genuinely understand the difference between these different models, the relative benefits and risks and far too often allow applicants to count ‘leverage’ as ‘match’.
This is one of the main reasons we always suggest it’s important to understand how a project will be scored before you submit it - so you can maximise your chances of answering the exam question, without over committing yourself.