The Difference Between Fundraising, Grantmaking, and Commissioning

TL;DR Fundraising, grantmaking, and commissioning are three fundamentally different mechanisms for moving money in the charity sector. Fundraising means soliciting voluntary support. Grantmaking means distributing funds through an application process. Commissioning means purchasing defined services under contract. They involve different power dynamics, legal frameworks, and cultural expectations. Confusing them -- which newcomers do constantly -- leads to misunderstanding how decisions get made, who holds power, and why money comes with the strings it does.

Why this matters

Within your first month in the sector, someone will say "we need to fundraise for this" and someone else will say "let's apply to funders" and a third person will mention "the council is commissioning this service." If you think these are roughly the same thing, you will misunderstand almost every conversation about money that follows.

These three mechanisms shape organisational strategy, staff roles, reporting requirements, and -- critically -- who has power over what gets funded and how. Getting clear on the distinctions early saves enormous confusion later.

The 5 things to know

1. Fundraising is about asking people to give voluntarily

Fundraising is the practice of soliciting donations, gifts, and voluntary support from individuals, companies, or the public. It includes everything from street collections and sponsored events to direct mail campaigns, online giving, major donor cultivation, and legacy programmes.

The defining feature is voluntary exchange. No one is obliged to give. The donor chooses to support a cause because they believe in it, feel emotionally connected to it, or want the social recognition that comes with generosity. In return, the charity offers gratitude, impact reports, and sometimes naming rights or event invitations -- but not a service or product.

Fundraising in England and Wales is regulated by the Fundraising Regulator, an independent self-regulatory body established after the 2015 fundraising scandals. Charities must follow the Code of Fundraising Practice. Scotland has separate arrangements: OSCR is the charity regulator, while fundraising adjudication is handled by the Scottish Fundraising Adjudication Panel.

Key fundraising roles include individual giving officers, community fundraisers, major donor managers, legacy officers, and events coordinators. Larger charities have entire fundraising departments; smaller ones rely on trustees, volunteers, or a single member of staff wearing many hats.

2. Grantmaking is about distributing funds through a structured process

Grantmaking is the process by which trusts, foundations, lottery distributors, and some government bodies distribute money to organisations (and sometimes individuals) through an application and assessment process. The grant-maker sets criteria, invites applications, assesses them, and awards funding.

The defining feature is selection and distribution. The grant-maker has money and decides who gets it, usually based on fit with its priorities, the quality of the application, and the applicant's track record. Grants typically fund specific projects or activities, though some funders offer unrestricted core grants.

360Giving, the UK's open data standard for grants, publishes data on over 1 million grants from hundreds of funders. The headline combined value exceeds £300 billion, though that figure is inflated by the inclusion of local government block grants and other very large allocations; actual coverage of charitable grantmaking is useful but incomplete, as many funders do not yet publish. Despite these limitations, the data reveals significant concentration: a relatively small number of large funders account for the majority of grant value, and certain geographies and cause areas are consistently better funded than others.

The Association of Charitable Foundations (ACF) is the membership body for UK foundations and grant-makers, with around 400 members collectively distributing over £4 billion annually. ACF promotes good practice in grantmaking, publishes research, and facilitates peer learning among funders.

Key grantmaking roles include programme officers, grants managers, assessment leads, and fund directors. The relationship between funder and grantee is formally one of gift (a grant is legally a gift, not a contract), but the power dynamic is unmistakable: the funder decides.

3. Commissioning is about purchasing specific services under contract

Commissioning is the process by which a body -- usually a local authority, NHS trust, central government department, or arms-length agency -- identifies a need, designs a service specification, procures a provider, and manages the resulting contract. When charities deliver commissioned services, they are essentially selling their expertise and capacity to a public body.

The defining feature is contractual obligation. The commissioner specifies what it wants (outputs, outcomes, service levels), the provider agrees to deliver it, and payment is contingent on performance. In theory this is fundamentally different from a grant, where the funder supports an organisation's own plans. In practice, the distinction is more of a spectrum: some grants come with such detailed conditions, monitoring requirements, and clawback clauses that they function very much like contracts, while some contracts allow more flexibility than their terms suggest. The legal distinction matters — particularly for VAT, accounting, and liability — but the day-to-day experience of managing a heavily restricted grant and a loosely managed contract can feel surprisingly similar.

Commissioning is governed by public procurement law, which since February 2025 operates under the Procurement Act 2023 in England and Wales. Processes can be lengthy, bureaucratic, and resource-intensive to bid for. Contracts often run for three to five years with extension options.

For charities, commissioned income can be large and relatively predictable, but it comes with significant constraints: detailed reporting requirements, Key Performance Indicators (KPIs), and limited flexibility to adapt services. There is ongoing debate about whether contract culture undermines what makes charities distinctive.

4. The power dynamics are completely different

This is the point most people miss.

In fundraising, the charity holds the narrative. It tells its story, makes its case, and invites support. The donor responds (or doesn't). The charity retains considerable control over how it uses the funds, especially unrestricted donations.

In grantmaking, the funder holds the power. It sets priorities, designs application processes, and decides who receives funding. Applicants must frame their work in terms the funder values. There is a growing movement -- often called "trust-based philanthropy" -- pushing funders to shift power towards grantees, but the structural imbalance remains.

In commissioning, the commissioner holds the power and the contract defines the relationship. The charity is a service provider. It must deliver what was specified, report against agreed metrics, and accept that the commissioner can terminate or not renew the contract. Charities in this space often describe feeling more like subcontractors than independent organisations.

These power dynamics shape everything: what language organisations use, how they measure success, what risks they can take, and how freely they can speak about systemic problems.

5. Many organisations do all three -- and the boundaries blur

A medium-sized charity might simultaneously fundraise from individuals, apply for grants from foundations, and deliver commissioned services for a local authority. Each income stream brings different obligations, timelines, and relationships.

The boundaries also blur in practice. Some government "grants" function more like contracts, with detailed output requirements and clawback clauses. Some corporate "partnerships" sit somewhere between sponsorship (a commercial transaction) and philanthropy. And some commissioning processes invite bids from charities in ways that look remarkably like grant applications.

This blurring causes real confusion -- not just for newcomers, but for finance teams trying to account for income correctly and for trustees trying to understand their obligations.

Common misunderstandings

"Applying for a grant is the same as fundraising." Technically, both involve asking for money. But fundraising typically refers to soliciting voluntary gifts, while grant applications respond to a funder's stated priorities through a formal process. The skills, timelines, and relationships are quite different. A community fundraiser and a grants officer are doing fundamentally different jobs.

"Commissioned services are grants from the government." The legal distinction matters: grants are gifts with conditions, contracts are legally binding agreements to deliver specified services. The financial, legal, and operational implications differ — particularly around VAT, liability, and what happens when things go wrong. If your charity treats a contract like a grant, it will struggle with compliance and risk losing the income entirely. That said, the boundary is genuinely blurry: some government "grants" have such onerous conditions they feel like contracts, and the terminology used by funders does not always match the legal reality.

"Grantmaking is just philanthropy." While most grantmaking is philanthropic in origin, the National Lottery Community Fund and other lottery distributors are major grant-makers funded by gambling revenue. Government bodies also make grants. The mechanism (competitive application, assessment, award) is the same regardless of where the money originates.

"Charities shouldn't be competing for government contracts." This is a values question, not a factual one, but the assumption that commercial competition is inherently un-charitable misunderstands the sector. Many charities have deep expertise in service delivery that government and private providers cannot match. The question is whether contract terms allow that expertise to flourish.

How it works in practice

A homelessness charity might fundraise from the public to fund its advocacy and campaigning work (unrestricted), hold a grant from a housing foundation to run a research project on rough sleeping (restricted), and deliver an outreach service commissioned by the local authority under a three-year contract (earned income). Each stream has its own budget line, reporting requirements, and strategic significance.

A community foundation acts as both fundraiser and grant-maker. It fundraises from local donors, businesses, and sometimes government, building endowment and flow-through funds. It then runs grant programmes distributing money to local voluntary organisations. It sits in the middle of the funding ecosystem, translating between donors who want impact and grassroots groups who need resources.

A large international NGO might receive a multi-million-pound contract from the Foreign, Commonwealth and Development Office (FCDO) to deliver humanitarian aid, a grant from a private foundation for an innovation programme, and unrestricted income from tens of thousands of individual donors. Managing these different funding relationships simultaneously requires sophisticated financial systems and a leadership team that can navigate very different stakeholder expectations.

What people disagree about

Whether commissioning has been good for charities. Advocates say it brought scale, professionalism, and sustainable income. Critics argue it has turned charities into delivery agents for government policy, constrained their independence, and driven a race to the bottom on price. The truth varies enormously by sector and locality.

Whether grantmaking is efficient. Charities regularly criticise the burden of grant applications -- the time spent writing bids, the low success rates, and the reporting requirements that follow. Funders counter that they have a duty to distribute wisely. Initiatives like the ACF's "Stronger Foundations" framework and the adoption of open application processes try to address this tension.

Whether fundraising costs are too high. The public expects charities to spend minimally on fundraising, but professional fundraising generates significant returns. The sector struggles with a paradox: investing in fundraising is one of the most effective things a charity can do, but donors punish organisations they perceive as spending too much on it.

Whether power in grantmaking can truly be shared. Trust-based philanthropy and participatory grantmaking models aim to redistribute power from funders to communities. Sceptics question whether funders will genuinely cede control, or whether these approaches are performative. The evidence is still emerging.

FAQs

Is a grant a contract?

A grant agreement is a contract in the ordinary legal sense — it creates binding obligations between two parties. What distinguishes a grant from a commissioned contract is the nature of the relationship: a grant is fundamentally a gift with conditions attached, while a commissioned contract is a purchase of specified services. The distinction matters for VAT treatment, financial reporting, and what happens if things go wrong. But in practice the boundary is a spectrum, not a line. Some grants come with such detailed output requirements, monitoring, and clawback clauses that they are functionally indistinguishable from commissioned contracts. If in doubt, check the terms of the agreement and take legal advice.

What is 360Giving?

360Giving is a UK initiative that promotes transparency in grantmaking by encouraging funders to publish their grants data in an open, standardised format. Its database now covers over 1 million grants contributed by hundreds of UK funders. The headline combined value exceeds £300 billion, though this figure is inflated by the inclusion of local government block grants and other very large allocations; actual coverage of charitable grantmaking is useful but incomplete. The data is freely available and can be explored through tools like GrantNav.

Can a charity be both a fundraiser and a grant-maker?

Yes, and many are. Community foundations fundraise locally and then distribute grants. Large charities sometimes run regranting programmes, receiving funds from a major donor or government body and distributing them to smaller organisations. The National Lottery Community Fund is itself a grant-maker funded by National Lottery proceeds rather than donations. The roles of fundraiser and grant-maker are functions, not fixed identities.

Why do charities complain about commissioning?

Common complaints include: contract terms that are too rigid and prevent responsive service delivery; payment by results models that transfer financial risk to the charity; short contract periods that prevent long-term planning; requirements to compete on price against private sector providers with lower costs; and loss of independence when the commissioner dictates service design. These are structural issues, not just grumbles, and they are actively debated across the sector.

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