Session purpose
This session explored how think tanks can better understand, anticipate and navigate funder restrictions. It focused on the practical effects of donor conditions on budgeting, staffing, reporting, audits, indirect costs, subcontracting and organisational planning.
The session recognised that funding restrictions are not only technical finance issues. They shape how think tanks plan, hire, deliver projects, recover costs and invest in long-term resilience. The discussion therefore focused on how think tanks can work more strategically with funders, build stronger internal systems and use early, honest conversations to avoid problems later.
Main conveners and contributors
This session was convened by:
- Fiorella Bianchi, Director of Finance and Strategy, OTT
- Bryan Schwartz, Center for Global Development
- Gabriela Suárez, FARO
- Jenny Lah, Trust and Accountability Initiative
- Anne von Au, GIZ
The programme framed the session around OTT’s work to develop a shared, community-led resource mapping the conditions funders apply to think tanks across funding models, contracting, budgeting and reporting. The aim was to move from transparency to action: sharing practical strategies for navigating restrictions, designing smarter budgets and strengthening organisational resilience.
Main presentation and framing
The session began from a familiar frustration: funder rules can limit flexibility, increase administrative burden and make it harder for think tanks to plan beyond the short term.
Fiorella Bianchi highlighted that strict caps on indirect rates can make it difficult to plan more than six months ahead, blocking decisions on hiring and investment in organisational capacity. Anne von Au explained the funder side, noting that restrictions often arise from political mandates, public finance rules, procurement systems and accountability for public funds. In the case of GIZ, for example, detailed budgets and audits are required because public money must be justified through formal oversight systems.
The framing, therefore, encouraged participants to move beyond frustration and understand both sides of the relationship: what think tanks need to remain sustainable, and why funders impose certain rules.
Main debates
1. Restrictions affect strategy, not only administration
A central point was that funder restrictions shape organisational strategy. Caps on indirect costs, limits on personnel, rules about consultants, subcontracting restrictions and audit requirements all affect how think tanks structure teams and make long-term decisions.
When restrictions are unclear or discovered too late, they can lead to under-budgeting, staffing gaps, delivery delays and financial risk. The session therefore treated funder conditions as something that must be understood at the design stage, not left to finance teams after a proposal is approved.
2. Funders have constraints too
The discussion also emphasised that funders are not always imposing restrictions arbitrarily. Public funders, especially, often operate under parliamentary oversight, procurement rules, political mandates and audit requirements.
Understanding these constraints can make conversations more productive. Rather than simply asking for exceptions, think tanks can ask better questions, propose workable alternatives and frame their budgets in language funders can accept.
3. Early conversations prevent costly mistakes
A repeated message was: talk to funders early. Anne encouraged organisations to clarify assumptions, budget categories and eligibility rules before submitting proposals. Gabriela also stressed the value of co-designing proposals with funders to align expectations and reduce fear around asking questions.
This matters because many budgeting mistakes become difficult to fix once a grant is approved. Early conversations can help organisations understand what is flexible, what is non-negotiable and where creative solutions may be possible.
4. Financial narratives are as important as spreadsheets
Jenny emphasised the need for strong financial narratives. Budgets cannot rely only on Excel sheets. Funders need to understand why certain costs are necessary, especially when they relate to communications, finance, management, monitoring, administration or other functions often treated as “overhead”.
A good financial narrative explains how each cost contributes to delivery and accountability. It can help funders see that indirect or support costs are not wasteful additions, but essential conditions for responsible project implementation.
5. Relationships with funder finance teams matter
The session highlighted the importance of building relationships not only with programme officers, but also with finance, grants and compliance staff inside funding organisations.
Bryan Schwartz and Gabriela Suárez stressed that strong relationships with donor finance teams can help clarify rules, solve problems and negotiate workable arrangements. Trust, transparency and regular communication reduce friction and make it easier to manage restrictions during implementation.
6. Audits are burdensome but useful
Participants discussed audits as one of the most demanding aspects of restricted funding. Annual audits and project-specific audits require staff time, documentation, preparation and follow-up. Smaller organisations may need to outsource parts of this process.
However, audits were also presented as capacity-building tools. They identify internal control gaps, improve financial systems and build funder confidence. Over time, organisations that manage audits well can become more eligible for larger or more flexible funding.
7. Service contracts may offer different forms of flexibility
Fiorella suggested that organisations should sometimes ask whether a service contract is possible instead of a grant. Service contracts may come with closer oversight, but they can also provide different kinds of budget flexibility depending on the context.
The session cautioned that organisations need to consider tax, legal and compliance implications before choosing between grants and service contracts. But the wider point was useful: contract type is part of the negotiation, not merely an administrative detail.
8. Internal teams need to work together
A strong theme was that navigating funder restrictions is not only the finance team’s job. Programme, finance, operations, communications and leadership teams all need to understand the implications of funding conditions.
Bryan described the role of institutional advancement teams in assessing whether a funding opportunity is viable for the organisation, not only attractive to a programme team. This kind of cross-functional gatekeeping can prevent organisations from accepting grants that are too restrictive, underfunded or administratively risky.
9. The funding landscape is becoming more restrictive
Participants noted a trend towards tighter funder conditions, with some exceptions such as more flexible funders like Hewlett. Large donors, including public agencies, may require complex proposals, heavy reporting and detailed compliance.
This means think tanks need stronger internal systems, better shared knowledge and more confidence in negotiating within constraints. It also points to the value of collective feedback mechanisms, such as OTT’s funder circle or shared resources that document funder requirements.
Main takeaways
- Funder restrictions are strategic issues. They affect staffing, planning, sustainability, delivery and organisational growth.
- Think tanks should understand funder requirements before proposals are finalised, not after grants are signed.
- Early and open conversations with funders can prevent misunderstandings, reduce audit risks and create space for practical solutions.
- Funders also operate under constraints. Understanding their accountability pressures can help think tanks negotiate more effectively.
- Strong financial narratives help justify costs that may otherwise be dismissed as overhead.
- Relationships with funder finance and compliance teams are as important as relationships with programme officers.
- Audits are demanding, but they can strengthen internal systems and increase funder confidence.
- Service contracts, grants and other funding modalities have different implications. Organisations should ask about options early.
- Finance and programme teams need to work together from the beginning of proposal development.
- Think tanks should know their red lines and avoid funding that creates excessive risk, micromanagement or mission distortion.
- The strongest message of the session was that funder restrictions cannot always be removed, but they can often be better understood, anticipated, negotiated and managed through trust, transparency and stronger internal systems.