The Cheque Has Conditions: Keeping Your Co-op Independent When Public Money Arrives

Public money rarely arrives naked. It comes with a file: an offer letter, a funding agreement, a monitoring framework, and a quiet list of things your co-op must become in order to keep it. For a small co-op, the temptation is to read the headline figure and skim the rest. That is how a grant turns from breathing space into a second job — or, worse, a second board.

At TBH Coop we are not against public funding. Community enterprises need capital, and the public purse is one of the few places where mission-led work can find patient money. But open books means open about the whole deal, not just the bank balance. So before you bank it, read the conditions like a governance document, because that is what they are.

The offer letter is not the deal

The press release says “£40,000 to support your community project”. The agreement says “payment on achievement of outputs, repayment on failure to deliver, prior written consent for changes to senior staff, and acknowledgement of the funder in all materials”. Both are true. Only one is legally binding.

Ask for the full funding agreement before anyone gets excited. Read it with two people: one looking at the money, one looking at control. The money person asks when cash lands, what evidence is needed, and what triggers repayment. The control person asks who approves what, who can veto what, and whether the co-op’s members still decide the direction of travel. If those two readings disagree, you have found the bit to negotiate.

Clawback: the boomerang money

Clawback clauses are where public funding gets its teeth. They usually trigger when you underspend, miss outputs, change the project’s purpose, dispose of assets, or wind up. Some are broader: “reputational damage”, “failure to comply with the funder’s policies”, “any change in control”. Those words are doing a lot of work.

You are not being ungrateful by asking for proportionality. If you deliver 80% of the outputs, do you repay 100% of the grant? If a project is delayed by six months because a landlord stalls, is that a breach? Can you agree a cure period before repayment is demanded? Can partial repayment be linked to unspent funds rather than the whole award? A good funder will have these conversations. A funder that will not is telling you something useful.

The admin tax

Every reporting line has a cost. A quarterly report that takes two days each time is not free; it is eight days a year, plus evidence gathering, plus the finance officer’s time, plus the bit where everyone hunts for a receipt from March. If the grant is £15,000 and the admin eats £3,000 of staff time, the real value is £12,000. That may still be worth it. But you should know.

Cost the obligations before you sign: monitoring returns, audits, site visits, case studies, photographs, newsletters, attendance at funder events, and the emotional labour of being inspected. Put those hours in the budget as a real line. If the funder will not fund admin, decide whether your co-op can absorb it. Open books means showing members the restricted fund and the unbudgeted cost of managing it.

Board seats by another name

Some agreements do not ask for a board seat. They ask for approval rights. That is governance by footnote. Watch for reserved matters: the funder may require prior written consent for changes to your articles, the appointment or dismissal of a chief executive, borrowing, disposal of assets, entering new contracts, or changing your governing document. Sometimes there is a funder observer with no vote. Sometimes there is a veto with no title.

For a co-op, member control is not a nice-to-have. If an outside body can block a decision that members are entitled to make, your governance has quietly changed. Check whether the agreement conflicts with your society rules or articles. If it does, you need advice and possibly a member vote before signing. Do not let a monitoring officer become the person who decides what your co-op is for.

Subsidy control and procurement

Since the Subsidy Control Act 2022, public grants to businesses and social enterprises can be subsidies. That does not mean they are banned; it means the funder should have considered the subsidy control principles, and your co-op may need to provide information to help. Small awards often fall under minimal financial assistance thresholds, but thresholds and rules are not a DIY job. Ask the funder what route they are using, and take advice if the grant is large or unusual.

Procurement is the other quiet condition. If you use public money to buy goods or services, the funder may require competitive tendering above certain values. That can sit awkwardly with a co-op’s commitment to local suppliers, fair work, or member-led purchasing. It is not impossible to reconcile, but it needs planning. Do not discover the tender rules after you have promised the work to a neighbour.

Match funding and the sustainability trap

Match funding can be cash, staff time, volunteer hours, or a donated venue. It is easy to overclaim and exhausting to evidence. More importantly, do not build core payroll on time-limited money. A grant that funds a role for two years is not a salary strategy; it is a project with an end date. Ask what happens on day 366. If the answer is “we will find more money”, that is a risk, not a plan.

A simple test before you sign

Run the offer through five questions:

• Does it fund work we would do anyway, or is it bending our mission to fit a funder’s outcomes?
• Can we afford the admin and evidence burden without burning out the team?
• Does any clause change who decides? If yes, have members seen it in plain English?
• Would we sign this if it were a loan with the same conditions?
• What is our exit plan if the money stops?

If the answers are uncomfortable, negotiate. Ask for a break clause, a revised payment schedule, a narrower clawback, or a clearer definition of outputs. Put the funding agreement in front of members alongside the budget. Let them see the strings, not just the cheque.

Public money can be a genuine partnership. It can fund a community asset, a new service, or a role that would otherwise take years to create. But a grant is a relationship, not a gift. Sign it with your eyes open, your accounts transparent, and your member control intact.