Committee Enquiry: Funding of Voluntary Sector Organisations

We thank you for the invitation to contribute to this enquiry and our comments are below.

1. Groundwork in Wales

Groundwork is a charity dedicated to helping deprived communities improve the environment in which they live. The Groundwork Federation in England, Wales and Northern Ireland comprises over 40 trusts and employs about 2,000 people. Groundwork has been active in Wales for over 21 years working in areas of deprivation both urban and rural. There are five Trusts in Wales.

Four, rooted locally, deliver services primarily to the communities of Bridgend, Neath/Port Talbot, Caerphilly, Merthyr Tydfil, Rhondda Cynon Taf and Wrexham and Flintshire. Groundwork Wales acts as the advocate for the four operational Trusts as well as delivering national programmes with funding from the Welsh Assembly Government and the European Union. Groundwork Wales is also the accountable body to the Welsh Assembly for the core funding which the latter provides to all five Groundwork Trusts in Wales.

2. The Nature of the Voluntary Sector.

The Sector is extremely diverse. Agencies within it vary from sizeable, professionally staffed organisations managing multi million pound budgets across the whole country to very local community bodies carrying out projects with the aid of volunteers. The sector varies from the unincorporated association to organisations accountable to both Charity Commissioners and Companies House.

Their activities have traditionally addressed gaps in public service provision or market failure in the business sector. Some agencies also deliver outsourced public services whatever procurement route is used for arriving at the contracts. Others deliver against partnership agreements with local and national government organisations.

The Sector has consistently showed itself to be flexible, responsive to the communities it serves and highly innovative. It is often able to reach sections of the community unwilling to engage with public authorities. It has many times shown itself to be both more efficient and more effective than organisations carrying a greater burden of public accountability.

3. Voluntary Sector Funding

The source and nature of funding which the Sector attracts is again very diverse. Even the funding streams within a single organization can often be multiple. This has an impact on both structures and overheads within the organization.

Funding can derive from:

Donation whether institutional or individual
Core funding from Public Sector Agencies
Partnership agreements against programmes
Individual programme funding whether grant or contractual
Tendered contracts
Trading arms covenanting their profits back to the core charity

4. Performance Measurement and Improvement

The outputs and outcomes for which funding is invested by the Assembly are also measured in a variety of different ways:

Programme or project outcomes
Programme or project outputs
Business Plan objectives
Social policy objectives

At times an agency will find itself being measured in all these ways at once. Further the financial pressures on Government and the need to demonstrate value for money have created a demand for year on year improvements in efficiency from its Voluntary Sector partners. This has created a significant problem where programmes and projects can not secure recovery of the full costs to the organisation of running them. Sadly and for understandable reasons this is almost invariably the case.

In the long run if value improvements are to be achieved year on year, cutting overheads can only make a limited contribution. It will often eventually have the opposite effect unless there is significant investment in skills development. This has to be seen as part of the costs of any project as does the organisational development without which skills development can not have full effect.

Investment in skills can only show a significant return if there is a substantial measure of staff retention. In practice Voluntary Sector conditions of service are rarely competitive when compared with the Business Sector and the Public Sector. This leads with one major exception to the recruitment of younger, able but less experienced staff.

These contribute a great deal of the dynamism and creativity for which the Voluntary Sector is properly reputed. However, staff in the earlier part of their career tend to stay in each post for shorter periods than their more experienced colleagues. This leads to significantly increased overheads on induction in comparison to less volatile organisations. It makes rather harder the retention of a substantial core of expertise and places more stress on coaching, supervision and medium term planning.

The Voluntary Sector does have the advantage in that it often succeeds in attracting higher calibre staff seeking greater fulfilment in their work. (This is the major exception mentioned above) Although common across the Sector as a whole, this is not reliable for business planning or management purposes in any individual organisation and to make matters worse varies considerably according to the employment climate in the public and business sectors at any one time.

5. Accountability.

Quite properly there has been increasing pressure to account rigorously for how public money is spent and this has led naturally enough to a greater burden on voluntary agencies. Yet there are difficulties here precisely because the Sector is so diverse particularly in scale. A burden which can be discharged by one agency is overwhelming for another and even for the larger agencies the processes of accountability are substantial and go beyond what is simply good business practice and should be carried out anyway.

In England, the Office of the Third Sector has found that agencies there spend between 4%-7% of their gross income on accountability processes. While the need for proper accountability can not be disputed, these are substantial sums of money which are not being spent on achieving the objectives for which the funding has been provided in the first place.

The current system can also militate against efficiency savings. Programmes are sometimes so tightly defined that savings achieved not only offer no benefit to the agency making them, they may even be inimical because they are used to drive down the cost of a service in the next round of procurement. There should be the possibility, as with partnering in the construction sector, for efficiency savings to benefit both the funder and the agency finding them.

6. Reliability of funding.

While a number of agencies have longer term (3 year) partnership agreements with the Assembly most of the Voluntary Sector remains dependent on project and programme funding ad hoc. This can be appropriate because that is the nature of the business which the agencies are conducting. It reduces, however, significantly the potential for planning and medium term investment in organizational development.

This in turn removes substantially any potential for developing the core expertise of those agencies with the consequent improvement in quality and value for money which that offers. This is in part intractable because of the very nature of the Sector but there should be potential to improve the capacity of the umbrella organisations and the larger Voluntary Sector organisations to offer development support. This would of course require defined outputs in terms of improved delivery in the Sector.

The variety of different streams of funding used to drive forward the Assembly’s objectives can be bewildering even for agencies whose budgets stretch to professional fund raisers. The culture within WAG is undoubtedly very supportive but the very limited availability of programme development funding makes it hard to take proposals to the point where they can be bid into a grant regime even in outline. An inevitable consequence is that innovation falls too frequently either to the well resourced or to the volunteer.

It is an obvious principle that the public purse does not exist to keep the Voluntary Sector in business. All the same some of the dislocations as funding transits from established programmes to new ones are immensely damaging. Exit strategies should preserve Voluntary Sector agencies from loss where programmes are genuinely coming to an end. The problem lies rather where programmes are merely mutating and essentially the same expertise is going to be needed in a new programme as that required in its predecessor.

Teams of real quality built up over several years have to be broken up during the hiatus between programmes that too often supervenes. When the new programmes do kick in there is often both a lag in starting and the inefficiencies of the early part of a learning curve as teams are built again. Neither improves the value secured for public money invested. Neither increases the likelihood of social policy objectives being achieved.

7. Some Ways Forward

Increase in the number and range of agencies on longer term partnership agreements

Measure performance within these against outputs and outcomes not inputs

Simplify the funding regimes making access to information about them easier through the WAG website

Improve the support for programme development through the Sector umbrella organisations

Encourage development support between the larger agencies and smaller ones in the Sector (development is not a burden which should be carried by the umbrella organisations alone

Accept the principle of Full Cost Recovery in all Assembly funded programmes and press the case for FCR with the European Commission

Manage transition between programmes to avoid loss of expertise to the Sector which is then needed later on

Ian McIntosh
Director, Groundwork Wales