CC(3) VS16

Communities and Culture Committee

CC(3)-07-07 (p3) November 21

Inquiry into the Funding of Voluntary Sector Organisations in Wales - WLGA Evidence

Background

1. The Welsh Local Government Association (WLGA) represents the interests of local government and promotes local democracy in Wales. It represents the 22 local authorities in Wales and the 4 police authorities, 3 fire and rescue authorities and 3 national park authorities are associate members.

2. The WLGA’s primary purposes are to promote better local government and its reputation and to support authorities in the development of policies and priorities which will improve public services and democracy.

3. Local government and the third sector in Wales have a shared interest in the well being of Wales’ communities and in the empowerment of local people.  Each has a role to play under the collaborative agenda for public services in Wales.  Local government holds the legitimacy to lead the communities and facilitate effective involvement of local people in improving public services.  The third sector, through supporting service design and as a service deliverer, and through participative working, representing service users and interest groups, may enable such involvement especially with groups regarded by many to be 'hard to reach’.  

Introduction

4. Welsh local government is a democratically elected, autonomous tier of government and is respected as such by the Welsh Assembly Government. Local financial flexibility in order to respond to local needs and priorities and local financial freedom (non-hypothecation) from national direction is the key underlying principle of the local-national governance partnership in Wales.  

5. The Community and Culture Committee’s terms of reference covers the Welsh Assembly Government’s funding and policy regarding the third sector in Wales. Local government is however not covered by the Welsh Assembly Government’s policy for funding of voluntary organisations, its Voluntary Sector Scheme, nor does the Assembly Government issue local authorities with policy directions regarding third sector funding. However, as one of the major funders of the third sector in Wales, local government seeks to follow many of the principles which underpin the Assembly Government’s own funding code of practice and has published its own code of practice for funding. These principles have underpinned best practice work with local authorities and the third sector, promoted by the WLGA and WCVA, during recent years

6. Research jointly commissioned by the WLGA, WCVA and the Welsh Assembly Government and conducted by the Local Government Data Unit-Wales shows a steady increase in the amount of funding that local authorities have provided to the third sector since 2000. Whilst a proportion of this recorded increase is attributable to more robust research and analysis, the significant proportion is as a result of increased core funding provided to the third sector, and notably, an increase in the level of services provided by the third sector on behalf of local government.

CC(3)VS16-WLGA

Financial Year	Grants awarded to the third sector	Payments for services provided by the third sector	Total local authority funding for the third sector
2001-02	30.8m	37.4m	£68m
2003-04	47.6m	78m	£125m
2005-06	54.8m	111.4m	£160m

7. The latest figures for 2005-06, published in June 2007, show that Welsh local government is providing more third sector funding and is commissioning more services through the third sector than ever before, with a £35m increase between the years 2004-06, representing a rise of 28%. Individual authority figures are presented in the Annex to this report.

8. On top of the £160m of third sector funding Welsh local authorities provided through grants and commissioning services in 2005-06, an additional £30m of rate relief was also provided. Local authorities also provided a significant amount of 'in-kind’ support such as subsidised or free accommodation.

9. Of the £160m direct funding, £54.8m was provided through grants and £111.4m through payment for services provided by the third sector. Social services and housing saw the highest amount of third sector spending, £91.8m and £39.4m respectively (see Annex).

10. The Data Unit research also shows that a significant amount of Assembly Government specific grants were passported to the third sector, with the majority of third sector funding (86m) provided via 'Assembly government sponsored initiatives’.

11. The research also shows that other public bodies have increased their funding to the voluntary sector, with National Park Authorities providing £504,000 to the voluntary sector (up from £269,000 in 2003-04) and Police Authorities in Wales providing £272,000 (up from £93,000 in 2003-04).

12. Whilst jointly commissioned by the WLGA, WCVA and Welsh Assembly Government, this bi-annual monitoring of local authority funding of the third sector is fully funded by a Welsh Assembly Government grant. We have yet to receive confirmation of an ongoing future commitment from the Welsh Assembly Government. The WLGA seeks support from the Committee that the Assembly Government should continue to fund this valuable research in order to further aid policy development.

'A Future Together?’

13. In 2003, the WLGA and WCVA produced 'A Future Together?’, a joint guide which set out guidance on how to strengthen relationships and partnership working between local authorities and the third sector. The good practice guide covered issues such as community planning, compacts, policy agreements and included a voluntary code of practice for funding the third sector. 'A Future Together’ is available at www.wlga.gov.uk

14. The voluntary local code of practice for third sector funding was based largely on the then Welsh Assembly Government code. It was recommended that local Joint Liaison Committees or other appropriate for between the third sector and local authorities should agree a local code and monitor its implementation. Given that local government is the major funder and commissioner of third sector services in Wales, it is vital that its relations are underpinned by core principles of partnership and good business management. 'A Future Together’ recommended the inclusion of the following core aims:

• Early and constructive dialogue - opportunities to discuss proposals well in advance of the formal application deadline and early in the budget planning cycle. It is recommended that should a voluntary group have external funding (other than from a local authority) over a limited period, it should contact the local authority at the inception of the project to apply for an extension to the funding rather than approach the local authority as the funding is running out;

• Respect for the sector’s independence - recognition that the voluntary sector can often reach groups that the local authority cannot and often provides innovation;

• Timely decisions - local authorities will ensure notification of approvals for each financial year as early as is possible in order to assist voluntary sector groups or projects to plan in advance. Feasible and appropriate timescales could be agreed locally by joint liaison committees;

• Security of funding - local authorities will strive for longer-term funding commitments to projects and groups, subject to performance and efficient and regular monitoring and evaluation. Where possible, 3 years core funding will be committed. Also, a commitment for the life of any specific projects will be given, providing firm year one funding and clear baselines for subsequent years;

• Fair funding levels - Levels of funding for the sector should be determined no differently than for other sectors or agencies where increases for inflation and growth can be built into bids;

• Payment in advance - where relevant funding programmes allow, local authorities will provide advance payment of grants. Where rules do not allow this every attempt will be made to alter the rules in order to allow advance payment;

• Fair and reasonable treatment - prior discussion and reasonable notice will be given before any policy changes or decisions which would lead to withdrawal or significant reduction of grants is agreed or implemented;

• Joint approach to monitoring and evaluation - monitoring and evaluation of funding should be robust and effective, but should not be too onerous or complex in order to ensure proper use of public funds;

• Collaborative procurement - local authorities will work with voluntary organisations to increase the number of social enterprises securing local authority contracts;

• Who does what best - a commitment from local authorities to identify where the voluntary sector might take the lead in or contribute to the implementation of new policies, and ensuring that there are the appropriate funding and procurement mechanisms in place to develop and deliver services.

15. 'A Future Together’ also recommended that local authorities take account of organisations within the third sector that may wish to tender for services, and the local authority’s procurement policies include arrangements to publish Invitations to Tender where social enterprises and voluntary organisations are likely to see them.

16. According to WCVA research published earlier this year, 10 local authorities have a funding code of practice in place, and a further 5 have drafts codes being developed. The WLGA is currently undertaking detailed research of local government relations with the third sector, including funding and codes of practice, in order to seek to corroborate and expand on the WCVA’s earlier survey. Unfortunately, this will not be completed within the Committee’s scheduled timetable for its review of third sector funding, however, the WLGA will send the results to the Committee when available in January.

17. Whilst formal codes of practice provide the third sector with a benchmark against which financial relations should be conducted, they cannot guarantee effective financial relations nor do they exclusively promote effective financial relations. Likewise, the absence of an agreed local code of funding does not necessarily mean that financial relations between the sectors cannot be effective and successful, similarly the absence of formal partnership mechanisms, such as a joint liaison committee, does not mean relations between an authority and the third sector are ineffective. Effective corporate management, business planning and contractual arrangements should ensure that effective financial relations are maintained between a local authority and the third sector whether a locally agreed code is in place or not. However, the WLGA is keen to ensure that all 22 authorities adopt a locally agreed code of practice for funding to emphasize their corporate commitment to supporting the third sector.  

18. Whilst a local code of practice for funding can improve relations, encourage longer term stability and a clearer understanding of mutual roles, it cannot guard against all financial eventualities and cannot prevent funding tensions between a local authority and a third sector organisation, particularly in the current financial climate. Recent local government settlements and the Making the Connections efficiency agenda have impacted on some services, including those provided by the third sector, where funding or service cuts or 1% efficiency savings have inevitably been passed onto third sector suppliers and providers.

19. As the third sector has increasingly become engaged as a deliverer of services on behalf of local government, like all local service deliverers, whether in house or private sector, it will be affected by the difficult local choices in terms of service prioritisation following the recent Assembly Government draft budget. Where service or funding cuts are inevitable, this may impact on medium-to-long funding projections with local third sector organisations, but it is crucial that other principles of the code (such as early dialogue and timely decision-making) are followed to mitigate the impact as much as possible.

20. A key feature of recent changes in funding and contractual relationships between the sectors has been an increasingly rigorous and robust approach to business planning, accountability, monitoring and evaluation from local authorities, particularly where local services are being delivered on a contractual basis. It is important however that such developments are proportionate to the level of funding, risks and the scale of services being provided and that grant-funding does not become too complex or bureaucratic and deter third sector organisations, particularly smaller groups.

21. However, robust auditing and accountability processes, tighter financial settlements and the Assembly Government’s efficiency agenda have presented a challenge to some third sector organisations.  This is recognised in the Assembly Government’s draft Strategic Action Plan for the Voluntary Sector Scheme, which proposes a new Voluntary Sector Capacity Building Fund to 'modernise business management systems; improve business management and tendering expertise; develop shared working arrangements to improve efficiencies; introduce quality assurance systems; and working across public sector boundaries’. The WLGA supports such a proposal and would contribute relevant support and expertise via our partnership with the WCVA.

22. Whilst only 10 local authorities have agreed local codes of funding with their thirds sector partners, it should be noted that there have been very few instances of third sector complaints raised nationally via the WCVA or via the Partnership Council regarding 'contraventions’ of local codes or agreed financial practices. Where this has occurred, it has typically been caused by unduly short notice for the reduction in funding to third sector projects or organisations. On such occasions, the WLGA has provided specific support, with the WCVA and Participation Cymru, to resolve any local breakdowns in communication.

23. As can be seen from the Data Unit statistics, local authorities are funding an increasing amount of services which are delivered by the Third Sector. Local authorities treat the third sector no differently to services delivered in-house or via private sector contracts. Unfortunately, given the recently announced below-inflation local government settlement of 2.2%, key local services will be squeezed and some will face cuts. However, there is no evidence to suggest that third sector is seen as a 'soft target’ to shave savings during hard times, on the contrary, the Data Unit’s research shows the third sector is a key service deliverer in two of local government’s key priority areas: social services and housing.

WLGA supporting improvement

24. The WLGA has an effective working relationship with the WCVA and Participation Cymru, and has provided local support and best practice guidance through 'A Future Together’, annual regional best practice events and specific support to individual local authorities and CVCs.

25. The WLGA is currently conducting a survey of local authorities regarding relationships with the third sector, to highlight areas of good practice and areas for improvement. This will complement the WCVA’s own research of CVCs published earlier this year and will inform a new joint programme of improvement and support, which will build on the good work of 'A Future Together’.

26. Given the current financial climate, there will be a particular focus in joint WLGA/WCVA work on providing support and guidance on the financial relationships between the third sector and local authorities. Central to this will be a revised code of funding which should underpin corporate and service relations with the third sector, grant management protocols and improving procurement practices (which will be informed by the Assembly Government’s draft 'Procurement and the Third Sector’ guidance which is currently being drafted).

Annex

Summary of local authority funding of the voluntary sector

CC(3)VS16-WLGA

Authority	Total grants awarded (£000s)	Total payment for services (£000s)	Total funding of the voluntary sector (£000s)
Unitary Authorities (a)	54820	111430	160493
Isle of Anglesey	1617	724	2342
Gwynedd	-	-	-
Conwy	1881	3117	4998
Denbighshire	2038	1231	3269
Flintshire	-	-	-
Wrexham	50	2734	2784
Powys	2176	10973	13150
Ceredigion	835	6075	6911
Pembrokeshire	918	3524	4442
Carmarthenshire	1842	3282	5124
Swansea	2083	6614	8697
Neath Port Talbot	-	-	-
Bridgend	420	6335	6755
The Vale of Glamorgan	650	0	650
Cardiff	26572	22964	49536
Rhondda Cynon Taf	1659	18380	20039
Merthyr Tydfil	-	-	-
Caerphilly	1044	2848	3892
Blaenau Gwent	568	1444	2012
Torfaen	2036	2892	4929
Monmouthshire	1958	712	2670
Newport	916	1882	2798

(a) 2005-06 - Total Unitary Authorities data has been estimated because data was not supplied by all local authorities

CC(3)VS16-WLGA

Authority	Central services	Court and probation services	Culture and related services	Environmental services	Planning and development services	Education services	Highways roads and transport	Housing services	Social services	All service areas
Unitary Authorities (a)	5295	0	3909	2210	10045	5511	856	39395	91772	160493
Isle of Anglesey	36	0	94	0	20	23	0	1137	1033	2342
Gwynedd	-	-	-	-	-	-	-	-	-	-
Conwy	5	0	0	37	192	328	0	73	4362	4998
Denbighshire	80	0	55	246	729	74	12	143	1930	3269
Flintshire	-	-	-	-	-	-	-	-	-	-
Wrexham	0	0	0	0	0	19	2	597	2166	2784
Powys	0	0	737	40	186	203	53	86	11844	13150
Ceredigion	104	0	614	0	139	86	73	78	5817	6911
Pembrokeshire	199	0	380	165	241	701	76	9	2671	4442
Carmarthenshire	124	0	161	0	159	19	52	305	4304	5124
Swansea	727	0	0	0	0	55	0	84	7832	8697
Neath Port Talbot	-	-	-	-	-	-	-	-	-	-
Bridgend	480	0	280	70	31	5	9	72	5808	6755
The Vale of Glamorgan	380	0	67	200	0	3	0	0	0	650
Cardiff	616	0	479	4	161	704	0	33446	14126	49536
Rhondda Cynon Taf	0	0	164	203	6026	495	181	547	12423	20039
Merthyr Tydfil	-	-	-	-	-	-	-	-	-	-
Caerphilly	1049	0	0	90	76	0	1	97	2580	3892
Blaenau Gwent	0	0	320	0	0	2	31	20	1639	2012
Torfaen	65	0	203	753	318	596	93	1335	1567	4929
Monmouthshire	0	0	86	13	972	0	0	880	719	2670
Newport	285	0	54	389	17	591	0	83	1379	2798

(a) 2005-06 - Total Unitary Authorities data has been estimated because data was not supplied by all local authorities