CC(3) VS54

CC(3)-09-07 (p2): 12 December 2007

Communities and Culture Committee
Inquiry into funding of voluntary sector organisations in Wales

1.   Heritage Lottery Fund

1.1.  The Heritage Lottery Fund (HLF) is the UK’s leading heritage funder, distributing the heritage share of National Lottery good causes income.  

1.2.  HLF is the only heritage organisation that funds all types of heritage - industrial, maritime and transport heritage; built heritage; natural heritage including parks; museums, libraries and archives; and the heritage of language, oral history and cultural traditions.  Crucially, HLF does not define heritage, but asks people to identify for themselves what is important to them and why they think it should be passed on for future generations.

1.3.  HLF helps groups and organisations of all sizes with projects that aim:

• to encourage more people to be involved in and make decisions about their heritage;
• to conserve and enhance the UK’s diverse heritage;  and
• to ensure that everyone can learn about, have access to and enjoy their heritage.

1.4.  Since 1994 HLF has awarded over £180million to more than 1,500 heritage projects across Wales:-

Since 1994 HLF has awarded over £42.5 million to voluntary and community sector organisations in Wales.

Voluntary and community sector organisations receive 68% of HLF awards for under £50,000 in Wales.  

Of those HLF applications submitted by community and voluntary sector organisations in Wales and requesting grants of less than £50,000, 71% have successfully received funding from the HLF.  

Role and background of HLF

2.1. HLF was set up by Parliament in 1994 to give grants to a wide range of projects involving the local, regional and national heritage of the United Kingdom. It distributes 16.66% of the money raised by the National Lottery for Good Causes.

2.2. HLF is a 'non-departmental public body’. The Secretary of State for Culture, Media and Sport issues policy and financial directions to the Fund, which reports to Parliament through the department. Decisions about individual applications and policies are independent (see 2.5).

2. 3. HLF is administered by the Trustees of the National Heritage Memorial Fund (NHMF) NHMF has a budget of £10 million of Government grant-in-aid each year for grants to our national Heritage. It acts as a fund of 'last resort’, to acquire items of national significance at risk of loss.

2.4 Wales Policy Directions

Although the National Lottery is a reserved matter, heritage is devolved in Wales, with the Minister for Heritage leading. The Directions issued by the Welsh Assembly Government are intended to supplement the UK-wide directions by reflecting interests specific to Wales that should be taken into account when HLF takes decisions on cases in Wales.  Recently HLF has agreed its Policy Directions for 2008 onwards with the Welsh Assembly Government.  Many of the elements of these Wales policy directions are aligned to the aims of the Assembly's own 'One Wales' report.  (See Appendix 1)

2.5  Decision-making within the Heritage Lottery Fund

The Board of Trustees delegates powers to regional and country committees who make decisions on individual awards of £50,000 - £2 million. They are supported by local teams assessing applications locally. HLF has offices in the nine English regions and in Scotland, Wales and Northern Ireland. The teams work with local communities and organisations to help develop and support applications, and to assess them once submitted. They are also responsible for outreach and other activities in their country or region.

Region and Country Managers take delegated decisions on small grants up to £50,000.  Decisions on grant applications above £50,000 are made by regional and country committees made up of local people recruited through open advertisement. Decisions for grants over £2 million are made by the Board of Trustees - enabling HLF to fund projects on a scale which wouldn’t be fundable from delegated budgets. HLF’s Committee for Wales is made up of eight people, appointed through public recruitment. The current members are appointed on their knowledge of heritage sectors, and issues relevant to HLF funding such as cultural tourism, sustainable communities and environmental issues: the members are Dan Clayton Jones (Deputy Chairman of the NHMF and HLF, NHMF Trustee, Chairman for the Committee of Wales), Jo Coles, Carol Greenstock, Eifion Pritchard, Ruth Waycott, Lindsey Cuddy, Merfyn Williams, Natasha Hirst.  Biographies of the Committee for Wales members and the HLF Manager for Wales are available on the HLF website: www.hlf.org.uk

2.6  Award Budgets

The award budget allocated to Wales last financial year (2006-07) was £7.4 million, an allocation based on population share across all the UK countries and English regions. In 2006-2007 HLF in fact distributed nearly £20 million in Wales, because good applications from Wales were able to access the Board of Trustees separate budget (set aside specifically for applications over £2million), including projects such as Bute Park, Cardiff, Tywi Afon yr Orsoedd, Bedwellty House and Park (Tredegar) and Shire Hall, Monmouth.

3.   HLF commitment to the voluntary or Third Sector

3.1.  For the purpose of its business, HLF defines community and voluntary sector as "non-governmental organisations that work for a community or cause on a voluntary or not-for-profit basis. The group must be formally constituted, i.e. they must have a written constitution or set of rules, and includes: Friendly Societies; Industrial and Provident Societies; Philanthropic or Benevolent Organisations; Trusts; and Registered Companies (non profit). The community/cause can be based on location, interest or shared background, e.g. community associations, residents' associations, clubs, and special interest groups".  

3.2 As well as a range of programmes for grant requests specifically aimed at voluntary sector applicants (see chart 3.4), HLF has developed a range of processes which support and build capacity within the sector:-

• It offers pre-application advice to all projects
• It produces clear guidance notes on specific topics and themes, many of which are designed to help voluntary and community groups carry out projects such as oral histories
• HLF is generally acknowledged as a fair and helpful funder with knowledgeable and supportive staff who provide a high level of assistance to inexperienced applicants and grantees.
• Since 2002 it has offered Project Planning Grants to enable voluntary and community sector applicants to do specialist preparatory work before their main grant application to the Fund. It has also allowed some preparatory costs to be allowed as a contribution to match funding.
• HLF accepts volunteer time as a contribution in kind to its match funding requirement.
• HLF encourages the use of a very wide variety of partnership funders.
• HLF allows contingency and inflation in the costs, so the grant request is more likely to cover the true costs.   

3.3.   HLF, recognising the needs of smaller community groups and others in the Third Sector, has instituted a number of changes to the way it makes grant payments to smaller organisations:

• HLF has a system of three phased payment, with the first payment given upfront (ie before project start, to deal with start-up costs) once the decision to award has been given;  
• HLF have a commitment to make the grant payments within 10 days - this facility can be crucial for smaller community organisations as the money can be in their bank account before the invoice falls due.
• HLF accepts photocopied invoices, again allowing leeway for small organisations to balance their cashflow, in a flexible way which suits their requirements.  It also allows the matched funders claim - who often require the original invoice - to be submitted simultaneously, again easing cash flow issues.

3.3.  Percentage of projects under £50,000 awarded in Wales, by organisation type  (includes Awards for All, Your Heritage and Young Roots programmes)

4.   HLF Wales development team

4.1.  HLF provides support to applicants through a dedicated development team which is responsible for:-

• a pre application enquiry service; responding to queries from potential applicants on their project ideas, strengthening proposals and, where they are unlikely to be prioritised by HLF, signposting to other more suitable funding sources
• strengthening applications and increasing success rates; by hosting surgery sessions across Wales, giving one-to-one support and writing Wales-specific help-notes (see table below)
• raising the profile of HLF and heritage at a national and local level; by attending funding fairs across Wales and producing newsletter and press / media articles on both local / national awards and grant programmes
• working in partnership with voluntary sector umbrella bodies; by supporting their events and providing briefing sessions and materials to their staff to cascade directly down into their membership
• prioritising specific and proactive support to 'priority areas’ which have been identified as not having achieved their equitable share of HLF funding (see 4.2)

4.2   Bringing about a more equitable spread of grants

As part of HLF’s commitment to bring about a more equitable spread of grants in Wales, particular geographic areas on which to concentrate development efforts, have been identified.  The aim in these areas is to increase the number of fundable applications received and to increase the range of applicants. HLF does not ring-fence budgets to these areas, but does allocate and prioritise the development resource in order to help them.

Since 2002 when the Wales development team was set up, the geographic priority areas have been Blaenau Gwent, Merthyr Tydfil, Neath Port Talbot, Rhondda Cynon Taff, Swansea and Wrexham, and since then the number of awards have risen significantly (see below). [SP1: relates to Strategic Plan One: 1997-2002; SP2 relates to Strategic Plan Two: 2002-07]

HLF is currently in a planning phase to identify priority areas for 2008-2013 ( its third Strategic Plan period)  and will be ready to announce a programme of activity to 'kick-start’ this work, in partnership with key local agencies (including elected Members), in 2008 / 2009.  

5.  Monitoring outcomes:

5.1.  HLF funded projects are monitored on a set of legally binding grant conditions. These conditions principally relate to a defined set of approved purposes for the projects that HLF has funded, including a requirement for proper maintenance (where relevant). During project implementation, compliance with these conditions is checked through regular reports to grants officers and, in some cases, the use of external project monitors.

5.2.  HLF has a framework in place to evaluate the environmental, social and economic impacts of the projects it funds. It collects data on project outputs such as activities, volunteers, trainees and visitor numbers. The main source of this quantitative data comes from a survey sent to all projects, one year after completion. For capital projects this survey is repeated after five and ten years. HLF  also carries out more in-depth research into the outcomes of a sample of funded projects, using a mix of quantitative and qualitative techniques. This work includes visitor and local resident surveys, social impact research and economic impact case studies. Evaluation reports for all of HLF’s programmes are published on its web site.

5.3.  In its third Strategic Plan (SP3) HLF  encourages more grantees to evaluate their own projects and to share what they have learned, through providing additional toolkits, guidance, and funding as a proportion of the grant award

6.   Our Heritage, Our Future:  HLF’s Third Strategic Plan 2008 - 2013

6.1. In its recent publication, 'Our Heritage, Our Future' HLF sets out the key elements of its future plans and outlined its strategic framework from April 2008 to 2013.

In developing its future direction HLF consulted extensively on the needs of the UK’s heritage, reviewed the performance of its existing funding programmes and began to evaluate the achievements of its second Strategic Plan 2002-2007, Broadening the Horizons of Heritage. The Fund also considered how best to deal with the reduction in the amount of funding it will be able to distribute each year from 2008 onwards (see section 7 below) and took account of the detailed feedback received from its 2005-2006 consultation with the public and other stakeholders.

Key points:

• HLF will have a UK-wide awards budget of £180 million a year from 2009-2013 (£220 million in 2008-2009).
• It will continue to offer funding for heritage projects of all sizes, including making some major awards over £5 million each year.
• It will keep what people value at the heart of our funding decisions and retain our existing aims of heritage conservation, helping more people, and a wider range of people, to take part in heritage, and helping people to learn about their own and others’ heritage.
• It will maintain its distinctive approach of adding value to the process of distributing funding - through development support, pre-application advice, funding for activity projects for up to five years, development grants, published guidance and expert advice on projects.
• It will continue its commitment to working towards achieving a more equitable spread of funds and will focus development and outreach work on young people and groups that have benefited less from HLF funding in the past, and on geographical areas that have received least funding from HLF and are affected by deprivation.
• Itwill introduce simpler application processes, in response to feedback from customers. All its main programmes will continue with improvements to make the application process quicker and less costly.
• It will provide more support for applicants and grantees. Its new approach to Heritage Grants (grants over £50,000) will include a simpler, shorter first-round application process and mentor support for those successful applicants who need help during the project development process to work towards their second-round submission.. It will continue to offer financial support for project planning and project development.
• Applicants to the Your Heritage programme (grants £3,000 to £50,000) (68% of whom are from the voluntary and community sector in Wales) will also be able to apply for mentor support for project delivery if they need extra help.
• It will produce a range of new guidance, including short 'First steps in …’ notes on a wide range of topics designed to help first-time applicants to our Your Heritage programme, particularly voluntary and community sector applicants who have not done a heritage project before.
• HLF will invest in heritage for the long term -asking applicants to 'green' their projects, minimising environmental impacts and encouraging innovative thinking and developing practice on sustainable use of resources. It will put a greater focus on the importance of long-term maintenance, with more training support and guidance for grantees, and more monitoring of maintenance practice after projects have finished.  
• It will improve the sustainability of the heritage sector by expanding the number of future champions for heritage - continuing the dedicated young people’s programme Young Roots (grants £3,000 to £25,000), giving targeted help and focused guidance to groups working with volunteers, and giving grantees tools with which to evaluate their projects and share what they have learned.
• It will continue to share heritage, working with a wide range of partners, including grantees, to increase public awareness of the benefits of Lottery funding, to recognise the contribution of volunteers, through a UK-wide awards scheme, and to further involve young people in heritage and the work of HLF by developing a youth participation strategy. HLF will encourage its employees to volunteer in heritage projects and to support the voluntary sector through an employee volunteering programme.
• HLF will introduce support for full cost recovery - with guidance on how to calculate these costs - to help the sustainability of the voluntary and community sector. This will also help applicants achieve greater cost certainty in their project proposals.

7.   Future Challenges

7.1. Three factors will impact on HLF’s available grant budgets between 2008-2013:

• Its approach to over-committing funding in advance in order to ensure that Lottery funds are distributed and spent as quickly as possible. Trustees have decided that the Fund has reached the point at which it can no longer continue to increase its annual over-commitment.
• The contribution already agreed coming from the Lottery Good Causes to the 2012 London Olympic Games and the additional contribution announced by the Government in March 2007 - in total this amounts to a diversion of £161.2 million from the Heritage Lottery Fund.
• Changes in the way that interest income is distributed on the Lottery balances.

7.2. To smooth out the possible peaks and troughs in funding that this total loss of income implies, HLF will mange the reduction in awards over the known lifetime of HLF to 2019, in order to maintain an awards budget of £180million pa from 2009.

7.3.  An annual UK-wide award budget of £180 million from 2009 compares with a budget of £330 million distributed in 2005-2006. Competition for grants will undoubtedly get tougher. But HLF will remain the UK’s leading funder for heritage. It expects to distribute £1.9 billion between now and 2019, both for big, iconic projects and small community grants.

7.4.  Meanwhile, the Olympics will provide a tremendous opportunity for heritage to be woven into an accompanying Cultural programme, and HLF is looking forward to working closely with other cultural organisations who are contributing to this important dimension of London 2012.

Appendix 1

Heritage Lottery Fund’s Wales Policy Directions

Directions issued to the trustees of the National Heritage memorial fund under section 26(1) and (2) of the National Lottery etc. Act 1993

The Welsh Ministers, in exercise of their powers conferred by section 26(2) of the National Lottery Etc. Act 1993 as transferred by the National Assembly for Wales (Transfer of Functions) Order 1999 and having consulted the Trustees of the National Heritage Memorial Fund ("the Fund”) pursuant to section 26(5), hereby gives the following directions to the Fund:

1.  In these Directions any reference to a section is a reference to a section of the National Lottery etc. Act 1993, as amended.

Directions in Relation to Wales

2. In exercising any of its functions, the Fund shall take into account the following matters in determining the persons to whom, the purposes for which and the terms and conditions subject to which they may make grants or loans, and the process used to determine what payments to make in distributing any money under section 25(1):

A. The need to have regard to the interests of Wales as a whole and the interests of different parts of Wales, taking account of the diverse demographic and deprivation patterns in the different parts of Wales, and the desirability of encouraging public service bodies to work together wherever it will result in better outcomes for people and heritage.

B. The need to promote and support the Welsh language and reflect the bilingual nature of Wales, including giving effect to the principle of equality between the English and Welsh languages, in line with the provisions set out in the Welsh Language Board guidance, and monitored in accordance with standard procedures.

C.    The need to ensure an outcome focussed approach, working closely with appropriate partners for the benefit of communities and heritage across Wales, where this is an effective means of achieving the Fund’s strategy.  

D.    The need to encourage the conservation, preservation, presentation, promotion and interpretation  of all aspects of the heritage of Wales;

E.     The need to encourage the financial sustainability of the heritage assets of Wales;

F. The need to provide opportunities for people, especially young people and the disadvantaged parts of society, to gain the skills required to conserve and preserve the heritage of Wales;

G.    The need to encourage the use of appropriate professional standards in all projects;

H.   The need to provide opportunities for people of all ages and all backgrounds, especially children and young people and the disadvantaged parts of our society, to have access to, to learn about, to enjoy and thereby promote the diverse heritages of Wales, where appropriate.'