Press Release - Working with the Third Sector
29 June 2005
Sir John Bourn, head of the National Audit Office (NAO),
reported today that substantial improvements are needed in the way
government departments provide funding to Third Sector
Organisations (TSOs) to deliver public services. A 2002 Treasury
Review made numerous recommendations aimed at improving funding
practices relating to TSOs. These recommendations have in the main
been implemented, but this action has not been enough to bring
about a widespread and substantive change in government funding
practices. The government has committed itself to increasing the
involvement of TSOs in public services. Today’s report emphasises
that further progress is dependent on departments’ willingness to
embrace new ways of working with the sector and to embed new
practices across their funding streams.
In recent years the government has recognised that TSOs have an
important role to play in the drive to improve public service
delivery. In some cases TSOs may be best placed to deliver a
service, or can use their specialist expertise to develop and pilot
innovative solutions to difficult issues. In the right
circumstances they can help to deliver a more effective service
providing the taxpayer with better value for money. TSOs already
carry out a wide variety of public services such as hospice care
for terminally ill patients, childcare services in disadvantaged
areas, and advice and guidance for young people.
The Home Office co-ordinates the government’s efforts to engage
with TSOs, but the quality and timeliness of its data on the level
of public funds invested should be improved. TSO activity is
estimated to account for around £2 billion of central government
expenditure in the financial year 2001-02, the most recent year for
which figures are available, around 0.5 per cent of public
expenditure. Departments do not have consistent methods of
categorising expenditure with TSOs, however, making collation of
more accurate data difficult.
Despite government’s efforts, led by the Home Office and the
Treasury, to implement the recommendations of the 2002 Treasury
Review, a number of funding issues continue to cause difficulty for
TSOs. ‘Full cost recovery’ – ensuring that funders contribute
towards TSOs’ overhead costs as well as the direct costs of
projects - is not yet embedded. Annual funding is still common,
creating uncertainty for the TSO and diverting staff from front
line activity to the negotiating table. Funding commitments of more
than a year allow TSOs to do more forward planning and improve
their service delivery. Funders’ monitoring processes are not
always proportionate to the funding and nature of the services
provided. Progress has been made in other areas. Payment in advance
of expenditure, which can be vital to allow TSOs to make the
necessary investments to deliver a service, is more common than in
the past, and departments have also made efforts to improve the
application processes that TSOs must go through to obtain
funding.
In many cases, funding to TSOs is administered by bodies other
than central government departments, such as executive agencies and
non-departmental public bodies (NDPBs), Government Offices for the
Regions, Regional Development Agencies and the National Health
Service. Local authorities are also an important source of TSO
funding. The NAO research shows that spreading good funding
practice throughout government and at a local level is a particular
challenge. Some intermediary bodies have adopted the Treasury’s
recommendations, but others have not yet taken them on board. The
NAO believes there is scope to simplify and reduce the complexities
and transaction costs of filtering money through a variety of
organisations until it reaches the front line.
The Home Office, working with the Treasury and all government
departments, should take a number of steps to help departments
improve their engagement with the Third Sector. These include:
The Home Office has already published proposals for a new
initiative known as ‘Compact Plus’, which provides a new and
encouraging step forward. The National Council for Voluntary
Organisations worked with the NAO on this report, examining the
third sector’s perspective on progress on funding issues. Their
report recognised that third sector organisations also needed to
enhance working practices when seeking funding.
Sir John Bourn said:
"Community and voluntary organisations play a vital role
in delivering public services. When engaging with the third sector,
departments need to be clear as to whether they are "shopping"
(buying a service), "giving" (supporting a worthy cause) or
"investing" (building capacity in the sector) and adapt their
approach to funding accordingly. Developing shared centres of
expertise across departments would enhance effectiveness in working
with the third sector through, for example, application of
specialist procurement skills. They would also assist in
streamlining monitoring processes and building relationships based
on trust and professionalism thereby securing the full contribution
which the third sector can make."
Notes for Editors
- Third Sector Organisations are the range of institutions which
occupy the space between the state and the private sector. They
include small local community and voluntary groups, registered
charities both large and small, and the growing number of social
enterprises and co-operatives.
- Press notices and reports are available from the date of
publication on the NAO website at www.nao.org.uk. Hard copies can
be obtained from The Stationery Office on 0845 702 3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 44/05
All enquiries to Bill Schaper,
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