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Public funding of Large National Charities

“Large charities are important providers of some public services, but public bodies’ funding arrangements are often unnecessarily complex and costly. Public bodies need to work together to bring coherence and consistency to their funding practices, to ensure that charities’ valuable work is not hampered by bureaucracy.”

The 12 case studies examined by the NAO, had between 95 and more than 4,000 separate funding relationships with public bodies. On average, the charities estimated that they spent around £400,000 annually on managing these relationships, although the total costs may well be higher.

The report also found, from the experience of these charities, that both central and local government bodies use poor funding practices, but the problems are more visible at local level. This is because large charities have many more separate funding relationships with local authorities than they do with government departments. The charities told the NAO that local government does not know enough about central government commitments to better funding practices.

The report concludes that complex funding structures sometimes deter charities from bidding for public funds and prevent them from influencing the design of services.

The Office of the Third Sector (OTS) and the Treasury have begun work to address many of the issues highlighted in today’s report. The OTS is implementing a cross-government action plan on partnership with the third sector and the Cabinet Office and Treasury has jointly published a recent review of the sector’s role as part of the Comprehensive Spending Review 2007.

But more needs to be done, according to the NAO. The OTS and the Treasury should bring the issues raised in this report to the attention of departments and other bodies, to help them ensure that their commissioning frameworks reflect the principles set out in the cross-government action plan. Departments’ actions should focus particularly on local implementation, and plans should include an assessment of the transaction costs borne by charities involved in public funding processes.

8 Aug 2007

Local Area Agreements and the Third Sector: Public Service Delivery

“Both main political parties have highlighted the third sector’s important role in building a civil society. It is therefore disappointing that the new Local Area Agreements have not embraced the potential of the third sector to help deliver public services.

“More needs to be done by the departments involved and by local authorities to understand the work of third sector organisations, and how it can be used to obtain better value for money in delivering services.”

Neil Cleeveley, Director of Information and Policy at the National Association for Voluntary and Community Action (NAVCA), said:

“NAVCA welcomes this report and is pleased that the Government is starting to address the issues it raises. Many of our members have been heavily involved in their Local Area Agreement, giving a good deal of time and effort to make them a success, often with very little recognition.

“NAVCA wants to see local area agreements work – the local third sector has a key role helping to bring about the improved public services they promise, especially in the most disadvantaged communities. It is still relatively early days – however NAVCA and its members will do all we can to help our partners in the public sector make the most of the third sector’s potential.”

6 Jun 2007

Office of the Third Sector – Implementation of Full Cost Recovery

Full cost recovery remains an important principle for financial relationships between government and the third sector, but government departments have found difficulties in translating the principle into practice, according to a review published today by the National Audit Office. Today’s review examines the progress made by central government departments in ensuring that, by April 2006, … Read more

1 Jun 2007

Working with the Third Sector

“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.”

29 Jun 2005