Funding Group Report and Recommendations

Transcription

1 VOLUNTARY AND COMMUNITY SECTOR COMMISSION Funding Group Report and Recommendations 1. Remit of the funding group, membership and process 1.1 The funding group was convened by Tim Render (BCC), Susan Spencer (Birmingham Settlement) and, until her move to a new job, Jane Harding (Age Concern). A list of those invited to participate in the group is attached in the appendices to this report. This list was drawn up following consultations between the convenors and BVSC. 1.2 The funding group was assigned a wide-ranging brief in the VCS Commission report, covering the need to define service delivery, the enhanced role for VCS organisations in service delivery envisaged by central government (cross-cutting review, Futurebuilders, infrastructure consultation), the potential for a corporate funding strategy and the need for the VCS to diversify its funding base through income generation and social enterprise initiatives. 1.3 After two scoping meetings in July 2003, the group decided that, given the time available, work should focus on two key issues: (i) security of medium-term funding; (ii) core cost recovery. A half-away day was held in September 2003 to reflect on these issues. 1.4 Although the majority of this report addresses medium-term funding and core costs, the wider range of issues set out in the original brief from the VCS Commission will also be discussed in response to reactions to an early draft which voluntary sector colleagues in particular felt was too narrow in scope. 1.5 The recommendations in this report draw on the outcomes of the funding group s meetings, as well as those of separate meetings held by the convenors, e.g. with the chair of the commissioning group. They have also been amended in the light of comments received on the earlier version of the report. 1.6 The funding group s work was informed by the following documents: Funding our future II (ACEVO paper on cost core funding model) Treasury cross-cutting review National Compact, Funding: A Code of Good Practice 1.7 The funding group shares with the commissioning group an understanding of a Voluntary Sector Compact for Birmingham as a statement of intent and good practice to set the framework for future cross-sectoral relationships. The Ten key points for an effective funding framework set out in Funding: A Code of Good Practice could serve as a useful model (appropriately adapted to Birmingham) for the funding section of the Birmingham Compact. The Ten key points are attached in the appendices. 1.8 The funding group s discussions went beyond the scope of a Compact and some actions identified will need to be progressed by the City Strategic Partnership (CSP). 1

2 2. Defining the relationship Revised version, 22 December The question of why statutory agencies want to have a relationship with the VCS was felt to be a fundamental one which should be answered before a more detailed examination of funding was made. 2.2 The VCS s role as a third sector alongside the state and the market, its engagement of volunteers and its contribution to civil society and active citizenship are identified in the national Compact as its defining characteristics. The national Funding Code extends this by defining the sector s contribution to service delivery: [VCS organisations] act as pathfinders for the involvement of users in the design and delivery of services and often act as advocates for those who otherwise would have no voice. In so doing they promote both equality and diversity. They help to alleviate poverty, improve the quality of life and involve the socially excluded. (Funding: a Code of Good Practice, Home Office/NCVO, p. 3) 2.3 Ideally, a recognition of the specific characteristics described above should be the driver for statutory agencies in Birmingham choosing to work with partners in the voluntary and community sector. 2.4 All statutory agencies need to develop a corporate view about why they are funding work with the VCS and make a public statement of this in a corporate funding strategy for the VCS. 3. Developing a shared definition of service delivery 3.1 In attempting to answer the question of why statutory agencies wish to work with VC organisations, the VCS s position outside both the state and the market, its contribution to service innovation and its capacity to promote social justice and cohesion were identified as characteristics which should make the VCS a key partner. At present, however, relationships between the sector and statutory agencies in Birmingham are undermined by a degree of mistrust on both sides (as identified by the VCS Commission), often arising from differences of view about the nature and scope of the activities for which the sector can legitimately be funded. 3.2 The main area of disagreement centres around definitions of what constitutes service delivery and the extent to which non-service delivery activities should be supported by funders. 3.3 In the funding group s meetings, it emerged that some VCS organisations believe that local agencies in Birmingham are funding them to deliver services cheaply without recognising that, if service delivery is to be efficient and of high quality, VCS organisations need to invest in non-service delivery activities including organisational capacity building, improving governance structures, and developing the capacity to engage in strategic policy debates. Conversely, there was a view from the statutory sector participants that they are already supporting or subsidising some of these costs, for example, through management charges to grant-funded projects. 3.4 This issue is discussed later in this report in the section on funding core costs, where the creation of a collective CSP resource for the voluntary sector is suggested as a means of moving beyond differences of view about the definition of service delivery. 4. Medium-term funding 2

3 4.1 The group recognised that security of medium-term funding was a crucial issue for VCS organisations of all sizes. In an environment where most statutory funding is projectbased, and organisations have to participate in competitive bidding processes, VCS organisations have to allocate large amounts of staff time to submitting funding applications. Funders are reluctant to make resources available to resource this activity, and in most cases do not recognise that it is legitimate for the sector to ask for such funding. Many VCS organisations piece together their funding from a range of different funders, not all of which are statutory bodies and/or Birmingham-based. Funders differing monitoring and evaluation systems place a significant resource demand on VCS organisations. 4.2 This situation reduces the scope for longer-term business planning, and often means that the activities of VCS organisations are skewed towards a set of externally defined priorities. 4.3 Central government funding is now structured in three year cycles through the Comprehensive Spending Review (CSR). The funding group agreed that the statutory agencies in the City Strategic Partnership should aim to follow the CSR example in their VCS funding and offer three year funding agreements. However, it should be noted that statutory agencies cannot make absolute commitments to multi-year packages. There will be a need to make provision for termination of funding in cases where performance fails to meet the required level, or if there are fundamental changes in either the structures of, or the funding available to, the statutory agencies. 4.4 In order for statutory agencies to guarantee security of medium-term funding to the VCS, the agencies themselves must themselves be able to rely on assured funding from central government (a particular issue for the city council). Central government must stop dividing the funding it allocates to local government and other statutory agencies into a plethora of different streams, each with their own administrative and management requirements and costs. The funding group believes that the CSP should make clear representations to the relevant government departments on the need to reduce the numbers of funding streams, in order for statutory agencies to be able to follow the direction of the government s own VCS policies which now place key importance on a move towards strategic funding for the sector. 4.5 The funding group recognised that the introduction of multi-year funding in Birmingham would have significant implications for both the statutory agencies and the VCS. Colleagues from the primary care trusts and Learning and Skills Council expressed concerns that a blanket introduction of three year funding packages would in effect be a move to a managed market and could lead to a reduction in the number of providers from the VCS. There would be a danger that some organisations would be excluded from funding completely. To avoid this skewing effect on the market, it would be important to provide a separate funding stream for pilot projects which would allow new organisations to become involved in service delivery or enable existing providers to work on innovative schemes which carry with them an element of risk. 4.6 For the statutory sector, there would be a need to develop corporate funding strategies which explicitly state why VCS organisations will be funded and the priorities this funding will support. A District Audit review of the city council s funding for the VCS has already pointed to the lack of such a strategy and this criticism was reiterated in the findings of the VCS Commission. Work is now under way in the council to develop a consistent corporate approach to the VCS. The funding group felt that it was also critical 3

4 for other agencies in the CSP to undertake similar work and that the CSP should agree a joint funding strategy for VCS organisations. 4.7 The funding strategies of individual statutory agencies and any CSP collective strategy should set out transparent eligibility criteria for funding. This is necessary to address the concerns expressed in the VCS Commission report at the lack of a clear rationale for decisions made by funders, with certain organisations apparently having a consistent record of success, while others are excluded. 4.8 The attempt to ensure that all VCS funding is awarded on a transparent and fair basis will be assisted by use of the template which has been developed by the BME thematic group and BRAP to help statutory agencies assess why they want to work with an individual voluntary organisation. 4.9 For the VCS, the availability of three year funding packages will increase the importance of moving on from the once funded, always funded mentality which was identified as an issue by the VCS Commission. The funders in the group expressed the hope that the availability of more secure funding would assist VCS organisations in developing a shared response to funding issues There will be a necessity for VCS organisations to demonstrate value for money and implement appropriate performance management and quality standards systems where these do not already exist. Small and medium-sized VCS organisations are likely to need support in developing these systems, and statutory agencies will need to make resources available It important to acknowledge the work that has already been done in the sector on quality assurance. Birmingham has been at the forefront of this, through its innovative partnership with the Learning and Skills Council which has delivered an established programme supporting organisations using both PQASSO and Investors in People. Birmingham has also developed its own standard for small organisations, Quality First, which is nationally recognised The support needed by small organisations will not just involve work on quality assurance. Work carried out in 2002 by BVSC in partnership with the city council on the readiness of small, particularly black and minority ethnic groups, to take advantage of the outsourcing of domiciliary care suggested that they were often a long way from being ready to contract with the statutory sector. There may be a need to support the development of consortia and for partnering of larger organisations with smaller ones ( development agency model). 5. Core Funding 5.1 The ACEVO core cost model and template was considered in detail by the funding group at its September away-day. Both the statutory and VCS members of the group agreed that the model was extremely useful in giving a picture of the total real costs of a project or service. Use of the template would help to weed out low quality bids by increasing focus on outcomes and requiring VCS organisations to supply realistic financial data in applications. It was felt that use of the template would lead to statutory and VCS representatives entering into funding negotiations on a more equal footing. 4

5 5.2 Overall, the funding group agreed that it would be a positive step for the ACEVO model and template to be adopted by the statutory and VC sectors in Birmingham as a way of ensuring that funding made available to the VCS should be on the basis of full cost recovery. However, this position was qualified by the points set out below. 5.3 The group felt that overall funding available to statutory agencies in the city is unlikely to increase. The adoption of a core cost model is likely to mean that some VCS organisations will receive more funding through the recognition of the real costs of their activities. Others may receive less, or even cease to be funded. The group felt that it was important that all parties were aware of the possible consequences of the model. Its impact on VCS organisations of all sizes, in particular the smaller, community-based groups, would need to be carefully considered. 5.4 The ACEVO manual on core costs points to the need for the sector not simply to push the core costs case, but be prepared to analyse those costs and review how [it] can improve [its] performance and effectiveness. (Funding our future II, ACEVO, p. 4) 5.5 It was recognised that VCS organisations need to develop more complex financial reporting arrangements to reach a point where they are able to carry out this detailed analysis of their costs. They will need to identify different types of costs (core costs/service delivery/campaigning and advocacy costs) and to cost risk in developing programmes. With the needs of smaller VCS organisations in mind, concerns were expressed in the group about the capacity of some organisations to prepare the financial and management information to the relatively sophisticated level needed to complete the template. A combination of things are needed to solve this: adequate resourcing within these organisations to enable them to recruit and retain staff with the necessary skills, and then give those staff the time to use them; and to ensure that infrastructure support services are able to assist in capacity building. 5.6 The statutory sector participants acknowledged the ACEVO case for the payment of core costs as defined as direct outputs, category 1 (direct support activities ) and category 2 (indirect support to outputs). They queried whether funders should be expected to cover some aspects of category 3 expenditure (defined by ACEVO as governance and strategic development). This was the main point in the discussion of the ACEVO model where the opinions of the statutory and VCS participants in the group diverged, with a clear view expressed by the VCS participants that governance and strategic development work form part of the wider definition of service delivery developed in the VCS Commission report. The voluntary sector participants in the group also noted that the failure of funders to recognise these functions as core functions was a major factor in placing strain on the existing resources. 5.7 The ACEVO manual recognises the difficulties raised by a core cost model which seeks to cover all category 3 expenditure: Governance and strategic development costs are not directly related to the production of current outputs in a third sector organisation. Governance costs will be incurred even if outputs are no longer produced and strategic development is, by definition, considering possible future activities of the organisation rather than providing any support to current activities (p.31). This is a good summary of the reservations expressed by the representatives of funding agencies in the group. 5.8 However, the ACEVO manual also presents an effective counterargument: Governance and strategic development costs are legitimate costs of any organisation even though they are not directly related to current outputs. Activities represented by these 5

6 costs are the ultimate guarantees that the organisation can deliver outputs successfully and efficiently. Hence they should be included in costings and should be paid by funders (p. 31). Clearly, there is some way to go in Birmingham before funders are fully persuaded by this view, but the use of the ACEVO template should help both sides to develop a shared understanding of the real costs of service delivery. 5.9 However, the group believes that a positive way to address and move on from this difference in opinion would be to recommend that the CSP considers the establishment of a collective resource to support some of the category 3 elements in the ACEVO model. This resource could be set to provide support in kind - e.g. facilitation of secondments from statutory agencies to VCS organisations to provide capacity building support - as well as direct financial support The LSC model for six development agencies in the city was also seen by the funding group as a model for infrastructure support that could be expanded. Under this scheme, the LSC has contracted with six larger VCS organisations to work with a group of smaller organisations in a specific geographical area. Activity is focused on building the capacity of the smaller organisations, but under the contract the development agency is also asked to function as a channel of opinion back to the LSC One of aspect of voluntary sector service delivery which the group did not feel was adequately covered by the ACEVO template was question of who bears the risk in the development of innovative services. Services provided by VCS organisations are often in the early stages of development, being either new services, new approaches or new work to reach excluded groups or individuals. Funding packages for programmes in development need to define who carries the risk, and how costs related to risk will be covered, e.g. time delays and abortive work. Furthermore, programmes in development may need to define a broader range of outcomes. 6. Other key issues 6.1 One city, one system Throughout the group s discussions, there was agreement that statutory agencies must do more to reduce the administrative burden placed on VCS organisations by working to harmonise application, monitoring and evaluation systems. 6.2 The funding group was asked by the VCS Commission to consider the single gateway model for VCS funding adopted in Suffolk. The Suffolk Gateway has created a single access point and application process for VCS organisations for funding from Suffolk County Council and the county s primary care trusts. The funding covered includes grant aid from the county council s and PCTs own resources, as well as external funds e.g. ESF global grants. (Materials on the Suffolk Gateway are available at: There have already been moves to establish single gateway models in Birmingham. The ESF co-financing structure provides a single access point to pre-matched funds, for example, and a gateway for youth funding is currently being discussed by the city council youth service and Birmingham and Solihull Connexions. The funding group did not have the time to discuss in detail the feasibility of establishing a citywide gateway in Birmingham. However, it is clear that the task would be more complex in this city, given its size, the number of agencies and the much wider range of funds, including regeneration funds, which are available to the VCS. 6

7 6.4 However, the funding group believes that further work should be done on the gateway model, drawing both on local experiences and those in Suffolk. Each statutory agency should consider implementing a gateway model in the interests of efficiency and effectiveness. Inter-agency work on the feasibility of a citywide gateway should be led by the CSP. 6.5 Efforts to harmonise application, monitoring and evaluation procedures across the city s statutory agencies should not await the outcome of any work agencies undertake on the gateway model. The agencies which operate grant-aid schemes for the VCS should aim to develop standard application, monitoring and evaluation procedures. Given the variety of constraints and audit regimes which apply in different agencies (e.g. the city council is answerable to District Audit, whereas the audit body for the LSC is the National Audit Office), this will be a challenging task. However, the benefits of implementing a standard system would be considerable for both statutory agencies and the VCS. 6.6 Large organisations such as the city council need to ensure that a single consistent procedure for VCS funding is applied across all parts of the organisation. 6.7 Although the funding group did not have an opportunity to address the question of VCS income diversification, comments received on an early draft of this report indicate that many in the sector continue to regard this as a key issue. The VCS Commission report highlighted the risks to the sector s independence posed by recent public policy changes and recommended that voluntary and community groups [ ] diversify their income base to regain their independence (Making the relationship work, p. 19). 6.8 VCS organisations can already access advice, information and training on fundraising from different sources in the city, including BVSC s funding capacity building project and the West Midlands European Network. However, there could be a role for the proposed CSP resource for the VCS in supporting organisations to diversity their funding, e.g. by promoting the secondment of statutory agency staff to work with VCS groups on their fundraising strategies. The potential for a city-wide payroll giving campaign should also be explored. This could be targetted at increasing the take-up of payroll schemes already in existence in both the public and private sectors, and encouraging employers to establish new schemes. 6.9 The CSP resource for the VCS and/or development agencies should work with initiatives such as the Birmingham and Solihull Social Economy Consortium to disseminate best practice on social enterprise and income generation. The government announced in the 2003 Queen s Speech that the DTI will develop a Community Interest Companies Bill, creating a new legal form for not-for-profit social enterprises: this may open up new opportunities for the sector in Birmingham With 190 businesses in Birmingham undertaking activities as signatories to the Better Together Business Charter for Social Responsibility, the sector should not ignore the potential for building links with the private sector. 7. Recommendations Rec 1: The NCVO/Home Office Ten Key Points should serve as a model for the CSP Secretariat in drawing up the funding section of the Birmingham Compact. 7

8 Rec 2: Statutory agencies in Birmingham should aim to introduce three-year funding packages for the VCS, while offering separate funding for pilot projects. VCS organisations will need to demonstrate a high level of performance under the three year model. Rec 3: The CSP should make a collective representation to appropriate government departments about the need to provide assured funding to local government and other statutory agencies and reduce the number of different funding streams. Rec 4: Statutory agencies should develop clear corporate funding strategies, to be complemented by a collective strategy agreed by the CSP. Once it has been further developed, they should make use of BRAP s self-assessment template to analyse what outcomes they hope to achieve in working with VCS organisations. Rec 5: The ACEVO core cost model should be adopted for VCS funding but both the statutory sector and the VCS need to be clear about the likely impact of the model on the distribution of funding. Rec 6: The CSP should develop a collective resource to offer support to VCS organisations for the activities identified as category 3 in ACEVO s model (governance, strategic development, capacity building). This resource should make use of in-kind contributions such as secondments from statutory agencies, as well as direct contributions, to help VCS organisations in meeting the demands placed on them by a move to multi-year funding, core cost recovery and the need to meet funders value for money criteria. Rec 7: Other funders in the city should consider introducing schemes similar to the LSC s development agency model as a means of providing infrastructure support to VCS organisations in specific geographical areas. Rec 8: Individual statutory agencies in the CSP should consider establishing the gateway model to improve access to funding for VCS organisations. Alongside this, interagency work on the feasibility of a citywide gateway should be led by the CSP. Rec 9: Statutory agencies in the partnership should start to develop a standard approach to grant aid. Each agency should also work to ensure that there is a consistent, wholeorganisation approach across all of its own departments/divisions. 8

9 Appendix 1 - Excerpt from Funding: a Code of Good Practice (NCVO/Home Offfice) Value for money. Ten key points for an effective funding framework Procedures that are consistent with the principles of good regulation and the need to provide effective protection of, and proper accountability for, public money. Respect for the sector s independence. Improved sustainability and longer term planning, for example, through multi-year rollforward funding. Recognition of core costs and the different ways these can be met. Support for the sector s infrastructure. Fair access to strategic, project and contract funding. Improved co-operation and consistency between departments. Clarity in funding conditions. Joint approach to monitoring and evaluation. with the aim of making a positive difference to the funding relationship between Government and the voluntary and community sector Appendix 2 Funding Group Participants Tim Render Birmingham City Council, Corporate Finance and Asset Management Peter Cross Birmingham City Council, Corporate Finance and Asset Management Liz Clements Birmingham City Council, Policy Development Team Susan Spencer Birmingham Settlement Jane Harding Age Concern Birmingham (replaced by Carol Butler from Sept 2003) Roger Telphia Future Housing & Community Care Association Margaret Geary Government Office for the West Midlands Ken Spencer University of Birmingham Julie Fowler Birmingham City Council, Social Care and Health Ray Walker Learning and Skills Council Paul Slatter Birmingham Community Empowerment Network Brian Carr Birmingham Voluntary Service Council Chris Cox Citizens Advice Bureau 9