Gordon
Brown’s first weeks as Prime Minister boded well for
voluntary organisations. The sector proved to be the subject
of his first major speech after being promoted to the top
job and he indicated that over the three years to 2011, government
assistance to the third sector would increase by 10 per cent
to £515 million.
Particularly encouraging was the renewed pledge that charities
contracted to provide public services can expect to receive
three year funding settlements under the next public spending
round, rather than the one year grants and contracts that
have generally been awarded until now.
Charities fulfilling this role have long complained of the
difficulties that result from short-term funding, ranging
from problems in strategic planning and recruiting staff to
finding the investment for training and IT. They can also
find themselves looked to for maintaining a service even when
their funding from central or local government has run out
or been cut off.
Brown himself recently referred to a survey that suggested
75 per cent of voluntary organisations only had three months
financing at most. To help finance innovatory projects in
the sector, he said, the government was looking at ways of
providing long-term financing for “a new kind of social
investment bank” to provide the funding for new ideas.
However, there have already been signs of discrepancy between
words and deeds. The Department for Work and Pensions has
angered public service charities for almost completely ignoring
them in awarding contracts under its Pathways to Work scheme.
Of 16 contracts awarded in the first phase of the scheme –
which aims to provide health support for people claiming incapacity
benefits and to get them back into work – only one went
to a charity and the remainder were awarded to private companies.
The sole success was managed by the Shaw Trust, the UK’s
largest voluntary sector provider of employment services for
the disabled.
The decision was attacked by Acevo, which wants the DWP’s
contract awards system reviewed. Perhaps conscious of the
upset caused, justice minister Maria Eagles has promised that
charities will be involved in delivering services under the
Offender Management Act.
Seb Elsworth, Acevo’s head of policy, says poor commissioning
is its members’ number one concern and hopes the minister’s
promise is fulfilled. “Criminal justice is another area
where the voluntary sector can do much in ensuring that previous
offenders do not re-offend,” he says.
Acevo has been closely involved with the government’s
plans for voluntary organisations to deliver more public services,
having championed the ‘sure funding’ concept –
long-term contracts to help fund capital development by providers.
They have much in common with the private finance initiative
(PFI) deals awarded to construction companies for major infrastructure
projects.
Its chief executive, Stephen Bubb, argues that a more professional
approach for charities delivering public services should extend
to better salary levels, and the possibility of not-for-profit
organisations making money to be used for reinvestment.
“Three or five year contracts should allow an appropriate
return for the organisation to reinvest in its own future,”
adds Elsworth. “It’s not enough for a contract
to barely cover costs – there should be some left over
for innovation.”
But he is heartened that both the government and the opposition
accept the case for longer-term funding. Labour’s Compact
Plus initiative follows a surer funding framework, while the
Tories’ Social Justice Policy Group, set up by David
Cameron shortly after he took over the leadership, also “shows
a good understanding”, he says.
Different perceptions
Despite the DWP’s snub, the commitment to longer-term
funding represents a step forward, says Cliff Southcombe,
director of Social Enterprise Europe. But it needs to be
accompanied by a longer-term relationship between the organisations
and their funding bodies, he adds.
His organisation, established 13 years ago, supports a variety
of bodies ranging from churches and schools to local authorities
and business advisers that seek to combine business and
social objectives.
Southcombe says that at the moment, contracts are supply-led.
The funders set the criteria, which charities have to comply
with in order to compete for a contract. This results in
a divergence in understanding of what constitutes a ‘sustainable’
contract.
“For those of us in the voluntary sector, it means
people who are seriously dedicated to the long-term delivery
of benefits,” he says, “whereas the government
tends to regard it more in terms of financial viability.”
For a charity, success is measured by being clear about
its social objectives, the benefits it is achieving and
how each is being managed, he suggests. But this tends to
put it “out of sync” with the rather different
perceptions of central and local government, as well as
funders.
The problem can be summed up as one of “the organisations
that deliver benefits having got it right and knowing how
to deliver being thwarted by funders who don’t know
how to fund”.
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The voluntary sector currently has a great opportunity to
strengthen its position, suggests Doug Forbes, director
of the Institute of Commissioning Professionals. He says
that most expenditure is governed by public contracts regulations
that come off EU regulations, which suggest four-year contracts
should be the norm rather than three years.
On the issue of transparency, the EU Court of Justice says
that contracts should be advertised and in a truly open
market, the independent sector should be able to compete
for contracts as well as charities.
“Transparency is important, as there are a lot of
‘sweetheart’ deals and under the table agreements
that are patently not transparent,” Forbes says. “The
Office of Government Commerce has asked charities if they
are happy with the regulations on procurement; that is,
would they like transparency to be introduced or are they
happy with the way things are?”
He believes that the third sector would strongly support
transparency if more organisations were actually aware of
the OGC’s consultation on the procurement regulations.
However, it has adopted “a low-key approach and the
document is, unfortunately, very complicated and difficult
to understand”.
Feeling the squeeze
Issues over contracts are fundamentally important to the
health of organisations
in the third sector that are delivering public services,
says Matt Townsend, public affairs officer of The Disabilities
Trust. So to hear the government talking about three or
four year contracts between the public and third sector
is “very encouraging”.
However, although the change should lead to greater financial
stability and enable charities to plan more effectively,
he adds that the issue of full cost recovery remains a concern.
“Under the terms of Compact Plus when entering into
contracts with the public sector, charities are supposed
to be funded to the full cost of delivering their services,”
he explains. “Too often this still does not seem to
happen.”
Townsend says that The Disabilities Trust has always adopted
“a robust approach” to contract negotiation.
Together with the organisation’s expertise in providing
highly specialised services for individuals with very specific
conditions, such as acquired brain injury, who often exhibit
challenging behaviours, it’s a policy that has proved
highly successful when dealing with public sector bodies.
The Trust has also been determined not to subsidise public
services from its own funds, which, he reports, is something
that too many charities end up doing. However, Townsend
reports that in recent contract negotiations there have
increasingly been signs that some local authorities are
unwilling to accept any “significant uplift”
in fees, and ignore the cost increases that have impacted
on third sector organisations.
“With the next Comprehensive Spending Review settlement
likely to be much tighter than in previous years and the
pressures on local authority social care budgets increasing,
this is going to become a crucial issue for the sector,”
he warns.
Social Enterprise Europe’s Southcombe is also concerned
that growing levels of bureaucracy are making the delivery
of services harder. “There’s a lot of inconsistency
in management of the various stages that begin with applying
and tendering for a contract, then monitoring it once it
has been awarded, and subsequently the evaluation,”
he suggests. “Differing standards apply at each stage
and the inconsistencies are getting more pronounced as they
get increasingly lost in detail.”
This means risk aversion has become more prevalent, stifling
entrepreneurship and innovation – so much so that
today’s environment comes off badly in comparison
to the “real change and progress” achieved back
in the 1970s, he suggests – an era that spawned initiatives
ranging from the Dial-A-Ride scheme to local housing associations.
“We still have a lot of keen individuals,” he
concludes. “But today’s structures make accomplishment
more difficult.”
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