Headlines: August 10th, 2007



The National Audit Office in a report on Public Funding of Large National Charities reveals a ‘baroque complexity’ in current arrangements. The report describes a patchwork of fragmented relationships between charities with a range of public bodies including central government departments, agencies, local authorities and primary care trusts.

Central government spending on third sector organisations in 2003-04 was 4.9 billion pounds and local government spent 4.3 billion pounds.

Arrangements for funding charities to deliver public services have simply grown organically over the years without any central co-ordination. The strategy of involving the third sector more extensively in the delivery of services has added more funding streams to an already complex network. Both central and local government bodies use poor funding practices, but the problems are more visible at local level because large charities usually have many more separate funding relationships with local authorities than they do with central government departments.

The income profile of charities may change at short notice and they may have to juggle many funders’ objectives and administrative requirements. This funding complexity restricts their involvement in public services, poses risks to the quality of their services and restricts their ability both to develop services over time and to innovate. Because of the highly fragmented public funding relationships with public bodies providing small amounts of funding, charities can have up to 4,000 separate funding relationships. On average the case study charities spent at least 381,000 pounds annually on managing these relationships.

Unnecessarily complex funding structures sometimes deterred the charities from bidding for public funds and prevented them from influencing the design of services. Once in receipt of public funding, their work could be terminated at short notice or collapse altogether if a key source of funding was withdrawn. In the long term, the charities’ ability to invest in and develop their services was limited by their reliance on ‘penny packets’ from multiple public sources.

The NAO recommends that public bodies work together to bring coherence and consistency to their funding practices, to ensure that charities’ valuable work is not hampered by bureaucracy. The report calls for early action by government to deal with the concern that current funding structures severely limit charities’ potential involvement in public services.

Link: http://www.nao.org.uk/publications/nao_reports/06-07/charity_funding.pdf