Committee of Public Accounts

Press Notice No. 32 of Session 2005-06, dated 2 March 2006


Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:

"The government's aim of working more closely with the voluntary sector in the delivery of public services is not being pursued with sufficient vigour and purpose. The involvement of the voluntary sector in public service delivery is still relatively very small, with central government funding to the sector amounting to less than one per cent of total government expenditure. Whitehall's lack of expertise at working with the sector is compounded by the scarcity of information on how funding is distributed between voluntary organisations. My Committee is concerned that the poorest communities might be getting a rough deal from the way funding is distributed.

"The voluntary organisations themselves can hardly be encouraged by bureaucratic procedures for applying for funding and the uncertainty which goes together with having to renew contracts annually.

"The Home Office and Treasury have to set a much more demanding target for government departments to increase their engagement with the voluntary sector. And, while the voluntary sector must of course account for the taxpayers' money it receives, monitoring of that money should not be pursued to the point where the effectiveness of voluntary organisations' involvement, and hence value for money, is undermined."

Mr Leigh was speaking as the Committee published its 32nd Report of this Session, which examined the progress made by central government to improve the way it works with VSOs and the steps being taken by HM Treasury and the Home Office to build funders' capacity to work effectively with VSOs.

In recent years government has increased the role which voluntary sector organisations (VSOs) play in public service delivery. The voluntary sector comprises a range of organisations, including local community and voluntary organisations and others at regional, national or international level, working as charities, social enterprises or co-operatives. VSOs may be best placed to deliver a service, particularly where the target group is difficult to reach or distrustful of state agencies. The sector is a prominent provider in some areas of public services, but accounts for only around 0.5% of central government expenditure. The Home Office estimated that central government funding of VSOs, excluding housing associations, in the United Kingdom was £2.03 billion in the financial year 2001-02, the most recent year for which data are available. Additionally, funding of £1.87 billion came from local authorities, £904 million from the National Health Service and £274 million from the European Union.

The Treasury and the Active Communities Unit of the Home Office play leading roles in disseminating good practice and reviewing departmental progress against the Home Office's target to increase the sector's involvement in public services by 5% by 2006. Where good practice exists, it has tended to be as a result of individual initiative rather than a well thought through or cohesive strategy. There is, however, a lack of expertise, experience and understanding of the sector across government departments with the result that departments can fail to capitalise on opportunities to enhance public service delivery through use of the sector.

Departments have also been slow to move away from long established funding mechanisms, such as annual grants even where there is an ongoing intention to continue to run programmes for the foreseeable future. This approach results in expensive annual bidding exercises, which divert VSO and departmental resources away from frontline work. It also creates uncertainty for the VSO, impacting adversely on their ability to retain experienced staff.

Delays in notifying funding awards are another recurrent theme, as is a reluctance on the part of funders to provide funds in advance of expenditure, making it difficult for smaller charities in particular to start up services. Some VSOs have borne a disproportionate share of the risk and cost of service delivery, as funders have been unwilling to contribute to VSO overheads even though private sector suppliers would be recompensed for overheads when quoting a price for a service.

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