Local authority funding pressures: love in a cold climate
Jim Gibson CA gives his perspectives on the complex relationship between local authority funders and charities and shares some thoughts on good practice based on his own charity sector experience.
Patronage, or problems?
“Is not a Patron my Lord, one who looks with unconcern upon a man struggling for life in the water, and, when he has reached ground, encumbers him with help?” The sceptic might be forgiven for thinking that Samuel Johnston’s aphorism applies to charities trying to obtain support from local authorities; others, more cynically, might see a sinister agenda, that of the Wooden Horse, by which the Greeks gained control of Troy; “Timeo Danaos, et dona ferentes”, as Vergil puts it, (“I fear the Greeks, even when they are bearing gifts”). But the reality today is that a sense of balance and a constructive partnership is required.
The pressure is on
There is no doubt that the funding pressures which local authorities are under have increased in the last four years and are likely to continue to do so. There is less money available from central government, budgets are constrained, there is also a duty to look after public money and there is constant pressure to achieve value for money. Funding models can change, as can the political composition and philosophies of local authorities. And there is always the inherent difficulty of dealing with a large organisation, when it is sometimes difficult to get through to the right person or forge meaningful relationships with officials.
At the same time the public wants to see things done about crying social needs such as isolation, disadvantage and loneliness. Gone are the days when charities could expect handouts without any real accountability and recent events concerning improper behaviour within some charities are intensifying the spotlight on charities. It can require a lot of hard work to turn the fine words spoken by councillors in public about the value of the charity sector to the reality of service delivery on the ground.
Demands from on high
What sort of demands are local authorities imposing? More and more funding is outcome based. There is increased monitoring, obtained either through reporting on outcomes or by a deeper analysis of financial information provided by the charity. The discretionary relief offered on water and sewerage charges can be reduced or abolished, and the charitable exemption offered by Scottish Water may not always compensate. Whereas in the past authorities might have been slow or reluctant to take action if they perceived that a charity was struggling, my experience suggests that they are now taking a much deeper interest in the quality of a charity’s staff, trustees and governance arrangements, and are more ready to intervene, by initiating discussions about reorganisation or refocussing activities.
There is also a tighter insistence on accuracy in reporting; this will manifest itself in the use of standard templates or spreadsheets in applying for funding, which can be complicated to understand, are often pre-populated so that cells cannot simply be overwritten and may involve several time-consuming iterations before one can get to an agreed position. A charity providing a service to a local authority will have to submit a detailed invoice four weekly or monthly, again often using a standard template, showing how many service users have been supported. If these are not completed 100% accurately, the claim will be rejected, and the charity will have to wait another month to get its money, thus bringing pressure on cash flow.
The charity sector is not traditionally a high paying one, and many authorities are insisting that charities pay the national living wage. This is laudable, but it does raise issues of pay differentials, and consistency of contracts of employment; charities need to have robust processes in place within their HR functions.
What do charities providing public services need?
1. Competent staff
Are your staff able to do the basics competently and efficiently, keep up with, or be prepared to seek help in keeping up with, the latest developments in legislation (such as the Charities SORP (FRS 102), pensions auto-enrolment and the General Data Protection Regulation), business practice and technology? Are they well supervised? Staff costs are usually the largest component of expenditure for any charity providing public services, and this must be carefully monitored. It is easy for “staff creep” to occur; someone is recruited to fill a one-off need, to cover for sickness or a short-term absence or to deal with a special project with time-limited funding, but then before the charity knows it, they are paying for one or two more staff members than they are receiving funding for, and their reserves are being depleted. The world of flexible working has many advantages, but it has drawbacks too; contracts of employment must be carefully drawn up, especially if there has been a reconfiguration of service. The temptation is to push on with the reconfiguration and not spend enough time reviewing the terms of employment contracts, which then come back to bite.
2. Strong accounting processes
Be on top of the day to day bookkeeping (this might seem obvious, but it can easily fall behind due to illness or operational pressures), keep a close eye on budgeting and cash flow, build in full cost recovery to your contracts, know the requirements of the Charities SORP (FRS 102), have a clear reserves policy and be able to justify it.
3. Attention to detail
Pay attention to contracts; be careful what you bid for, read the small print, and if in doubt talk to a colleague. The writer has experience of a situation where the terms of a contract between a charity and a local authority were reviewed after the initial phase, apparently with no issues arising. The trouble was that the new contract contained more onerous outcomes, and nobody at the charity noticed until the income fell well short of budget. Fortunately, the reserves were able to withstand the shortfall, but it was a salutary experience.
Conclusion
“Everything is in a state of flux”; the words of Heraclitus the Greek philosopher (around 510BC) are still true, especially in the charity sector as it has experienced the shift from grant funding to commissioning.
Many ICAS members give of their expertise to the charity sector and the ICAS Charities Panel reflects the broad range of sector knowledge and professional skills of the wider membership. The Panel is keen to support its members who advise, work for and otherwise support charities.
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