[WiLT] New funding thresholds exclude small charities

[WiL Admin]

New funding thresholds exclude small charities

A number of recent central government funding programmes contain some
new eligibility criteria based on prospective applicants' level of
income, as demonstrated by their accounts. These thresholds explicitly
exclude smaller organisations at the first hurdle, regardless of the
quality of their work or their ability to operate nationally.

What really got the alarm bells ringing was the fact that they have
appeared in funding programmes across several different departments.
This looked like an instance of that rare and elusive creature -
joined up government. And one might be forgiven for a degree of
suspicion as to why this has suddenly happened.

The examples that have come to our attention so far:
* The Communities and Local Government department's proposals for its
Empowerment Fund, currently out for consultation, contains two income
threshold limits at £400,000 and £1m that organisations must exceed to
be eligible to apply for smaller or larger amounts of funding;
* The Department for Children Schools and Families' Youth Sector
Development Fund specifies that eligible organisations must have an
average turnover of between £1m and £5m for the past three years;
* The new Department of Health main investment programme specifies
that the amount awarded may not exceed 25% of an organisation's income
(this is just a just a different expression of the same proportional
relationship between the maximum size of grant that can be awarded and
the organisation's total income).

 We made some enquiries with the relevant fund managers to find out
what was going on. The main reason given was that there are concerns
about organisations becoming too dependent on one source of income. If
funding is significant and it is not renewed, it could put the
organisation's existence at risk.

This would appear on the surface to be a sound principle. It certainly
seems well-intentioned. But we're skeptical. Is it really true that
central government has suddenly woken up and decided it needs to help
us maintain our own independence and financial viability? Surely there
is more to the story.

The more likely reason is that difficulties with a few organisations
which have been jeopardised by funding cuts led to this response. The
driving factor surely is the department's desire to cut down on
administrative hassle, rather than any truly benevolent intentions for
the organisations concerned.

After all, maintaining an organisation's independence and
sustainability are mainly the responsibility of the organisation's
trustees in particular. While being dependent on a single source of
income is not good, there is no reason why any particular amount of
funding received necessarily translates into dependence if the
organisation manages it properly and has a good exit strategy in
place. That is what an informed, engaged funder should look for.

We were also told that the thresholds had been put in because of
guidance from the National Audit Office, but our contacts could not
give any more specifics.

Last year, NAO published a Third Sector Funding Decision Support Tool,
which aims to give fund managers comprehensive guidance about the
process of involving third sector organisations in policy delivery,
and how to put appropriate funding mechanisms in place to support
this. This would be the most likely source of any recommendations, but
it says absolutely nothing about income level or size of funded
organsations.

We contacted NAO, who confirmed our opinion and stated that the
criteria did not originate from them their recommendations. Indeed,
they said it would be 'strange' for them to have provided any such
guidance.

Setting aside the evident lack of clarity in the decision-making
process, and the very thin reasoning given by fund managers, there are
a number of problems with using income level as a selection criterion
in any application process of this type:
* Income does not necessarily indicate effectiveness, reach, ability
to achieve national policy goals or even size necessarily. What's the
difference between an organisation with £500,000 income and 5000
volunteers and one with £5m income and 500 paid staff? The former may
be more effective and sustainable than the latter;
* The criteria exclude organisations which are arbitrarily defined by
the department as 'small', even though those organisations may do high
quality, relevant work and would therefore be desirable organisations
to fund;
* Conversely, the criteria unfairly favour organisations with well
developed funding streams or enterprise income, which already have an
inbuilt advantage in putting forward funding proposals;
* There is likely to be a disproportionate impact on BME
organisations, which are already under-represented;
* The criteria create an artificial incentive for organisations to
grow in order to be able to influence government policy and service
delivery - but this is quite clearly not the primary purpose of
charitable endeavour;
* The proportion of funding awarded does not inherently lead to being
dependent on the grant - if organisations plan properly they will not
necessarily be threatened with closure. Further, it is the
responsibility of trustees to determine if this risk is acceptable in
the interest of supporting beneficiaries;
* The criteria are impractical and will prove difficult to manage and
justify consistently (what if income is just on the threshold, or
increases/declines year on year?).

These flaws are so obvious it's hard not to be cynical, but there's
probably no conspiracy here. That said, the concerns about
sustainability must be mostly window-dressing. The real reasons are
likely to be nothing more sophisticated than the bureaucracy wanting
to limit the number of applications received, and to cut down on the
flak that it inevitably gets when funding is inevitably cut.

Extrapolating backwards from the bad outcomes of bad processes to a
'solution' that potentially damages the policy goals of the entire
programme is bad practice, but typical. It does not deliver the best
policy outcomes for the department, the government, or the taxpayer in
the long term. And in this case it also presents an unnecessary
obstacle to small organisations influencing government policy.

We call on the departments concerned to abandon these arbitrary
thresholds entirely and to evaluate the merits of applicants according
to how well they can contribute to the goals of the programme and
their ability to manage the funds properly. Any other departments
thinking of introducing such thresholds should think again.

by Jay Kennedy, Policy Officer, Directory of Social Change
http://www.dsc.org.uk/NewsandInformation/News/Newfundingthresholdsexcludesmallcharities


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http://www.dsc.org.uk/NewsandInformation/News/Understandingnotendlessevidence