Five things the government could do to really support small charities

30930962770_a68e502cd6_zThe government responded to new research highlighting how ‘broken commissioning threatens the survival of small charities’ with a programme of support to help small and medium charities to successfully bid to deliver public services. Others will have their own views….but suffice to say I was underwhelmed by their approach.

But if incubators and Crown Representatives aren’t the answer, how could the government respond meaningfully and effectively to the challenges faced by vast swathes of the not for profit sector?

Here I suggest five ways the government could offer genuine support to small and medium sized charities:

1. Stop believing that ‘business’ is inherently better than ‘charity’

Charities and not for profits must be entrepreneurial to thrive, but to suggest that aping big business is the way to do this is misguided and damaging. ‘Big Business’ remember brought us delights such as Enron, the global banking crisis, PFI and countless other examples of how not to do things. There are economies of scale that are helpful to achieve, but charity performs a hugely important – and socially distinct – purpose to commercial enterprise. Social enterprises are a hugely important part of the social economy (particularly those that are genuinely enterprising and actually deliver social impact) but not every charity ought to be a social enterprise.

We should not judge charities by the business acumen and financial efficiency – though that’s not to say strong financial management and entrepreneurialism are unimportant. Charity must deliver social benefit. They should be ‘charity-like’.


2. Make ‘The Grant Making Tango’ compulsory reading for commissioners and funders

Written in 2004 and as compelling today as it was then. Julia Unwin sets out the need for funders to be clearer about what impact they are seeking from their funds; maintaining activities or services, building organisations or systems change. She also makes the case for different funding styles to support this; giving, shopping and investing.

Too many funders and commissioners are unclear about the approach they are taking and precisely what impact they want to have. Understanding the differences and being clear about intent will inform the way charities (and others) are invited to bid and reduce the amount of time wasted trying to second guess vague specifications and guidelines.


3. Start doing more ‘investing’ – let charities find solutions to problems

If commissioners knew best how to solve a particular social challenge then I’d have thought they’d be best placed to deliver that solution or service. The fact is that smaller charities and community groups are experts in their fields. They are often closer to their beneficiaries (many of them run by their beneficiaries – or at the least directed by them) and well equipped to identify the best ways to tackle those challenges. Commissioners are paying for someone better placed then them to deliver the solution. Why then should we try to impose the most appropriate way to deliver the solution?

Invest in the groups and organisations that are best equipped to find solutions and then trust them to get on with it. Provide support, challenge, question, encourage and work with them to ensure they have every chance of success…but let them do what they do best – support people and causes that need their help.


4. Don’t allow grants to be seen as the commissioners’ Cinderella

For too long grants have been seen as the poor relation of contracts. The Orwellian mantra of ‘contracts good, grants bad’ has eroded confidence in grant-making as a valid mechanism for supporting the delivery of social outcomes. It must stop. Grants are often more effective, more efficient and less bureaucratic than the dead hand of public sector procurement.

The real villains here are inappropriate use and poor practice – whether in grant-making or in procurement. Done poorly grant-making is expensive, burdensome and unlikely to deliver real impact to beneficiaries and procurement is no different. Let’s stop judging a particular approach and start appraising the way it’s done. Good grants and good contracts.


5. End austerity – fund public services adequately and start investing in prevention

The elephant in the room here is the fact that our public services are chronically underfunded and charities are being asked to pick up the pieces. Local government funding has been cut savagely over recent years and is only getting worse. Take Adult Social Care for example, one of the biggest costs in our Welfare State. It may need reform and there are plenty of things that can be done to improve the way we deliver it, but there is simply not enough money to meet rising demand. There’s no realistic prospect of investing properly in preventative measures when councils are struggling to merely meet their statutory duties. If the government wanted to alleviate the pressure on small charities, it should fund public services properly and not expect the care of millions of vulnerable people to be provided ‘on the cheap’ by someone else.


I’m not so naïve to believe that these five things on their own would fix the ‘commissioning crisis’. Nor would they mean an end to the challenges faced by small and medium sized charities. In fact it’s my view that the constant hand-to-mouth existence faced by many small charities is what gives them their cutting edge and drives innovation and improvement. However the government are serious about wanting to offer support to these organisations, they may want to consider these actions. And….the bit I know they’ll really love, they could do numbers 1-4 without it even costing them any more money.


Small charities in crisis but fear not…here comes the government

commissioning20report20coverThe excellent ‘Commissioning in Crisis’ report from the Lloyds Bank Foundation for England and Wales recently set out how ‘broken commissioning threatens the survival of small charities’. And just a week later the Minister for Civil Society, Rob Wilson, announced a programme to help get small charities into the public service supply chain.

Excellent – responsive government, sensitive to the needs of small charities and acting on available evidence in a decisive and timely fashion, right?


Or perhaps it’s merely encouraging more small not for profits down the road of wasted hours, time and thankless bureaucracy in the forlorn hope of winning contracts?

To help me make up my mind (and mindful of the political dimensions of interpreting evidence), I thought I’d start by taking a look at what Commissioning in Crisis says.

Much of the report’s content will not come as much surprise to anyone who has worked for or with small charities (or for that matter a SME). Phrases like unacceptable hoops, poor scrutiny and irrelevant requirements are sadly all too familiar to those who have ventured bravely down the public service procurement path. It is worth mentioning at this stage that this type of bureaucratic time-wasting is not the preserve solely of government. At their worst charitable trusts and foundations ae also guilty of poor processes and systems that place huge unnecessary burdens on applicants. It is by no-means widespread and substantial effort to improving things has been made over the past 20 years or so….but not to the extent that charitable grant-makers can start pointing out the inadequacy of government without impunity.

My perspective here may not be unique, but I have worked as a grant-maker; I have developed commissioning processes in local government and I have applied for numerous grants and public service contracts within small charities. In my experience, public sector procurement is far far worse than almost all charitable grant-makers application processes.

What is not new, but has now reached epidemic proportions, is the shift away from grants towards contracts for no other reason than the new public management orthodoxy says grants are bad and contracts are more efficient. It is a widely held view and one that I have absolutely no sympathy for. The evidence to justify this politically-motivated approach is noticeable only by its complete absence. I am not for one minute suggesting that contracts are inappropriate in some circumstances, what I am saying is that they are used crudely and inappropriately far too often.

The solution offered by the Minister is – as Gethyn Williams pointed out – very reminiscent of government policy circa 2005…but without the money to back it up. We have a Public Service Incubator, a commissioning kitemark and a voluntary, community and social enterprise crown representative.

I had never heard of a ‘crown representative’ before but it turns out it’s something that was introduced in 2011 in order to ‘help the government to act as a single customer.’ Strategic suppliers – which appears to mean big business – have Crown Representatives. The likes of Serco, BAE Systems, Tata Steel and Lockheed Martin have named individuals on a document on the Cabinet Office website. There’s also one for the banking industry, one for the energy industry and one for SME sector.

Clearly someone feels that’s a model which is working so well it ought to be replicated for the not for profit sector. I wonder whether the Federation of Small Businesses would care to comment on the efficacy of the approach?

In 2005 we didn’t have Public Service Incubators we had a national training programme through the ‘Partnership in Public Services’ programme.

An article in Third Sector magazine from 2006 says this:

The Government has pledged to make procurement processes fairer and more proportionate by drawing up a set of standard contracts for public bodies contracting services from the voluntary sector.

Sound familiar?

The fact is that huge budget cuts and increasing demand on public services has made things far worse, not better, in a great many instances.

Smaller charities may well be facing a crisis; indeed it is one that has been rumbling on since 2008/9. The belief that the solution is to spend time learning to navigate the labyrinth of public sector procurement processes and compete for an ever-diminishing pot is misguided. Surely the solution is to change the system rather than suggest everyone learn how to play by the broken rules of commissioning?

I’m not suggesting that’s an easy task for central government or local government. But I’d like to think that if we put our minds to it, we could come up with a better solution than a commissioning kitemark and crown representative. And maybe it involves small charities and community groups getting on with delivering social benefit without necessarily delivering public services.

The advocates for austerity now have charities in their sights

Recent scandals engulfing large fundraising charities dubious ethics and the collapse of Kids Company following the withdrawal of government funds have put the charity sector in the spotlight. However, things have quickly moved on from the legitimate questions around these affairs to more fundamental – and unwarranted – questioning of charity and charities.

the battle lines have been drawn

Take this Petition calling on the government to end funding for all charities.

No matter that it has only 300-odd signatures, the fact is someone thinks this.

The proposer’s thinking (I use the term loosely) is elaborated in this post on the Libertarian Home website. Let’s start with this for an opening gambit:

“If a “charity” receives public funding, it’s not a charity, it’s quango.  That may just be semantics…”

Excuse me? Semantics? Hello!!!!

I have sat on quangos and I have run charities and they are very different. There are similarities in that the principles of good governance and standards in public life apply equally to both, but one is answerable to a Minister, the other (notwithstanding the need to operate within the regulatory requirements) should be accountable to its beneficiaries.

Now it’s not clear whether the author is talking about grants and contracts. But even if we assume that it’s just grants, the receipt of government funds does not turn an independent organisation into an agent of the state. Does that apply principle apply equally to subsidies given to private sector companies to run railways, or for research and development grants or a whole host of other purposes?

And the argument is even more absurd if you take in funding awarded for contracts. Are the many private sector companies that thrive off the back of public sector contracts merely ‘quangos’ too? I don’t hear that argument too often, even from libertarians.

Successive governments have pushed the delivery of public services by charities and social enterprises for many years. For nearly 20 years the mantra from Whitehall has been: grants bad, contracts good. Charities should not rely on handouts, but should earn their income by delivering services.

That’s fine….to an extent. I certainly have no opposition to charities being more entrepreneurial. But the implicit suggestion here that charities are ‘dependent on the state’ is just neo-liberal claptrap.

Now the charity sector is seen as fair game for the ideologues intent on cutting back the state to unfathomable levels, that would have ever more dire consequences on the most vulnerable.

I believe that with confidence imbued from a Conservative general election victory the government’s real puppets are now attacking the charity sector, emboldened by the spotlight shone on Kids Company.

We’ve seen these ideas before from the likes of the IEA and other free market zealots and they were utter nonsense then. They haven’t improved with age.

trust in professionsSo there is something quite galling to see journalists lining up to criticise charities over how the conduct themselves. I am not for one second suggesting that charities should not be subject to scrutiny – far from it, I welcome the highest levels of accountability and transparency – but some of the criticism now being directed at the sector is as unwarranted as it is hypocritical.

Research conducted by Ipsos MORI shows that only around one in five of us trust journalists and Government Ministers to tell the truth.

trust in charities

Charities on the other hand have much greater levels of public trust and confidence – only doctors and the police are more trusted professions. As the figure (left) shows only 12% of the public think that charities cannot be trusted.

So when it comes to trust. There’s simply no contest.

That is not an argument against scrutiny of charities or their practice, but it does rather fly in the face of much of the rabid attack that seems to be a growing part of the current political and media discourse.

Some charity sector leaders have been defending Kids Company and the growing number of attacks on the charity sector. But fewer than I would have expected and less vociferously than I would have imagined. Perhaps they do not yet feel that their interests and values are – yet – in the firing line. But it is my firmly held believe that this is the beginning of a major offensive against charity and charities.

The battle lines are being drawn.

Fit for purpose foundations and the ‘grant making tango’

A couple of days ago Jake Hayman posted this fascinating post on the widespread flaws among grant making trusts and foundations (and thanks Alice Evans for sharing it). In it he set out his many frustrations with the way that charitable funders operate – whilst acknowledging that not all are like that all of the time – gleaned from 10 years of working in the charity sector.

Overall I found the piece refreshingly direct, honest and insightful and much of what he said resonated with things I have seen over the 25 years I have spent working in the sector. However – inevitably with a piece such as this – I also felt that many notable exceptions exist and that a many foundations are quite different to the picture Jake painted.

The Grant Making Tango

My experience is of ‘both sides of the fence’ having been a grant maker for the last 15 years – including a stint on the board of the Association of Charitable Foundations (the membership body for charitable trusts and foundations). I’ve also done my share of fundraising and run organisations seeking funds for many years. I recognise that my experience is therefore not typical, as I’ve been fortunate to be able to see ‘behind the curtain’ into what foundations are thinking and doing and to get to know many funders personally.

My first observation is that grant makers are very much like the rest of the not for profit sector in their diversity and so to talk about them as a homogenous group is as misleading as lumping together the Oxfam with my local friends of the park group. Some are large scale operations with teams of staff – though often far fewer than you would imagine – and capacity and resources to do things. Others are much leaner affairs with one, or even no, dedicated member of staff responsible for running the entire organisation along with a board of trustees. Clearly capacity and resources makes a difference to how they operate – though I would also suggest that the values and principles you adopt still affect your approach.

Secondly, I suspect many foundations would agree with much of what Jake has levelled at them. They are often aware of the weaknesses and I have attended more than the occasional angst-ridden meeting where grant-makers have expressed very candidly their desire to improve their work. However their money and power brings an inevitable inequity into many of the relationships and discussions they have – people are often cringingly deferential towards the purse string holders. I’m not saying we shouldn’t be nice to funders – we should be nice to everybody – but the brown-nosing that goes on is vile.

Thirdly, I think many of the criticisms levelled at foundations can equally be applied to the public sector. In fact I think that in many respects the state is far more guilty of some of the points made. Public bodies are generally more risk averse, do far more box ticking (indeed often ticking the wrong boxes just because they are easier to tick/measure), distrust charities, base processes around their own convenience….I could go through nearly the entire list. Far more money is spent by public bodies than by trusts and foundations. Though there are – like foundations – many exceptions the general trend is in my view similar.

My fourth observation – which is probably most likely to irritate people – is that I believe the sector is partly complicit in the current situation. Too many charities – in particular the larger ones with the resources and capacity – play the game. Rather than doing what Jake has done and raising their concerns in a way encourages debate they keep their heads down and try to make the best of the circumstances. Of course that is understandable – their responsibility lies with their beneficiaries and so doing what needs to be done for their benefit is perfectly fine. But that does, to a greater or less extent, perpetuate the problems we’re trying to solve.

There is a dishonesty in the games that are played – grant-seekers overstate what they will do and report impact than they don’t achieve. If you added up the total fiscal and social benefit of the grants that foundations make according to beneficiaries it would, I would guess, dwarf the economies of the G8 every year. Similarly if I had a pound for every project that promised to ‘be sustainable at the end of this grant’ actually was financially viable, I would be able to set up my own endowed foundation. Grant makers have no incentive to challenge these fantastic claims and results as it makes their impact more impressive – after all they are reliant on others to help them achieve their aims. The dance goes on.

Julia Unwin, now CEO of the Joseph Rowntree Foundation, wrote a report back in 2004 for the Baring Foundation called ‘the grant making tango’ about the strange relationship between the funders and the funded and ways in which it could be strengthened. I think there is still a great deal in there which would help address some – though not all – of the issues Jake has raised.

How do we ensure publicly funded grant makers remain relevant for the twenty first century?

In a recent piece I quoted a figure that Senscot had published, claiming that over one-third of Unltd’s Millennium Commission funded investments were going to organisations without any form of asset lock. Unltd’s chief executive, Cliff Prior, contacted me following the article’s publication to say that this figure was incorrect and that the actual figure was far lower. He told me – as is now on their website – that the actual figure was only 30 out of 5,000 awards. Which is around half a percent of awards made.

It’s worth clarifying where the one-third figure came from and how it differs from the, equally correct, figure of 0.6% that Unltd prefer to use.

Rodney Stares, Senscot’s Treasurer and the author of the statement on their website, has explained that the figure is drawn from a report that went to Unltd’s board in 2012. The paper showed that the proportion of Level 2 awards (more substantial awards of up to £15,000) that were going to Sole Traders and Companies Limited by Shares – neither of which provides an asset lock – between 2008-2012 added up to 33.3% of the total. This is the figure Senscot quoted and which I referred to.

The figure Unltd have quoted is, I believe, the proportion of total awards made, including Level 1 awards – which go to support people with ideas, but without any organisational structure around them.

I accept that the one-third figure could be misleading, since it does not include Level 1 awards and I have sought to clarify the basis of these numbers. Nonetheless, the one-third figure does provide an important indicator of more substantial investments made.

However, despite the confusion (now, I hope, cleared up), I do stand by my general view that Unltd has not delivered against its original proposal, particularly in relation to the drawing in of significant private sector finance to support social ventures and in the way it has sought to secure charitable funds from other sources to deliver its programmes.

It’s worth – not least for reasons of transparency – explaining the basis of my opinion. At the time when the proposal to establish Unltd and bid to take over the Millennium Commission endowment was being developed, I was running a charity supporting homeless and ex-homeless people to run community projects, Groundswell UK. I was approached by my father, who was one Unltd’s founders (though no longer associated with the organisation), to see whether we would support the proposal – along with a large number of other not for profit organisations. After objective consideration of what was being proposed, we decided to lend our support to the initiative and wrote a letter of support for inclusion in the submission. I also appeared in a promotional video that was produced; explaining why I thought Unltd’s plans to support people with ideas to improve their communities was a good idea. Since we were asked to support the proposal, I was given sight of the plans that were being submitted to the Millennium Commission.

I was most impressed by the charts that showed how the Millennium Commission’s endowment would be more than matched by huge swathes of private investment which would provide the finance to implement their proposals. The Millennium Commission funding would be used to leverage this additional investment and bring extra finance to support social good. It was an attractive part of the proposal – bringing in huge amounts of cash to support social entrepreneurs, but one that has never materialised.

This is my biggest disappointment about Unltd.

It offered something more entrepreneurial and exciting than what had gone before. It was not, to my mind, ever intended to be ‘just another grant distributor’ funnelling public money to good causes. If that had been the intention, then would it not have been more efficient just to hand the money back to the Lottery distributors that the Millennium Commission funding had been siphoned off from in the first place?

There is though, I think, a wider debate which we ought to be having and that is what we see as the role of funders that are distributing public money. How should they operate? Should they be concerned about asset locks, governance structures and profit? Or should they focus exclusively on the outcome and not worry about the means of achieving it? Do we expect grant distributors to collaborate to maximise the efficient use of resources? Or should we be encouraging competition as a means of driving up quality?

When Unltd was being set up there were of course, no Community Interest Companies, little discussion of asset locks and the social investment sector was still in its infancy in the UK. Things have moved on and of course the context has changed greatly too.

How do we ensure our funders remain relevant and fit for purpose in order to meet the aspirations and needs of social innovators and entrepreneurs? How do we ensure they remain accountable and transparent? What is the role of civil society and other stakeholders?

These are questions which I feel need to be asked if we are to meet the social, economic and environmental challenges of the 21st century.