Letter to the Times: payment upon delivery

11th April 2006


I write in reference to your article (4 April 2006) 'charity sector striving to cover costs'.

CFDG, in collaboration with the CIPFA Charities Panel, has recently undertaken a quick survey of CFDG members to understand the challenges charities face in contracting with government to provide public services. Our initial findings show that over half of those charities surveyed recover only 85% or less of the cost (including overheads) of delivering the service to the funder. Charities are increasingly being seen as playing a key role in delivering public services and strengthening local communities through innovative ways of working yet it seems funders aren't prepared to pay for the high quality service they receive. In addition funders are requiring greater levels of financial detail such as office and staff costs rather than agreeing a price for a quality service that ensures best value for money.

Funders themselves are increasingly facing greater financial pressure and uncertainty over government funding making them reluctant to sign or renew contracts for lengths longer than a year. In particular, health and social care budgets are facing constraints and as one charity put it, they are expecting a 'gloomier prospect for next year' as the anticipation is that 'there is likely to be no funding for development and inflationary uplift will be lower'.

55% of charities highlighted that the lengths of their contracts are inappropriate to the service they provide. Charities want to see longer contracts that are relevant to the services they are providing in addition to appropriate risk sharing in contracts which enable them to make best possible use of public funds rather than the current "long term relationships with short term contracts".

60% of charities responding didn't expect to achieve full cost recovery of the services they provide despite a government announcement that as of April this year all statutory funders should implement full cost recovery.

CFDG and CIPFA Charities Panel is keenly awaiting the publication of HM Treasury guidance in spring, as announced in the Budget 2006, which will including new guidance on best practice in funding full costs and hopes this will encourage statutory bodies to work in greater partnership with charities in delivering public services.

This issue will be covered in more depth in a series of workshops at the CFDG annual conference on 31st May 2006, an event which in the past has attracted 300 senior charity finance professionals.

Yours faithfully,

Keith Hickey

Chris Harris
Chair of CIPFA Charities Panel


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