Government relations with the voluntary sector must change

13th October 2006

If the government wants to devolve more public services to the voluntary sector, it must urgently address its funding relationship with charities, say financial specialists. The joint response by the Charity Finance Directors' Group (CFDG) and the Charities Consortium to the sector review highlights particular issues at local government level.

(CFDG) and the Charities Consortium are concerned that there is a dis-connect between central and local government. Keith Hickey, CEO of CFDG, said "central government is putting in place policies that are supportive of a balanced relationship that aren't being implemented at local level where much of the funding is taking place. There is a need for real understanding of charities and how they are structured at local level so funders understand the importance of full cost recovery, the need for timely payment of services delivered and an appropriate level of risk sharing."

The response to the third sector review also argues that if government wants the voluntary sector to take on more public service delivery then it must ensure there is a level playing field for the voluntary, private and public sector so that they can all compete on equitable terms. Currently the voluntary sector is uniquely disadvantaged because it operates in an environment where there is no level playing field on issues such as pensions and VAT.

A CFDG member recently gave the example of not entering into a contract that would have meant a transfer of 60 staff from the statutory body to the charity. The charity could not afford to fund the pension contributions enjoyed by that statutory body and there was no additional funding in the contract to cover the additional costs. The charity was forced to walk away from a contract which could have helped to support 250 beneficiaries.

In addition, CFDG and the Charities Consortium are urging government to review the level of regulation it imposes on the sector. There is a clear balance to be struck in requiring a charity to show that it is accountable and transparent and as such build public confidence without being overly burdensome. Many charities are finding that they have to divert resources away from their charitable objectives in order to deal with the increasing amount of regulations imposed on them.

Funders need to be persuaded of the effectiveness of regulation by the Charity Commission, and not require in a different form, information that is already in the Trustees Annual Report or other available statutory documents. Members have also highlighted the requirement to provide evidence of compliance for regulation which they aren't technically subject to such as the Gershon efficiency targets. This particular additional regulatory requirement necessitated a significant amount of management time and effort researching the subject and presenting back to the funder some of the initiatives one charity had underway to satisfy this point.

The CFDG and Charities Consortium joint response also touched on issues around trading and the recommendation contained within the government publication "Private Action, Public Benefit" which proposed that charity law was amended to allow charities to undertake all trading within the charity without the need for a trading company. Finance directors were disappointed to see that this recommendation has not been implemented.

Finally the response also touches on gift aid audits carried out by government and criticises the bureaucracy involved in maintaining a Gift Aid Declarations database and the zealous nature of HM Revenue and Customs in finding errors for recovery of revenue. The response recommends an error rate of 2% should be allowed before which government can make retrospective claims.

 

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