INTRODUCTION AND SUMMARY OF CONCLUSIONS
AND RECOMMENDATIONS
1. The National Lottery Charities Board (the Charities
Board) was established by the National Lottery etc. Act 1993 to
distribute money raised by the National Lottery. As at 30 November
1999, the Charities Board had awarded some 28,000 grants totalling
over £1.5 billion to charities and voluntary groups throughout
the United Kingdom. The Department for Culture, Media and Sport
(the Department) is responsible for setting the overall policy
framework; issuing Financial Directions that set out the broad
framework of financial and management controls; monitoring the
performance of the Charities Board; and providing best practice
guidance.[1]
2. Over 88 per cent, by value, of the grants awarded
by the Charities Board have been made through seven main grants
programmes. The value of grant awards ranges from £500 to
over £1 million, and has averaged £93,000. Unlike projects
funded by the other lottery distributors, there is no requirement
for grant recipients to provide matching funding for projects.[2]
Examples of funding provided by the Charities Board are set out
below.
- (to cover salaries and production costs for three
years) to set up and run a youth arts team to target disadvantaged
young people. The main activities of the project are theatre productions
and supporting and developing youth theatre groups. The overall
aim of the project is to empower young people by giving them a
voice in the community, raising awareness of relevant issues,
providing training, and developing positive attitudes and behaviour.
- (to cover salaries and running costs for three
years) to provide 'outreach support' for young women who have
suffered sexual abuse. The project provides individual and group
support aimed at helping young women remain in the community,
develop their skills and break down social isolation. The overall
aim is to lessen the effects of poverty.
- (to cover salaries, running costs and publicity
material for two years) to harness the creativity of disabled
people. The project involves the creation, by disabled people,
of a range of resources, including plays, sculptures, music and
a CD, to provide positive images of disabled people, increase
disability awareness, and challenge prejudices. A longer term
aim of the project is to empower disabled people to have more
control over their lives.[3]
3. On the basis of a report by the Comptroller and
Auditor General[4]
we examined the Department and the Charities Board about the distribution
of lottery grants, the achievements on projects funded by the
Charities Board, and the management of grants programmes. This
is our third examination of an individual lottery distributor.
Our previous examinations covered the English Sports Council[5]
and the Arts Council of England.[6]
4. Our main conclusions and recommendations in this
case are as follows.
- Although the Charities Board already take account
of social exclusion when distributing grants, they need to do
more to ensure that grants reach the most disadvantaged areas.
Access to lottery funds should be improved by making the application
and monitoring processes as simple as possible; by helping less
capable organisations improve their capacity to prepare successful
applications for funding; and by tapping into local knowledge,
for example through closer working with local authorities.
- The Charities Board's grants programmes have
done much to help those in society at greatest disadvantage and
over 80 per cent of the projects examined by the Comptroller and
Auditor General are progressing much as planned. However, up to
£145 million on the first three grants programmes may have
gone to projects that are not progressing as planned. The Charities
Board need to identify more fully the risk factors in projects
and ensure that in future these are addressed adequately both
when considering applications and when carrying out subsequent
project monitoring.
- The Charities Board have strengthened their management
arrangements, but could achieve greater efficiency and impact
by targeting their grant management resources on the areas of
risk, and developing a structured scheme of programme evaluation
to inform their future plans. Some of the problems at the Charities
Board (projects not progressing as planned, failure to ensure
compliance with their terms and conditions of grant, and insufficient
information about the progress of projects) are similar to those
occurring at other lottery distributors examined by the Committee.
The Department for Culture, Media and Sport need to ensure that
lessons and good practice are identified, disseminated and implemented
throughout the sector.
5. In more detail, our conclusions and recommendations
are as follows:
On the distribution of lottery grants
(i) Some of the
most deprived areas have yet to see the full benefit of lottery
money. The National Lottery Act 1998 gave lottery distributors
new responsibilities and powers to address this issue, for example
by soliciting grant applications, and the Charities Board should
take full advantage of this change. The examples they gave of
their work to target areas of need in Wales and Glasgow are encouraging
signs that they are moving in the right direction (paragraph 14).
(ii) The Charities Board do not consult
local authorities about individual grant applications because
they are properly concerned about the added bureaucracy and the
perceived threat to the independence of the grant approval process.
They have tried approaches such as joint seminars, and are in
discussion with authorities in Scotland about a more strategic
way of working. But although they have now been making grants
for nearly five years, they have yet to develop a clear system
of working with local authorities to make sure that lottery funds
reach the neediest areas. The Charities Board should give priority
to finding ways of capitalising on the knowledge and expertise
of local authorities (paragraph 15).
(iii) The people who most need help from
the Charities Board can be those least able to seek it. The Board
are prepared to provide practical support to help smaller groups
prepare bids, but their NOP survey has confirmed that their processes
are a potential barrier. The Board should take steps to make their
application and monitoring processes less onerous for applicants,
while maintaining an appropriate degree of control. (paragraph
16).
On achievements on projects funded by the Charities
Board
(iv) Analysis of
a representative sample of 150 projects from the Charities Board's
first three grants programmes shows that over 80 per cent were
fully or mostly delivering the level of service set out in the
original grant application, albeit later than planned in some
cases (paragraph 22).
(v) The scale of the Charities Board's grant
giving means that any shortfall in performance puts large sums
of money at risk. Out of grant awards totalling £460 million
over the first three grants programmes, between £65 million
and £145 million could have been given to projects which
were not delivering the intended level of service or activity
at the time of the National Audit Office examination. The Charities
Board have assured us that they have followed up the specific
cases identified by the National Audit Office as not having progressed
as planned, and in one case they have withheld grant of £30,000
and sought repayment of a further £22,000 (paragraph 23).
(vi) The difficulties experienced on some
projects appear to reflect the special risks involved in the acquisition
or refurbishment of premises; and not all projects have been approved
on the basis of realistic estimates of the costs or the likely
number of beneficiaries. The Charities Board have now taken steps
to address these issues, including the introduction of a new two-stage
approval process for capital projects. It is important, however,
that they identify the risks to all projects at the grant application
stage, and take account of the risks in their subsequent grant
monitoring. Drawing on the analysis already undertaken by the
National Audit Office, the Charities Board should identify the
key risk and success factors on the projects they have funded
to date to ensure that they are not overlooked in considering
future applications (paragraph 24).
(vii) The Charities Board are aware of ten
cases of suspected fraud, and several factors underline the need
for the Board to be vigilant in this area. There is the sheer
volume and value of grants awarded by the Board, and the likelihood
that some applicants have limited experience of managing projects
and operating financial control systems. It is important therefore
that the Board see through their programme of fraud awareness
training for their grants officers (paragraph 25).
On the management of grants programmes
(viii) The Charities
Board's arrangements for monitoring how lottery grants are used
have not taken account of all the risks associated with projects;
their visits to projects have not always been timely; and the
key self-assessment reports from grant recipients are often late
- sometimes a year late and more. The Board are now adopting a
more robust line with those grant recipients who are late providing
self-assessments, and are now piloting a risk assessment system.
A risk based system is important both for effective grant management
and monitoring, and in making the most efficient use of the Charities
Board's own staff resources (paragraph 38).
(ix) The Charities Board have attached terms
and conditions to grants but then failed to ensure that grant
recipients meet them. The special conditions set by the Board
in some cases are there to ensure that risks which might compromise
the project are addressed early on, yet in one case the Board
paid out the full grant of £95,000 without the special conditions
being met. The Board need to be more robust in their enforcement
of grant conditions in future (paragraph 39).
(x) The Charities Board's monitoring arrangements
have been evolving over time, and have now reached the point where
they are fully staffed. Nevertheless, in the five years since
the Board started making grants, they have been slow to meet those
aspects of the Financial Directions set by the Department which
require them to monitor the use of assets beyond the period of
grant and to evaluate their grants programmes. The Board spend
large amounts of money on supporting good causes (over £1.5
billion already), and it is essential that they learn from experience
and apply the lessons to their future activities (paragraph 40).
THE DISTRIBUTION OF LOTTERY GRANTS
6. Figure 1 shows the spread of grants across the
United Kingdom for the first seven grants programmes. Grants under
the Charities Board's first main grants programme were awarded
in late 1995, and the seventh programme began in January 1999.[7]
Asked about grants to deprived communities, the Department told
us that the National Lottery Act 1998 had made important changes.
For the first time, distributors were required to produce strategies
for addressing the needs of their sector, and were allowed to
solicit applications to address those needs. Through Policy Directions
laid down under the Act the Department requires distributors to
ensure that all parts of the country have access to funding, and
to focus on social exclusion issues, including young people in
particular.[8]
1 C&AG's Report, HC 378 of Session 1999-2000 Grants
made by the National Lottery Charities Board, paras 1.1,
1.3 Back
2 ibid,
paras 1.6, 1.8, 2.3 Back
3 ibid,
para 2.3 Back
4 ibid Back
5 68th
Report from the Committee of Public Accounts, HC 873 (1997-98)
The Distribution of Lottery Funds by the English Sports Council Back
6 6th
Report from the Committee of Public Accounts, HC 129 (563 - I
(98-99)) of Session 1999-2000 The Arts Council of England:
Monitoring Major Capital Projects Funded by the National Lottery Back
7 C&AG's
report, p11 Back
8 Evidence,
Q74 Back
