THE MANAGEMENT OF GRANTS PROGRAMMES
26. One of the two main elements to the Charities
Board's arrangements for monitoring the progress of projects is
the requirement for grant recipients to complete and submit a
self-assessment progress report at the end of each year. Of the
150 projects examined by the National Audit Office, 132 had reached
the stage where a grant recipient should have completed and returned
an annual progress report. However:
- for 15 projects, with grant awards totalling
£1.8 million, reports were received between three and 12
months late;
- for nine projects, with grant awards totalling
£1.2 million, reports were received between 13 and 31 months
late; and
- for two projects, with grant awards totalling
£400,000 reports, had not been received.[25]
27. The Charities Board acknowledged that there had
been unfortunate and in some cases long delays, but said that
they had got the reports in the end. They had significantly stiffened
their procedures, and for the end of grant report grants officers
had now been instructed to make three telephone calls and then
to send a letter if there had still not been a reply. If that
failed the grant recipient would be sent a letter by lawyers saying
that they were in breach of terms and conditions and that unless
they sent the report, the Board would sue for the return of the
grant on the ground of non-fulfilment.[26]
28. The other main element of the Charities Board's
monitoring is to visit projects. The Comptroller and Auditor General
reported that all projects awarded £200,000 or more are visited
and below this threshold a random sample of five per cent of projects.
Some 30 of the 35 grants officers consulted by the National Audit
Office considered that decisions about which projects to visit
should be based on an assessment of the risk associated with each
project. The size of the grant might be one aspect, but from their
experience of managing projects grants officers identified other
indicators of risk. These included:
- organisations where management is weak or lacking
in experience;
- small organisations, particularly those in receipt
of large grants;
- organisations that have asked for numerous grant
variations;
- projects involving revenue funding of several
different activities.
The Board had commissioned a comprehensive analysis
of indicators of risk and were piloting a risk assessment system
which would categorise grants as high risk, medium risk, or low
risk and enable them to focus their grant management and monitoring
accordingly.[27]
29. The timing of project visits will influence their
impact. Of the 150 projects examined, 45 had received a grant
over the threshold for an automatic visit and the Charities Board
had visited 30 of these. Of the other 15 projects, 12 had either
not started or were less than half way through their period of
funding, but two projects were nearing completion and a third
was causing particular concern for the Charities Board. In this
case they did not know where £18,000 of the grant had gone.
This project was one of those the National Audit Office identified
as not progressing as planned.[28]
The Charities Board told us that they had paid a number of visits
to the project but had been unable to see anyone. They had now
written to them saying that unless they received comprehensive
documentation they would instruct lawyers to start proceedings.[29]
30. Each offer of grant by the Charities Board includes
standard terms and conditions with which the grant recipient must
comply. For 136 projects (91 per cent) of the 150 projects examined
terms and conditions had been complied with. In the remaining
14 cases information required by the Board had not been provided,
and four were among those not providing the planned level of service
or activity. The kind of information not provided included audited
accounts and quotations for capital purchases.[30]
The Charities Board acknowledged that there had been less than
fully satisfactory control. In eight cases they had paid out grant
without being given the full quotations from the architects or
the contractors, although in six of those cases the service had
been fully provided and they had obtained the documentation later.
They told us that they had tightened their procedures since the
first three grant rounds and did not pay out money unless they
had certificated bills.[31]
31. Where the Charities Board have identified unresolved
risks, they attach special conditions to the grant and this had
been done for 79 of the 150 projects examined. In 63 cases the
conditions had been complied with, but in the remaining 16 cases,
with grant awards totalling £1.6 million, there was nothing
in the Board's records to indicate compliance. In one case, the
Board were particularly concerned about the lack of detailed planning
and preparation, and attached four special conditions to the offer
of grant. They did not receive the information they required but
they continued paying out the grant of £95,000.[32]
They accepted that they had paid money out without rigorous enforcement
of the initial special conditions, but added that the project
was now fully operational and had produced the benefits of the
grant. [33]
32. The Financial Directions issued by the Department
require the Charities Board to obtain assurance that assets purchased
with lottery funds are being used for the purposes intended. The
grant recipient may not dispose of those assets without the prior
permission of the Board. If any assets are sold, the Board can
reclaim that part of the grant which was used to acquire the assets.[34]
We asked the Board what gave them the right to recovery if disposal
did take place,[35]
and they informed us that their position was protected through
the grant contract, in the form of the grant offer letter and
the standard terms and conditions of grant. Their legal advice
was that they were adequately protected by the firm requirement
that the assets could not be sold without their written permission.
They would normally seek an appropriate share of the market value
from such disposals, although cases would be judged on the particular
circumstances arising at the time.[36]
33. We asked the Charities Board why, given the Financial
Directions, they did not have a consolidated register of capital
assets funded by them, and formal procedures to verify the existence
and use of assets. They told us that they were producing a consolidated
asset register which would be available in autumn 2000, and that
they proposed to carry out periodic visits to projects.[37]
As they had started funding projects in 1995 we put it to the
Board that they should have given greater priority to this aspect
of their responsibilities. They told us that the sheer scale of
the information required meant it had not been possible to produce
the comprehensive register earlier.[38]
34. We asked the Charities Board whether, once they
had their computerised register, they thought they would discover
cases where they might have a right of recovery of which they
had not been aware. They said that the computer system would not
discover the cases, but would automatically prompt grant staff
to undertake inspection visits or other investigations. They considered
it unlikely that they would discover cases where they had a right
of recovery. The type of groups that they funded were not on the
whole ones who sought to gain commercial advantage from the capital
assets that had been funded. Their experience so far had been
that the voluntary sector was anxious to hang on to and to use
the capital assets for its beneficiaries rather than wanting to
sell them off.[39]
35. The Financial Directions also require the Charities
Board to establish a policy for evaluating their projects, and
state that where analysis of individual projects may be impracticable,
programmes of grants should be evaluated. The Board's policy is
to evaluate the impact of their funding at the overall programme
level, but they have not yet sought to evaluate grants programmes
as a whole.[40]
They told us that since publication of the Comptroller and Auditor
General's report they had commissioned a full report on north
east community buildings, and commissioned research on black and
ethnic minority projects in Birmingham, spatial targeting in Barnsley,
refugee grants in London, advice services in Northern Ireland
and the first grants on poverty in Scotland. Their research committee
was looking at a comprehensive set of proposals for further evaluation.[41]
36. The Charities Board's monitoring arrangements
have evolved over the period that they have been making grants.
They told us that their permanent staff had risen from 43 to 250
trained grants officers. There were some clear lessons to be learned
from the Comptroller and Auditor General's report, and they had
introduced a comprehensive grant management manual, extended and
improved the training of their grants staff, tightened up the
rules for chasing the end of grant reports, and introduced their
new two-stage approach on property grants.[42]
37. The Financial Directions issued by the Department
set out the broad framework of financial and management controls
within which the Charities Board must operate.[43]
Asked what they had done to ensure that these Directions were
observed, the Department told us that at the outset they had approved
the Board's systems and procedures, and that they did an annual
assurance check on the systems, including work by internal audit.
They had been discussing with all the lottery distributing bodies
the lessons emerging from their own experience and the two previous
reports on lottery distribution from the Committee of Public Accounts
and the National Audit Office.[44]
Conclusions
38. 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.
39. 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.
40. 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.
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