Memorandum submitted by Third Sector European
Network (ESF 04A)
Description of the Voluntary and
Community Sector as referred to in this document.
The Third Sector European Network
(TSEN) took over representation of the European funded VCS from
NCVO in 1998 it represents approximately 20,000 small and large
groups using European funds.
TSEN was meaningfully engaged with
the DfEE in the development of agenda 2000.
Agenda 2000 includes substantial
focus on hard to help groups and capacity building actions in
Policy Field 2 (25% of the programme in England).
The DWP introduced the Co-finance
policy in 2002, which has been prejudicial to work with the hard
to help and capacity building.
Consultation on the introduction
of the policy was politically driven, hurried and incomplete.
Co-finance has lost focus and resources
from the current programme.
Capacity building, actions to combat
discrimination and work with the disabled are substantially lost
from the programme under Co-finance.
Co-finance runs counter to Government
policy as expressed in the Compact, the National Action Plan on
Social Inclusion and the Cross Cuffing Review as it is withdrawing
resources from the VCS for capacity building and inclusion work
that were hitherto used effectively.
The strategic focus of Co-finance,
employment and training is much narrower than Agenda 2000.
TSEN believes that Direct bidding
at least equal to the activity operated traditionally by the VCS
(35%) should be retained in all Government regions to ensure that
inclusion activities, capacity building and work the hard to help
1. The voluntary and community sector
1.1 The Voluntary and Community Sector's
operations account for 4.8% of the UK's Gross National Product,
it employs 4% of the workforce. These figures are greatly enhanced
by the volunteer effort, which the sector mobilises in order to
fulfill a number of functions, and run a number of services. The
sector comprises 182,000 charities with a turnover of £24
billion. It is funded by central government and charitable trusts
in equal measure (£1.5 billion), next steps agencies such
as the Arts Council and Local Learning and Skills Councils as
well as local government and the public (£5 billion). Among
the VCS groups are a large number who provide services, sometimes
they are the only service providers, as in the fields of terminal
care and HIV related work. The majority of voluntary organisations
are small, 50% according to the latest NCVO figures, have no paid
staff and all voluntary organisations involve volunteers whether
as trustees or active members.
2. Third sector European Network (TSEN) and
European funded Voluntary and Community Groups
2.1 The Third Sector European Network
(TSEN) is the body that brings together the voluntary and
community sector support agencies in all 9 English regions. These
bodies provide technical assistance and encourage the development
of voluntary and community sector projects to fulfill the objectives
of the structural funds. Agencies working across Objectives 1,
2 and 3 are represented on TSEN, as well as national level agencies.
It has a membership of approximately 20 regional and national
agencies representing approximately 20,000 providers. (Membership
2.2 In 1998 NOVO passed over its seat as
a social partner on the Monitoring Committee for the European
Social Fund to TSEN when it ceased to be involved with European
funded projects, since then TSEN has represented the sector substantially
in both the development and operation of Agenda 2000. As the voice
of the voluntary sector, it was influential particularly in the
design of Policy Field 2 for excluded groups; the retention of
30% advances for training providers and famously the gap guarantee
fund that the DfEE put in place to maintain support for voluntary
sector funders in the summer of 1999 when the start of Agenda
2000 was delayed by 10 months.
2.3 As a member of the English Monitoring
Committee it was also responsible for co-ordinating the voluntary
and community sector input to all Objective 3 documentation for
Agenda 2000, the Community Support Framework; the English Operational
Plan and the Complement.
2.4 Each TSEN member undertakes similar
work for their region, frequently as members of the Regional Programme
Monitoring Committee and as significant actors in regional partnership
2.5 TSEN has been engaged with the administration
of Objective 3 funds with the DfEE/DWP and the regions for the
last five years, as NCVO was before it. This activity was seen
as a model of good practice in engaging the voluntary and community
sector that was the envy of other European member states. It must
be acknowledged that in part the nature and complexity of the
English Voluntary and Community Sector has given rise to this
close involvement where in other member states the VCS is already
much more closely associated with public service delivery.
3. DWP and Co-finance
3.1 Since the DWP took control of the Administration
of Objective 3 ESF, their control has been co-incident with and
identified with one important systematic change. That change is
the introduction of Co-Financing.
3.2 Co-financing is a mechanism whereby
the Objective 3 ESF funds are allocated to approved Co-financing
Organisations (CFOs). These add in the match funding internally
and then invite organisations to bid, offering them 100% funding
for their project. As the match funding is taken care of by the
CFO, the delivering organisation only has to engage in one set
of reporting and does not have to secure 55% of the funding in
advance of applying for ESF.
3.4 The theoretical advantages, and the
motivation for introducing this mechanism, are enormous. The first
is that the CFOs will usually be sub-regional and therefore nearer
to the ground on their patch, so they can better analyse need
and plan responses. This advantage might be called "better
strategy". Secondly, relieved of match funding obligations,
new and smaller groups may be able to deliver projects at community
level. This advantage might be called "better access".
The third advantage is less administrative burden, at least on
the delivering bodies"less bureaucracy".
3.5 In practice the CFOs only add in a small
percentage of Match Funding as cash, and "attach" Match
Funding from existing activity to projects selected to receive
ESF funding. While this might make sense where existing mainstream
funding is working on the same issues and with the same cohort
of beneficiaries it makes no sense at all when dealing with excluded
communities the focus of activity in Policy Field Two ("Equal
Opportunities for all and Promoting Social Inclusion").
4. Introduction of Co-finance-the consultation
4.1 The notion of Co-finance was originally
introduced in Learning to Succeed
the Governments review of Post 16 funding, in the discussion about
ensuring the integration of all public funds into Learning and
Skills council strategies for post 16 learning. The report actually
stated "the European Social Fund in particular makes a significant
contribution to the achievement of the Government's education
and training priorities . . . in 1999 approximately £1 billion
is available to the UK through European Social Fund". However,
the authors of that report failed to acknowledge that the design
of ESF in Agenda 2000, particularly Policy Field 2, included a
whole range of measures to combat exclusion that are not traditionally
associated with the Government's education and training priorities.
In Policy Field 2 only 27% of activity is expected to be ESF training
(74,302 beneficiaries from a total of 226,075 beneficiaries) according
to the outcome tables in the Operational Plan.
It is these actions, capacity building and measures to combat
discrimination, which have become the casualties of the Co-finance
4.2 During the development stage of Co-finance,
TSEN expressed concerns about the extent to which a mechanism
designed to maximise the acquisition of ESF through matching government
funded training programmes would be able to respond to the various
needs which the voluntary and community sector has met by using
European funding over the last two programmes.
4.3 In January 2000 the DfEE announced its
consultation on Post 16 Funding, in which it outlined the vision
for Co-finance stating "current domestic funding systems
have not maximised the incentives to win European funding"
This was true of statutory users. The VCS had declared minimal
under-spends in the previous programmes. Further, "It will
be important to ensure LSCs and ESF funding is accessible to community
and voluntary organisations, who are often best placed to provide
learning in the most socially disadvantaged communities."
4.4 Following a limited response to this
document the first Co-finance proposal appeared in October 2000
This document included determining criteria for CFOs, these included
have a locus for training
are in the publicly funded sector
would commission provision from other
would secure provision of a high
have established a constructive working
partnership with regional and local providers
have money from other sources to
use as match funding
Would be able to meet the requirements
in relation to quality, monitoring evaluation and audit associated
with managing ESF projects
4.5 The same section compared performance
of the previous programme indicating that the VCS had been the
largest provider of projects after the DFEE at 21% of programme
against 18.5% FEFC and 9% TECs. It had used 12% of the available
funding against 13.6% by FEFC and 8.7% byTECs, and whilst the
VCS fulfilled all the above criteria with the exception of having
a locus for training, its involvement as a CFO was patently disallowed.
4.6 On the basis of another limited consultation
the Co-finance Project Board was established with staff from the
DWP, representatives from the newly established National LSC,
RDAs, Connexions and Employment Service (about to become Jobcentre
+) to introduce the policy.
4.7 Despite its membership of this board,
TSEN as the representative of the VCS was unable to make heard
its concerns about the areas that would not be well served by
Co-finance. It has to be said that at the time of these discussions
other matters such as the timing of the policy, management arrangements
(calls for proposals versus tendering), advances and formula funding
were also under discussion.
4.8 A report produced for TSEN
by LRDP in 2002, outlined clearly the extent to which the sector
has delivered a substantial part of the ESF Objective 3 programme
in England in the first two years of Agenda 200035% of
all approved applications came from the sector.
4.9 The agencies involved supported 234,520
beneficiaries and operated projects with a total value of £438.8
million. The sector mobilised £241.3 million as match funding
from a variety of sources, some government programmes such as
New Deal, but also Community Fund, Local Government funds and
their own resources including volunteer time.
4.10 Providing their "own" match
funding had enabled projects to receive the actual funds they
needed to work with hard to help groups who had traditionally
been excluded from government programmes by low unit costs and
outcome related funding. TSEN made clear that it was this level
of activity that could be jeopardised by the wholesale introduction
of Co-finance and lobbied for the retention of substantial direct
4.11 In 2002 The Department for Work and
Pensions commissioned a report from Fraser Associates to evaluate
the implementation of Co-finance. Fraser Associates report, written
at a very early stage and therefore resulting in `provisional
seemed to suggest that the stated aims of Co-finance were at risk
of not being met. `The ability of CFOs to respond strategically
is limited by the imprecise nature of RDPs' (Regional Development
and' It is not clear that the aspiration of reduced administrative
costs will be realised, at least in financial terms'.
4.12 Whilst the report concluded that "Access
by disadvantaged and excluded communities is substantially guaranteed
. . . to the extent that the RDP identifies them".
It also concluded that "In delegating resources targeted
on disadvantaged and excluded communities to CFOs, the Programme
Secretariats should obtain a clear picture of what delegated resources
will purchase, and by implication, what is an appropriate level
of resource to retain for direct bidding".
This exercise has to our knowledge never been undertaken.
5. Implementation of Co-finance
5.1 The Co-finance policy was in effect
implemented in early 2002. The department approved CFOs; mostly
LSCs at this stage, these were subsequently approved by Regional
Committees. A small number submitted Co-finance plans for Spring
2002 and announced bidding rounds. In the West Midlands and Southeast
LSCs undertook consultation with the VCS.
5.2 In March 2002 the DWP produced guidance
for Co-financing, which was discussed at some length with TSEN
as the representative of the voluntary and community sector. Changes
to the guidance were agreed relating to advance payments, use
of match funding (since it had already become apparent that match
funding from most CFOs was `notional'), mapping of CFO activity
and the review of CFOs. It is worth noting that by the time the
guidance appeared in March 2002 the definition of a CFO was any
body that had been granted CFO status by the department.
5.3 The Guidance also referred again to
the need for GOs and/or Regional Committees to map the coverage
of CFO activity in the regions in order to determine the activity
for which no appropriate CFO exists and therefore the level of
Direct bidding that would need to be retained.
6. Competitive Tendering
6.1 A significant development of Co-finance,
and one which has had a major impact on the VCS, is the introduction
of competitive tendering. This was one of the conditions agreed
by the DWP with the European Commission in order for CFOs to become
the `end beneficiary' in European terms, that is, to enable the
agency to recover contract costs (as opposed to actual expenditure)
and assume audit responsibility from its providers. CFOs are obliged
to let tenders to providers rather than receive bids from providers.
(A fuller discussion of these processes is submitted by ESFVON).
6.2 This process in itself did not form
part of the consultation on Co-"finance and has been one
of the most exclusive aspects of the introduction of the policy.
It is indeed the narrow nature of CFO prospectuses, which is excluding
projects in large geographical areas (cf. example given from the
Northeast in para. 7.5) and excluding groups such as the disabled
and communities which could benefit from capacity building measures.
6.3 The Department claims competitive tendering
both rationalises competition and brings strategic coherence to
the ESF process, in practice it allows only for narrow training
solutions, top down strategy and offers nothing to community generated
strategies, bottom up strategy which have hitherto to been the
hallmark of inclusion work in policy field 2, but is arguably
applicable across Policy Fields 3 and 5.
7. The current situation
7.1 In 2003 most CFOs have been agreed,
the majority of funds available from ESF Objective 3 are being
routed through CFOs. In programme management terms Regional committees
have the responsibility of reviewing CFOs status but there is
currently no framework for this activity and to our knowledge
in no region have CFOs been reviewed. Nor has any review of coverage
of CFOs been undertaken by the DWP or the Government Offices to
identify gaps in provision or the direct bidding retention needed
with the sole exception of the Southwest which has mapped LSCs.
7.2 Analysis by TSEN of CFO coverage in
S regions (Southwest, Northeast, West Midlands, East Midlands
and London) indicates that there are many areas of need not covered
by CFOs such as work with the disabled, measures to combat discrimination
and capacity building.
7.3 Project promoters in the sector, whilst
being assured by the Co-finance project team that disadvantaged
groups would be well catered for, have experienced a range of
challengesmany of which have still to be resolved.
7.4 CFOs submit Co-finance plans to cover
parts of measures and parts of Policy Fields it is often unclear
even where direct bidding still exists if providers can submit
projects in an uncovered measure or for a target group not covered.
Competitive tendering has of course exacerbated this process.
7.5 Emerging evidence
suggests that there are clearly geographical inequalities under
the Co-finance system; in some cases targeting is so precise as
to be exclusive rather than promoting social inclusion. E.g. the
LSC for Tees Valley operating in Policy field 2 is only proposing
to support projects working with seventeen year olds in their
last year at school undertaking GCSEs and Job Centre+ in the Northeast
does not operate in Policy Field 2.
Thus, projects wishing to provide for anyone but 17 year olds
are precluded from applying for European funds.
7.6 A similar picture of CFOs picking and
choosing areas of training to cover emerges as a pattern in London,
the Southwest and East Midlands. The report commissioned from
Alex Fraser Associates
by the DWP on the implementation of Co-finance in 2002 suggested
there was a tendency for CFOs to be driven by their own priorities
rather than Regional Development Plans; this now appears to definitely
be the case.
7.7 In some regions, early CFOs, (notably
LSCs) expressed the desire only to work with Preferred Providers.
However the Consolidated Guidance for Co-finance confirmed that
organisations developing quality assurance measures should also
be considered as subcontractors, this is not applied universally.
7.8 Some CFOs operate formula and outcome
related funding, mechanisms, which have traditionally excluded
hard-to-help groups from work with Government programmes.
7.9 To our knowledge no CFOs allow project
providers to bring their own cash or "In Kind" match
funding. The 100% funding for projects is usually provided from
ESF alone that, as has been said, is matched to existing activities
(eg Modern Apprenticeships) within the CFO. This has the effect
of reducing the amount of money available to projects for programme
activity and the range of activities. If there is no existing
programme e.g. Capacity building or New Deal for the Disabled
which does not cover those with Learning Difficulties, there can
be no Co-financing by LSC or Jobcentre+.
7.10 CFO selection processes are not always
transparent and feedback both to applicants and the Regional committee
limited. Few CFOs have an appeal procedure, despite that being
recommended by the Consolidated Guidance.
7.11 The picture currently with Co-finance
is unclear since Government Offices, have maintained direct bidding
rounds in order to assure their targets on outcomes by December
2003. However it is clear that there is an expectation that by
the end of 2003, the majority of funds (over 80% in most cases
and 100% in London) will be routed through CFOs and projects currently
funded by the GOs will have to apply to CFOs irrespective of their
suitability or not at all.
8. Partnership and communities
8.1 A cornerstone of the present ESF system,
enshrined as one of the operational principles, is that of "partnerships".
Over recent years, all parties have worked hard to establish regional
partnerships as responsibility has moved away from central government
to the regions.
8.2 The voluntary and community sector played
a crucial role in this devolution. It co-operated closely with
partners in the planning, marketing, scoring and evaluation of
programmes. The experience was hands on. Co-finance presents a
real danger of distancing all regional partners from decision-making.
As Fraser Associates reported "Almost all of the Objective
3 Secretariats interviewed perceived Co financing plans to be
wholly or partially driven by the priorities or agendas of the
CFOs . . . Two Secretariats expressed concern that the delivery
of more difficult activities and outcomes that were regionally
important . . . might not be a priority for CFOs."
8.3 The whole experience of Objective 3
over the last decade has been to develop selection mechanisms
that balance the imperative to address need and the attainment
of outputs. Direct bidding is the only proposal that allows this,
since the applicants provide specific data. In the case of the
voluntary and community sector this data often has the merit of
flowing from target communities themselves.
8.4 If the consideration of applicant-supplied
needs evidence is important in Objective 3 in general, it is absolutely
essential in Policy Field 2 work. The whole ethos of the policy
field (following on from regionalisation and Priority Four in
the last programme) is to emphasise the self-activity of disadvantaged
communities. Furthermore the policy field is explicitly about
involvement, participation, long-term issues and so-called "soft
outcomes" and is not amenable to an output formula tendering
process at all.
8.5 The co-financing proposals as a whole
will remove communities from participation in the framing of solutions
and will fracture partnerships, and reverse the whole process
that Policy Field 2 (over a quarter of the programme) is designed
to address. In addition many millions of pounds worth of activity
at grass roots level may be fragmented by losing the ESF "glue"
that binds it into a coherent response to need.
9 Current policy context
9.1 These changes are occurring at a time
when the UK government is committed to developing the capacity
of the Voluntary and Community sector as a means of increasing
active participation in communities. Both the Compact and the
Cross Cutting Review talk of the Government's commitment to creating
a framework in which the voluntary and community sector can flourish
as well as strengthening the role of the VCS in public delivery.
9.2 Equally the agenda of the European Union
and the Commission is moving towards more work with excluded groups,
characterised by the production of the National Action Plans on
Inclusion in each member state in addition to the National Employment
9.3 The UK NAPSIon which European
Anti Poverty Network an associate group of TSEN was consultedvariously
commits government to mobilise all actors, notably voluntary and
community groups to help promote inclusion and discusses how the
structural funds could be used to promote the inclusion agenda.
9.4 At present 26% of total Objective 3
funds in England are spent on Policy Field 2 promoting Social
Inclusion and Equal Opportunities as opposed to 40% in Scotland.
9.5 The midterm review of the Structural
Funds to be carried out with the European Commission by December
2003 will offer an opportunity to redirect funds to areas and
individuals experiencing disadvantage. As part of it's submission
to the Monitoring Committee and the Commission TSEN will be proposing
the reintroduction of a priority for capacity building and measures
to combat discrimination operated through direct bidding. In this
way communities will be able to define their own needs in a regionally
agreed framework and have access to a sensible allocation from
funds for developing solutions.
9.6 Recent research
shows that, in England, 35.1% of all approved 2000/200 1 ESF applications
were from the voluntary sector, with an overall policy field breakdown
This illustrates the continued substantial involvement
of the sector in the field of equal opportunities and social inclusion.
9.7 Any provision retained for the groups
helped by the VOS should reflect at least this level of operation.
TSEN believes that
10.1 European Funding has been used effectively
by some parts of the VCS to work on the inclusion agenda for the
10.2 Co-finance was introduced very rapidly
and driven by political considerations; consultation was inadequate
and as a result there have been unintended consequences.
10.3 The mechanisms of Co-finance are not
only undermining the VCS sectors ability to work with the hard
to help but have also lost resources to the programme.
10.4 Co-finance is destroying the community
capacity building work that was and could still be undertaken
with European Social Funds, as such the policy runs counter to
Government policy as expressed in the Compact, the Cross Cutting
Review and Next steps in Volunteering and Giving in the UK.
TSEN recommends that
10.5 Direct bidding for European Social
Funds, at least equal to the proportion of the English programme
used by the VCS (35%) in the early part of the programme should
10.6 That providers should be allowed to
continue using their own match funding to match ESF, thereby extending
the programme. That the match funding should include match funding
`In Kind' and Volunteer time.
10.7 As part of the mid term review of the
Structural Funds the English Monitoring Committee should propose
the reintroduction of a priority for capacity building and further
measures to combat discrimination.
10.8 A full consultation by the DWP be put
in place to inform the English Government's input into the post
2006 Structural Fund discussions in order to ensure that the focus
on the inclusion agenda is retained in any unitary funds that
might emerge as a model for the new ESF.
10.9 This consultation should be congruent
with and inform the consultation proposed by the DTI, Treasury
and the ODPM in `A Modern Regional Policy for the United Kingdom'.
Tamara F Flanagan
31 March 2003
13 Learning to Succeed 1999. Back
Operational Plan for England and Gibraltar Revised June 2002. Back
Learning to Succeed Post 16 Funding and Allocations First Technical
Consultation Paper Jan 2000. Back
The European Social Fund proposals for Co-financing in England. Back
ESF Co-financing Research-draft report by Chris Allison LRDP
Ltd. March 2002. Back
Evaluation of the Initial Implementation of ESF Co-financing
in England-p 4. Back
Ibid p 73. Back
Ibid p 72. Back
Ibid p 72. Back
European Social Fund-Co-financing Consolidated Guidance March
2002 p 9. Back
Analysis of CFO coverage in 4 Government Office Regions, London,
Southwest, Northeast and East Midlands by TSEN officer based at
Op Cit. Back
Implementation of Co-finance, Alex Fraser Associates 2002. Back
Evaluation of the Initial Implementation of ESF Co-Financing
in England. Back
Source: DfES/DWP statistics 2002. Back
Op Cit. LRDP report March 2002. Back