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In recent years government has increased the role which voluntary sector organisations (VSOs) play in public service delivery. The voluntary sector comprises a range of organisations, including local community and voluntary organisations and others at regional, national or international level, working as charities, social enterprises or co-operatives. VSOs may be best placed to deliver a service, particularly where the target group is difficult to reach or distrustful of state agencies. The sector is a prominent provider in some areas of public services, but accounts for only around 0.5% of central government expenditure. The Home Office estimated that central government funding of VSOs, excluding housing associations, in the United Kingdom was £2.03 billion in the financial year 2001-02, the most recent year for which data are available. Additionally, funding of £1.87 billion came from local authorities, £904 million from the National Health Service and £274 million from the European Union.
The Treasury and the Active Communities Unit of the Home Office play leading roles in disseminating good practice and reviewing departmental progress against the Home Office's target to increase the sector's involvement in public services by 5% by 2006. Where good practice exists, it has tended to be as a result of individual initiative rather than a well thought through or cohesive strategy. There is, however, a lack of expertise, experience and understanding of the sector across government departments with the result that departments can fail to capitalise on opportunities to enhance public service delivery through use of the sector.
Departments have also been slow to move away from long established funding mechanisms, such as annual grants even where there is an ongoing intention to continue to run programmes for the foreseeable future. This approach results in expensive annual bidding exercises, which divert VSO and departmental resources away from frontline work. It also creates uncertainty for the VSO, impacting adversely on their ability to retain experienced staff.
Delays in notifying funding awards are another recurrent theme, as is a reluctance on the part of funders to provide funds in advance of expenditure, making it difficult for smaller charities in particular to start up services. Some VSOs have borne a disproportionate share of the risk and cost of service delivery, as funders have been unwilling to contribute to VSO overheads even though private sector suppliers would be recompensed for overheads when quoting a price for a service.
On the basis of a Report from the Comptroller and Auditor General,[1] the Committee examined the progress made by central government to improve the way it works with VSOs and the steps being taken by HM Treasury and the Home Office to build funders' capacity to work effectively with VSOs.
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