House of Commons - Public Accounts

Select Committee on Public Accounts Forty-Ninth Report

1 Assessing the cost-efficiency of making grants

1. In 2006-07, the nine principal grant-makers sponsored by the Department for Culture, Media and Sport (the Department) received some £2 billion in funding from the Exchequer and the National Lottery, and awarded grants totalling £1.8 billion (Figure 1). The administrative cost of making these grants and carrying out related activities was in the region of £200 million.[2]

Figure 1: Value of grants awarded by the nine principal grant-makers in the culture, media and sport sector in 2006-07

Source: C&AG's Report, Figure 3

2. Grant-makers held little information by which to judge whether their grant-making was cost-efficient. They had not routinely undertaken an analysis of the costs of their processes, and the Department and the grant-makers had not agreed common measures to assess and compare costs or efficiency across the sector. Without some means of comparison, it is hard to see how the Department could perform an important aspect of its role as sponsor by ensuring that the grant-makers were operating efficiently in carrying out their core activities.[3]

3. The Department's approach to achieving savings in the sector had been to put pressure on grant-makers' total operating costs, although how and where savings were made was a decision for each body. The Department had not insisted on all grant-makers comparing costs with each other as it considered they were intrinsically different. However, it agreed that for them to achieve savings it was in the bodies' interests to compare costs with one another. The Department required grant-makers distributing lottery funds to report their total administration costs on a consistent basis, as they all distributed large volumes of grants, but it had no such requirements for those bodies funded by the exchequer. This was because, at these bodies, grant-making was often only a small part of their business. The Department and grant-makers had attempted to compare costs several years ago, but had not learned enough from the exercise to continue it on a regular basis.[4]

4. The C&AG's Report focused on the costs of making grants at Arts Council England, Big Lottery Fund, English Heritage and Sport England. Between them these organisations had accounted for over 60% of grants made in the sector in 2006-07. The National Audit Office looked at a sample of eight of their grant programmes, through which £647 million of grants had been awarded in that year. The grants ranged in size from a few hundred to many millions of pounds. They funded a wide variety of activities from educational schemes for children and theatre performances, to the restoration of places of worship and the building of new sports facilities.[5]

5. The cost of making a grant across the programmes varied, although most had the same basic administrative processes in common. For example, 'open application' programmes, those to which anyone can apply, typically involve promoting and providing information on grant programmes, setting up and maintaining an applications process, receiving and logging applications, notifying applicants of decisions, and monitoring outcomes. For the six open application programmes covered by the Comptroller and Auditor General's Report, the average cost of awarding one pound of grant ranged from 3 pence on the Big Lottery Fund's Reaching Communities programme to 35 pence on the Arts Council's Grants for the Arts for Individuals programme.[6]

6. The Arts Council's Grants for the Arts for Individuals was its main programme for developing individual artists. In 2006-07, it made 1,666 awards with a combined value of £9.8 million to all types of artists, including choreographers, poets, novelists, photographers, sculptors and painters. It cost the Arts Council £3.9 million in that year to administer the programme, of which the direct staff cost was £1.8 million. We asked why the average cost of awarding £1 of grant was 35 pence, whereas the cost to the Arts Council of making a grant to an organisation under its Grants for the Arts programme was just 7 pence. The Arts Council said that a large part of the cost was spent on supporting individual artists to develop their proposals and so increase their potential to be awarded funding. One of its duties as an arts development organisation, under its Royal Charter, was to increase opportunities for artists to practise their art. Although emerging artists often had a general idea of what they wanted to do, specialist Arts Council officers had to work with them to develop credible proposals so that funding went to projects that would attract an audience. [7]

7. The Arts Council gave the example of the Hull novelist, Steven Wells. He had received support from the Arts Council's literary department in his regional office to develop his ideas and, because he had no other source of income, had been awarded a grant of £4,000 to allow him time to write his novel. We were surprised that novelists were receiving such public support and funding, and questioned how the Arts Council's staff could substitute for commercial literary agents.The Arts Council explained that it gave the would-be writer, who may not be able to afford to take the time off, the opportunity to write a book. It did not, however, second-guess the commercial publishing sector's decision on whether the book was published or not.[8]

8. In 2006-07, 80% of the grants made under the Arts Council's Grants for the Arts for Individuals programme were for £5,000 or less, and it cost £2,000 on average to administer each grant. We questioned whether the cost of making grants to individual artists was proportionate to the value of the grants made. The Arts Council told us that it planned to look at where its costs lay in the grant-making process to see whether it could reduce both its development work and other costs. It could then consider whether such costs were proportionate to the outcomes delivered.[9]

9. The average cost of awarding a grant through an open application programme ranged from £380 on Big Lottery Fund's Awards for All programme to £9,700 on English Heritage's Repair Grants for places of Worship programme. In 2006-07, English Heritage awarded £24 million to 225 grant applicants to repair places of worship. English Heritage said that the high costs of awarding these grants reflected the high risk nature of the programme. It involved complex repairs to buildings up to 700 years old, with sums of up to £200,000 awarded to congregations who were normally inexperienced in building projects. It cited as an example a grant given to St Clements in Manchester to fund the repairs necessary to stop water pouring though the church roof. Neither the new vicar nor her churchwardens had ever owned property or had any building experience, but had been faced with managing a £250,000 project to repair an historic building.[10]

10. English Heritage estimated that almost half the £9,700 cost of awarding a grant covered the cost of architects to advise the congregation and the architects they employed. We questioned why English Heritage was paying its architects to support other architects. English Heritage explained that its own architects had unique experience of very old and complex buildings, and their expertise and knowledge in conservation issues made them well placed to estimate repair costs. The cost also included the services of specialist quantity surveyors, as the average surveyor would not be able to advise, for example, on the cost of putting shingles on the spire of a mediaeval church. When questioned on whether the most cost-efficient materials were used to repair such buildings, English Heritage said that, while it always considered the cost of materials, it was often not appropriate to use the cheapest option. For example, alternatives to lead were rarely used for the repair of church roofs for reasons of performance and authenticity.[11]



© Parliamentary copyright 2008	Prepared 6 November 2008