Examination of Witnesses (Quesitons 1-19)
DEPARTMENT FOR
CULTURE, MEDIA
AND SPORT,
SPORT ENGLAND,
ENGLISH HERITAGE,
ARTS COUNCIL
AND BIG
LOTTERY FUND
MONDAY 2 JUNE
2008
Q1 Chairman: Good afternoon. Welcome
to the Committee of Public Accounts where today we are looking
into the Comptroller and Auditor General's Report into Making
Grants Efficiently in the Culture, Media and Sport Sector.
We welcome to our Committee Nicholas Holgate, who is the Chief
Operating Officer from the Department for Culture, Media and Sport;
Alan Davey, who is the Chief Executive of Arts Council England;
Peter Wanless, who is the Chief Executive of The Big Lottery Fund;
Dr Simon Thurley, who is Chief Executive of English Heritage;
and Jennie Price, the Chief Executive of Sport England. Perhaps
I will start with you, Mr Holgate, and if anyone else wants to
chip in they can do. If you look at paragraph 2.2 of the Report,
which you will find on page 18, you will see: "The Department
considers that as the grant-makers are different types of bodies
working in different sectors, the costs of their grant programmes
are not comparable. It does not therefore require grant-makers
to report against a common set of measures." But if you are
not comparing the efficiency of these various grant-makers, how
can you ensure that they are doing their jobs properly and, for
instance, are not wasting money on bureaucracy? Surely it makes
eminent good sense to compare how they are performing in this
regard, does it not?
Mr Holgate: Thank you, Chairman.
What the Department does is place general pressures on the totality
of the operating costs of these bodies by one means or another
and we delegate to the managements of those bodies exactly the
locations of the savings, and in most cases it is year-on-year
savings comparing like-with-like. We do not insist on them comparing
across each of the bodies who are engaged in intrinsically different
roles.
Q2 Chairman: Why not? It rather calls
into question what is the point of your Department. If these are
independent bodies doing much what they want to do and you are
not comparing their efficiencies, which I would have thought you
could do, because although they are different, they are making
grants in very different enterprises, they all have offices, they
all have IT systems, they all have forms and applications for
these grants, I would have thought this is a prime role for you
to compare what they are doing and ensure that they are efficient,
that they learn best practice.
Mr Holgate: Yes. Can I give two
complementary answers to that question? The first is that although
there are processes that are plainly common to nearly every form
of grant regime you can imagine, if they are interspersed or,
as it were, alternating bits of a process which are quite different
and quite unique to the grant-giver in question, then it is not
actually that easy to compare meaningfully and draw useful management
conclusions from what proportion of a small number of pence per
pound goes on a particular function which happens to be the same
one compared with another. The second part of my answer is that
because of the pressures that we put on all these bodies to save
costs year-on-year it is actually entirely in their interests
to compare costs with one another. We are putting absolutely no
hindrance in their way, and we have made attempts to do that and
they have made attempts to do that in the past. The sad fact is
that we have not learned enough from that process in the past
to make a regular job of it. What they have had to do instead
is find other ways of making the efficiency savings.
Q3 Chairman: Reading on in the report
on a similar sort of theme, paragraph 4.19, page 38: "However,
the grant-makers had not taken the opportunity to work together
to identify potential cost savings or efficiency gains. For example,
the Arts Council and Sport England were independently implementing
shared service centres in different locations, but had not appraised
the costs and benefits of sharing facilities ... " This seems
to me fairly basic. This should be the prime role of your Department,
to ensure that we are getting value for money, should it not?
Mr Holgate: Again, we did try
to make such comparisons several years ago and it did not yield
insights of sufficient value that that should become the driving
force to determining the scale of costs to be expended on—
Q4 Chairman: You say that but, frankly,
I do not buy that. If you read 4.20, it says: "Similarly,
the grant-makers had all separately developed and implemented
their own grants management IT systems and there was little evidence
that they had shared knowledge of effectiveness or lessons learned."
Are you still going to stick to your mantra that they cannot learn
from each other?
Mr Holgate: Well, I think they
can learn from one another.
Q5 Chairman: That is all I am saying
to you.
Mr Holgate: I also think they
can learn from other bodies. There are examples. For example,
English Heritage looks to Defra for some steer on what you would
expect grants with characteristics not wholly dissimilar to the
Repair Grants to have. They can and do learn, the question is
how much effort you put into that compared to other ways of bearing
down on costs. That is the essential—
Q6 Chairman: Perhaps I can ask Mr
Wanless, would you describe yourself as the voice of this sector?
Mr Wanless: The voice of the grant-making
sector?
Q7 Chairman: Yes.
Mr Wanless: We are probably the
biggest—
Q8 Chairman: Exactly. Why do you
not try and answer this question that I put to Mr Holgate. Let
us look again at paragraph 2.2.
Mr Wanless: Yes.
Q9 Chairman: Before this Report was
published, did you compare the costs of making these grants between
different bodies?
Mr Wanless: Up to a point, yes.
We have looked to both develop performance measures, key performance
indicators, to test our effectiveness and the costs of our processes
and looked at sharing those not just across Lottery distributors
but grant-makers as well. We have a lot of conversations through
the Association of Charitable Foundations and also the Intelligent
Funders' Forum, which we describe. I would reinforce what Mr Holgate
has been saying about the elements of the grant-making process
which are common to different grant-making schemes but a portion
of the total operation, so even across the Big Lottery Fund there
is a range of different programmes which we would support which
would have different cost-drivers depending on the policy objectives
we were seeking to achieve from that programme.
Q10 Chairman: Perhaps, Mr Davey,
I could ask you about this IT point that I put to Mr Holgate.
This is mentioned in paragraph 1.16. You had a new IT system in
2006, did you not?
Mr Davey: Yes.
Q11 Chairman: Why are you all using
separate IT systems? When you brought in a new IT system why did
you not go round the other grant-making bodies and see if you
could share IT?
Mr Davey: We did look quite widely
at a number of examples of different systems. The one we chose,
which is called Arena, is more than a grants management programme,
it is also around procurement and wider finance management. If
I can put that in context for the Committee, that is part of a
series of quite large structural changes we have been making over
the last five years which began with combining 10 organisations
into one, which continued with combining over 100 grant schemes
into five, and has continued with 10 IT systems into one. We concluded
after extensive study that the Arena system we chose was the most
cost-effective for what we required from it. Taken together, all
of those initiatives that I have outlined there have saved us
£10.3 million. That is before we start our further work in
coming years.
Q12 Chairman: If I could ask about
Sport England's IT system, for instance, we read in paragraph
4.l3: "All applicants to Sport England's Community Investment
Fund programme can now apply online", that is fine, "We
found that for the other grant programmes we looked at, however,
the grant-makers continued to receive large numbers of paper-based
applications." Surely we should be making more progress there,
should we not?
Mr Davey: If I could comment on
the online application issue. That is something we want to make
progress with in this spending period, although we do find that
some of our clients prefer paper-based applications. When we are
dealing, for example, with individual artists they might not have
the IT requirements that a totally online process would require.
However, we do want to move to an online process and we think
that might bring benefits.
Q13 Chairman: Perhaps I could ask
Mr Wanless then further on this IT point. In the USA, this is
dealt with on page 37, if you look at figure 22: "Grant-makers
in the US have developed automated shared services". Have
you seen this?
Mr Wanless: Yes.
Q14 Chairman: This seems to be quite
an interesting idea. Why have you not got something more along
these lines in this country?
Mr Wanless: We actually do have
something rather similar to this up to a point already. The Lottery
distributors together run a website called www.lotteryfunding.com
and there anyone can go in, answer very simple questions about,
"How much money are you seeking to access? Where do the people
live that you are seeking to help? What is the subject you are
seeking to support?" One click and it will tell you the Lottery
programmes that are open for distribution. From there you can
print out the application form, the rules, procedures and all
the rest of it. We are not yet at the stage where applications
can be made online right the way across the piece and, like Mr
Davey, I am really keen the Big Lottery Fund should get more of
its application processes online. We can see based on experiments
we have done on online applications previously that that very
significantly improves the cost-effectiveness of the programme.
Q15 Chairman: Perhaps I can ask Mr
Davey again, would you like to look at figure 11. Right at the
top there: "Direct staff cost for each £ of grant awarded:
Grants for the Arts for Individuals: 18 pence. Grants for the
Arts for Organisations: 4 pence." Why is it so much more
for an individual?
Mr Davey: Because a large part
of that cost is around the development work we undertake with
individual applicants. The Grants for the Arts for Individuals
scheme is one of the main development schemes we have for developing
individual artists, individual artists such as the Hull novelist,
Stephen Wells, who got a small grant of around £4,000 to
allow him time to write his novel, which he did and it became
successful. That is an individual artist who has been helped by
us and who was helped with a lot of development work from the
Arts Council. That kind of work is included within the cost. However,
clearly I want to look to see how those costs lie and to see if
we cannot get process costs down and development costs down as
well as other costs, such as assessment costs.
Q16 Chairman: Could I ask another
question of the Big Lottery Fund. This is dealt with in figures
11 and 15. We read that it takes on average about five days' work
to do a grant but you only spend about £200 on each grant.
What is going on here? Is there not a mismatch between the two?
Mr Wanless: This is the Awards
for All programme?
Q17 Chairman: Yes.
Mr Wanless: We do not prescribe
how much time applicants should choose to put into applying for—
Q18 Chairman: It only costs you about
£200 for processing each application but you need applicants
to spend about five days putting the application together.
Mr Wanless: I would not say we
needed them to spend five days. If they choose to spend five days
it is probably time well-spent because they are going to put together
a good application which is going to help with the planning and
delivery of their proposal. The application form, and I have got
one here, is pretty simple. You answer 20 questions and you have
got about a 50% chance of securing an award. We administer it,
as you can see from the figures, pretty cost-efficiently, not
to say we could not do it better as we move online into the future.
Q19 Chairman: Dr Thurley, can I ask
you, at figure 13 we read that the average administration cost
for each grant awarded was £9,700. That seems a lot of money
to me.
Dr Thurley: Our grants are quite
big grants and, as the NAO pointed out, it works out as about
7.6% of the cost, which is a significant reduction. In 2003-04
we did an exercise which calculated the cost of undertaking our
grant programme and it was 9.15%, so what the NAO are showing
is our percentage has actually dropped quite a bit over the last
three years.
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