COVID-19: Government Support for Charities Contents

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1Transparency over how decisions about how to allocate the funds were made

1.On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Digital, Culture, Media and Sport (the Department), The National Lottery Community Fund (TNLCF) and The Charity Commission on the government’s £750 million funding to charities during the COVID-19 pandemic.1 We also took written evidence from several charities, membership bodies and organisations representing the charity sector and think-tanks.

2.In April 2020, as part of its response to the COVID-19 pandemic, government announced a £750 million financial support package for organisations in the voluntary, community and social enterprise sector, targeted at those organisations providing vital services to the vulnerable. The Department was responsible for allocating £513 million of the total available funding, including funds distributed through itself, at least nine other government departments, three other public-sector organisations and 186 other partners. HM Treasury provided up to £200 million directly to the Department for Health & Social Care to purchase bed capacity in charitable hospices and at least £60 million was expected to be provided to the devolved authorities.2

3.Of the £513 million, the Department and its partners spent £19 million on administrative costs leaving £494 million of funding for charities.3 By 7 April 2021, it had paid out more than 90% of this total to charities.4 The Department allocated funding through seven different schemes, announced at different times between April and December 2020:

i)the Coronavirus Community Support Fund (CCSF) via The National Lottery Community Fund (TNLCF) (By 7 April 2021, £188 million paid out of £199 million allocated);

ii)21 sector-specific projects across nine government departments including the Home Office, Department for Education and the Ministry of Justice (£159 million paid out of £164 million);

iii)the Community Match Challenge scheme (£82 million paid out of £85 million);

iv)the National Emergencies Trust, BBC Children in Need, and Comic Relief to match donations raised through the BBC Big Night In fundraising event (£34 million paid out of £37 million);

v)the Youth COVID-19 Support Fund (£3 million paid out of £17 million);

vi)the Loneliness Fund (£5 million paid out of £8 million); and

vii)the Voluntary and Community Sector Emergencies Partnership (£4 million paid out of £5 million).5

Total value of the package

4.We asked the Department how it had calculated the amount of money it would make available to support charities through the pandemic. It explained that it worked as quickly as possible to develop its plans yet there was inevitably some uncertainty and assumptions that had to be made about what might be a sensible package to support charities.6 The Department told us that the overall value was a “reasonable estimate, considering the atmosphere of uncertainty”.7 It also said there was no target on the number of organisations the funding was intended to support – it wanted a mix of large and small and medium sized charities. The Department stated that it would be very difficult to estimate what the specific loss due to the pandemic would be for many charities.8 The Charity Commission suggested that individual donations might have increased at the start of the pandemic by as much as £800 million.9 However, the Association of Chief Executives of Voluntary Organisations (ACEVO) told us that charities might have lost as much as £4.3 billion between March and May 2020, whilst Pro Bono Economics ran a survey which suggested as much as £6.7 billion had been lost in income.10 The Department acknowledged that, in contrast, it had estimated the number of organisations it aimed to support through the Culture Recovery Fund (CRF), a support package for cultural organisations unable to operate during the pandemic. It aimed to support 75% of cultural organisations through the CRF.11

5.We asked the Department why the CRF received nearly three times as much funding as charities. The Department explained that the two sectors (charities and arts) were in different situations and that many of the organisations supported through the CRF had been forced to stop their activities completely throughout the past year, which was not the same situation that charities found themselves in. The Department stated that in many cases charities were not closed but actually seeking to meet increased demand for their services.12 The Department explained that many charities had also accessed other support measures announced by HM Treasury, such as the furlough scheme.13 The Department admitted however that it did not know, at the time of designing the charities funding scheme, exactly how the furlough scheme was going to affect charities and how much of the income gap would be closed.22 In written evidence, ACEVO told us that whilst some charities were able to access other sources of funding such as the furlough scheme, others were not eligible because they had to keep their doors open. It said that loan schemes, such as the Bounce Back Loan Scheme, were not designed with charities in mind as loans were often inappropriate funding mechanisms for charities. It explained that whilst charities welcomed the emergency funding, it did not address the funding gap identified and could only meet the needs of a small number of charities working in a limited set of sectors.14

Transparency in the allocation of funds

6.We questioned the Department about how it decided which bids from other government departments it would provide funding for. Special advisers were invited to discuss the initial assessments from the Department’s officials before final advice was given to Ministers.15 Correspondence from the Department showed that in the meeting to discuss bids five special advisers were present alongside officials from the Department, HM Treasury and the Prime Minister’s Office.16 The Department told us that advice was often written by officials which special advisers then commented on, as was appropriate. However, in the interests of working at pace it had brought the two processes together, which the Department recognised was an unusual form.17 We asked whether the Department had, or planned to, publish information that would allow Parliament to tell what influence special advisers had or the advice submitted to Ministers.18 The Department emphasised that while special advisers were involved in discussions and that these discussions informed the advice that went to Ministers, the advice provided to Ministers was from officials who had been comfortable with the proposals that had been put forward.19 We noted that special advisers had a very important and useful role to play in government, but that if the distinction between special advisers and civil servants is blurred “there can be a real danger constitutionally, and it can case real questions”.20 We remarked that the level of influence exerted by special advisers and their involvement at the point of decision making appeared to go beyond anything we had previously witnesses as Members of this Committee or in previous Ministerial roles.21 We were concerned that there had been a lot of senior advisers “making very candid and detailed comments on these [Minister’s] briefings”.22

7.Given our concerns that this was an unusual process, the Department contended that it was not different from the normal process by which advice was offered to Ministers. The Department, however, was unable to offer further examples of when such an arrangement has been used.23 Nor was it able to say whether, or give examples of, the recommendations by officials changed after the meeting with the special advisers, repeating that special advisers may provide information that was helpful, but that it did not consider this the same as “influencing or changing the advice, which I am certain did not happen”.24 When asked in what way the information could be helpful if it did not lead to a change in advice, the Department told us that it was often the case that special advisers had a stronger sense of the issues that were being raised with Members of Parliament than officials, which was “significant and important” but reiterated that “it is not influence, but there will obviously be information discussed that is useful”.25 The National Audit Office found that in addition to all four proposals that officials had rated as highest scoring (Green) being selected for funding, nine out of the 13 bids that officials had assessed in the lowest scoring category (Red) were also selected for funding. This included four of the five lowest scoring applications.26

8.The Department provided £30 million of funding to the Department for Environment, Food and Rural Affairs (DEFRA), with £7 million allocated to the Zoo Support Fund.27 We asked the Department why the allocation to DEFRA to support zoos came from funding designed to support charities helping the vulnerable during the pandemic. We remarked that this seemed at odds with the fact that many zoos operate as businesses rather than charities. The Department explained that the design was the result of officials being “extremely concerned about the welfare of animals in zoos and what was going to happen as a result of zoos being closed during the period.”28 We asked whether this was an appropriate mechanism to support zoos, considering that a fund to support zoos was already in place through DEFRA. The Department stated that “Ministers took a view that they wanted to allocate funds to zoos” but was not able to provide any further detail.29

9.We also asked about the decision-making process around awards for the Community Match Challenge scheme, where the Department match funded the amounts raised by philanthropic groups, foundations and grant-making organisations. Ministers selected twenty organisations to receive funding, including seven out of the ten highest scoring applications. All four of the proposals that were assessed as having the lowest score by the Department’s officials, however, also went on to receive funding, including three instances where officials were unsure if they were eligible.30 The Department said that after initial bids were scored it presented initial ideas to Ministers about how the funding could be distributed, and there was a “set of discussions with Ministers about their views and preferences” which led to further information being sought from bidders. This subsequently confirmed that those organisations were eligible for funding and resulted in funding being approved for those proposals. The Department asserted that the processes followed were appropriate, with advice being iterated as new information became available.31 It was, however, unable to elaborate further on what new information came to light that led to the lowest scoring applications receiving funding.32

10.The Department reduced the funding allocation to TNLCF from £310 million to £200 million around one week before it was due to start distributing funding.33 When asked why this was the case, the Department told us that it was due to the fact that Ministers wanted more flexibility in how funding was distributed and were interested in whether more could be done to leverage private donations as part of the funding distribution.34 It clarified that the decision was “absolutely not” because of a lack of trust in TNLCF.35 The funding that was removed from TNLCF was instead later allocated to the new Community Match Challenge scheme, the Voluntary and Community Sector Emergencies Partnership, the Youth COVID-19 Support Fund and the Loneliness Fund.36 The Department highlighted that by redirecting money to the Community Match Challenge scheme it was able to leverage additional funding because of its match funding arrangement. TNLFC said the decision did not impact how it went about advertising the available funding or the ability of the funding to support small and medium-sized charities.37

Due diligence on funding awards

11.The Department paid £2 million in 2020–21 to a professional services firm, PwC, to provide support on grants and operations, including checks on awards made by TNLCF for the Coronavirus Community Support Fund (CCSF).38 We asked why this additional support had been needed and how the Department ensured that it was not duplicating work already being undertaken elsewhere. The Department said that this support was not designed to take over jobs from civil servants and that the majority of the administrative work relating to the funding for charities had been completed by civil servants. The Department explained that Ministers wanted to thoroughly understand the process that was being followed and ask questions about it given the pace at which progress was needed.39 When we asked TNLFC whether it felt that it had the skills necessary to undertake this work itself it said that it was “confident in our processes in terms of making the appropriate awards.”40 We questioned the additional value that the Department received for its £2 million investment of taxpayers’ money. The Department acknowledged that the process “had not been set up in the best possible way to start with” and that ultimately very few bids were subject to detailed review.41 It changed the process after a short amount of time because it decided that reviewing awards under £10,000 was overly onerous.42

12.We have found in our reports on the government’s response to the COVID-19 pandemic, that the need to act at speed can reduce transparency and increase the risk of fraud and error. In our report examining Government procurement and the supply of Personal Protective Equipment, we found that Government had faced significant challenges in having to work at pace, using emergency procurement procedures in a competitive international market. But its failure to be transparent about decisions, publish contracts in a timely manage or maintain proper records of key decision left if open to accusation of poor value for money, conflicts of interest and preferential treatment of some suppliers. While levels of fraud were low, the costs could run into millions of pounds.43 Similarly, in our report on the Bounce Back Loan Scheme, we concluded that shortcoming in the Scheme’s design had exposed the taxpayer to potentially significant losses and that plans to manage risks from the taxpayer from fraud and borrowers who were unable to replay loans were woefully under-developed. Government had been prepared to accept a higher level of risk to ensure that loans were available to businesses as quickly as possible. The Department for Business, Energy and Industrial Strategy estimated that potential losses from fraud and credit risks were between £15 billion and £26 billion, and could be even higher and the estimate was highly uncertain.44

13.By February 2021, the Department had identified 76 fraudulent applications, 70 of which had resulted in awards. The Department estimated that up to £614,000 had been distributed to fraudulent applicants and had reported cases equivalent to £400,000 to the police. The remaining £214,000 were still under investigation. The Department estimated that fraud levels could be between 0.5% to 5% across all schemes by the time it has completed all post-award checks, a process it expected to complete in May 2021.45 The Department accepted that its decision to prioritise getting money to charities quickly to meet the extra demand cause by the pandemic increased the potential for fraudulent claims. It stated though that it also had an objective to ensure the money was “distributed in the right way” to try and prevent fraud.46 But it agreed with the Cabinet Office that a “risk mitigation approach” was sensible that allowed it to shift some of its usual upfront checks to post-award instead.47 It said that to-date it had detected fraudulent awards worth £624,000, a £10,000 increase from the value in February 2021, with most of these awards so far in the CCSF, in part as funds were paid out earlier than other schemes and checks on other schemes are ongoing. It explained that the total fraudulent awards were less than 0.5% of the total funds being distributed but there were still many post-award checks to be completed. The Department committed to doing “everything that we can” to recover the money according to the government’s usual approach to clawbacks.48