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Myths about the voluntary sector - Parts 5 and 6

10 Sep 2015 - 11:54 by Mike Wild

A few weeks back I met with a group of voluntary & community sector leaders working with children young people and families and our local Director of Children's Services. We were talking about how to build the relationship between the sectors so we hit on the idea of writing a blog to challenge a few myths and misconceptions which tend to distort the relationship.

What follows was written for an audience of people working in the public sector and in social services roles. That said, there is enough here which is generally true of the relationships between the sectors (in Manchester at least) that I thought it was worth sharing more widely.

This is Parts 5 and 6. Click here to read Parts 1 and 2 and click here to read parts 3 and 4.

 

Myth 5: Charities only ever want to talk about money – the voluntary sector relies too much on statutory funding
The State of the Sector report published in 2013 showed the local sector’s financial income was about £477millon. At the time, around £47m of that came from Manchester City Council. So you could say that for every £1 invested by the Council in the local voluntary sector, we brought in around £9 more (and that doesn’t include the financial value of the volunteer time, the savings made to the public sector in reducing demand, etc.).

That figure of £47m is misleading because you might think the Council just hands over £47m to the sector and we then get to choose what to do with it. The Council does not ringfence a certain pot of money for the voluntary sector. The days of grants are long gone: most of that £47m (which is now much less, of course) was won by voluntary sector organisations through competitive processes such as tendering. Much of it could equally have gone to private sector bidders.

The theory in moving to contracts rather than grants is that voluntary organisations could bid to deliver services on a commercial basis: the assumption is the competitive process would drive up quality and organisations winning contracts could use the “profit” they make from contracts into their other charitable activities. However, even before the days of austerity that is not how it worked in practice: most of these contracts don’t leave any room for a financial surplus and the contracting culture is very admin-heavy – but many voluntary organisations feel like they have to compete in this marketplace. Partly because the contract may be for a service which they developed and delivered in the first place and sometimes because of concern that private companies may not have the same values based approach.

One important point about grants vs contracts is that a contract might require the charity to register for VAT: which can be a huge administrative burden to an organisation for relatively little benefit. Most charities spend around 80% of their budget on staff so they don’t really gain anything by being registered for VAT. Public sector officials rarely have to deal with VAT so often don’t understand this: even nationally, the NHS has something it calls a “grant agreement” but it’s over 20 pages long and has 100+ pages of supporting documents setting out other requirements.

You might think that voluntary organisations can launch fundraising appeals and ask the public to help with donations after all with online giving it’s easier to do that now. The reality is that some causes gain more attention than others and people tend not to give to things which they assume the state is / should be paying for: like advice services or domestic violence support. Public fundraising simply can’t fill the gap left if a major contract or funding stream is lost.

If you look at a charity’s accounts you’ll see the level of reserves they’re holding: so why don’t they spend those? Actually far too many of them have been doing just that in the last few years – dipping into reserves to ‘keep the doors open’ as demand increases. National evidence suggests that most charities which have reserves have about a month’s worth of running costs. That’s not enough if you have to make redundancies amongst paid staff with any length of service, for example.

The reality for most voluntary organisations is year-on-year funding, trying to manage a balance of a range of funding, contracts, income streams and general fundraising in which the “price” is generally set by the funder and demand is set by the people who use the services, make referrals, etc. Imagine trying to build a house of cards on shifting sand while standing on one leg on a rug which someone is pulling from under your feet and you’ll get the idea. Most of us in the voluntary sector simply get used to living with that level of uncertainty and just get on with trying to make it work.

But the bottom line with all of this, particularly from Macc’s perspective, is that the voluntary sector is a means to an end: voluntary organisations are there to create a benefit for local people.
 

Myth 6: The voluntary sector is fabulous! They can do everything!
There’s certainly a lot of fabulousness in the voluntary sector but challenging positive myths is important as challenging negative ones. We’d never say that everything is brilliant about the sector any more than we’d say you should automatically give people money just because they have a charity registration number. There’s a lot of debate in our sector about than risks of “charismatic leadership” – what happened with Kids Company recently is not a new story – people in our sector can be very good at marketing their cause and building expectations too high on reach, impact and innovation. Just as with management solutions, there’s “fashionableness” among voluntary sector projects.

Some organisations have weak governance or others fall into the trap of “mission drift” and spend time chasing opportunities for new funding rather than focusing on their core purpose.

The important thing is not to make broad assumptions about “the sector” – you need to look at the individual organisation. For example: there’s an impression that large regional or national charities will swoop into Manchester and try to win contracts currently delivered by smaller local ones. Certainly that does happen occasionally. Does that matter? In itself no it doesn’t: it’s about what is going to create the most benefit for local people. Equally, many of the large national charities who have developed a local branch are great at working in collaboratively with smaller local organisations and often have more capacity to assist with things like sector representation on Safeguarding Boards and other partnership structures, working through the Forum to be accountable back to the wider sector.
 

So there are some thoughts on 6 myths I hear repeated a lot. I've only tried to capture some of my own thoughts about these, rather than give a fully researched and evidenced answer on everything. That would be a book not a blog. There are also others could address, of course - particularly challenging some of the myths regularly revived by parts of the media about charity CEO pay, fundraising, campaigning and "lobbying". If you've any thoughts or comments on these blogs as always, please use the comments box below. I try to write as a prompt for discussion, not a definitive statement so I'm interested to hear what others think.

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