Charity Support, Advice, Impact Measurement, Philanthropy Impact – NPC

Aspirations and reality—how the voluntary sector can achieve even more

By Dan Corry 21 September 2014

Political conference season is upon us, kicking-off this weekend with the Labour Party in Manchester. NPC will publish a detailed manifesto for the charity sector early in 2015—in the meantime, Chief Exec Dan Corry thinks about the biggest challenges facing Charity Ministers present and future.

All political parties have long talked about the role they see the charity sector playing in UK society. This aspiration is the right one. The sector already does a lot to make our society and economy stronger and fairer, but there is an enormous amount of potential that has yet to be harnessed.

If this vision is ever to become reality, political parties must act now—by encouraging a culture that supports charities to use their resources in the best way possible.

The new Minister for Civil Society does not have much time before a general election to oversee major changes in the charity sector. Yet this does not mean he cannot make a start. Similarly, other Westminster parties should also begin to think about the reforms the sector needs—and the culture of impact which should be central to them.

Below are our priority reforms that would help place a culture of impact more at the heart of the social sector.

    Strong governance is important for any organisation, whether it is a FTSE100 or a small charity. However, in the charity sector, the regulations direct trustees to focus more on survival of the charity, rather than achieving the charity’s mission. NPC believes the language of the Charity Commission’s trustee obligations should be re-drafted to focus less on acting in the interests of the charity, and more on the interests of the core mission of the charity. If trustees were required to report each year on the impact of the organisation on its core mission and how it plans to improve, this would be a powerful nudge to more impact-driven behaviour. This report could form an additional element of the financial reporting each charity has to submit to the Charity Commission, and would help change the culture of the sector by bringing a focus on impact to the very top.
    As a core principle, NPC believes strongly in transparency in the charity sector. It is right that the public, potential donors, users and beneficiaries should be able to see how charities operate. Transparency is critical to both measuring and increasing impact. Our position on this issue contrasts with what many membership organisations within the sector have been saying.Transparency should apply to income and expenditure, as we argued in our response to the recent Charity Commission consultation. Ideally, it should also surround data on what charities actually achieve—their impact—and our proposal above for trustees starts to move towards this. The Charity Commission should consider what more it could do to help in this area.Data-sharing is also a critical element of this agenda. One aspect of this work concerns ensuring charities can access government-held administrative data, so that they can better assess what works well, track the progress of clients, and continually improve the ways in which they deliver their services. We have already worked with the Ministry of Justice to produce the Justice Data Lab, and we believe many more departments should join in this data revolution.
    Without reform of the design of contracts, as well as the bidding process and feedback systems, it will remain extremely difficult for charities interested in this area to maximise their potential. NPC believes that the next government should aim to design contracts in a way that attracts more competitive bids from the charity sector, with the target of awarding a minimum of 10% of new contracts to charities and not-for-profit organisations as the prime provider. This doesn’t mean using 10% as a maximum—in some areas of work the proportion of charity contracts already exceeds this, and there is no reason for the proportion to grow beyond 10% in others.Such a redesign might include longer-term contracts, greater time for commissioners and interested parties to liaise in the pre-procurement phase, and a more sensible design of payment-by-results contracts—so that charities providing services to a prime contractor are not landed with the greatest risk for the least stable income as a result. To scrutinise these changes, NPC believes that commissioners should be required to publish a report annually that shows:– Data on the percentage of contracts going to charities, and the number acting as prime contractors; and
    — What steps they are taking in service and contract design to ensure that at least 10% of contracts are being granted to the charity sector.

The Public Accounts Committee would audit the information in these reports and respond through their own published report.The 10% target we propose would bring two immediate benefits to the commissioning system. Where charities have resources that make them particularly well-suited to providing a service—a network and high levels of trust in a local area, for example—contracts should be designed to ensure that they have a fair chance of delivering that service. The target would also create a benchmark against which to measure the quality of services delivered by charities versus those delivered by other providers, so that future commissioning decisions are informed by more robust and reliable data.

    Smaller charities and community groups in some of the most deprived areas of the UK have been among the worst hit by the recession. Despite the economic recovery, the next two years look particularly difficult: many charities have struggled through to now using reserves and volunteers, but our contacts suggest that many are now standing at the edge of a precipice. Meanwhile, the prime funder for many of them—their local authority—is facing an uncertain funding future until the next election has taken place and a new spending round been concluded. NPC believes that the government should focus attention on making sure effective local charities in these areas have the best chance of surviving over this period. To the degree that grant money is available we would welcome that. If, due to ongoing constraints on the public purse, this needs to be revenue neutral within the sector, the government should look instead at what switches might be made in terms of grants that currently go to the sector and in altering tax reliefs for a limited period.