Endowment fund proposed for Communitybuilders

The Social Investment Business asks the government to help organisations that would have to spend their grants or loans before the financial year ends


The organisation managing the government’s £70m Communitybuilders programme has proposed putting its funds into an endowment so that recipients do not have to spend loans or grants in the current financial year.

The Social Investment Business told applicants in October that their bids would only be considered if they could spend any funds awarded in this financial year. It blamed the decision on the Treasury's firmer line on annuality, which requires government budgets to be spent in the financial year or returned.

The National Council for Voluntary Organisations described the move as "outrageously bad funding practice".

The SIB has since asked the Communities and Local Government department, which was responsible for Communitybuilders, to put the programme’s remaining £10m in an endowment run by the Adventure Capital Fund, the SIB’s parent charity. It has yet to receive a response.

A SIB spokeswoman said an endowment would mean "greater flexibility in committing and paying funds".

"It creates the opportunity for an evergreen fund where loan repayments are recycled back into the sector, as well as enhancing the ability to grow the fund by topping up the original amount with money from other investors, foundations or even philanthropists," she said.

But with just over a month of the financial year remaining, the  uncertainty surrounding Communitybuilders applications was described as "ridiculous" by Geraldine Peacock, a trustee of the Wells and Mendip Museum, which submitted a £2m bid before the annuality rule was announced.

Peacock, former chair of the Charity Commission, wrote to Nick Hurd, the Minister for Civil Society, in November suggesting the creation of an intermediary organisation to satisfy the requirements of the Treasury and applicants.

"I’m very cross," Peacock told Third Sector. "There’s little more than four weeks left until the financial year closes and there has been no decision."

Communitybuilders, which issues loans and grants for community cohesion projects, was a two-year fund set up by the previous government. Year one awards were not subject to the annuality ruling.

A spokesman for the Communities and Local Government department confirmed it was considering an endowment approach and hoped to have a resolution soon.

"We are working with the Social Investment Business to achieve the best solution for the sector, so that access to the fund is practical and realistic," he said.

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