Finance: Charities 'are not getting full costs'

More than half of all charities recover no more than 85 per cent of the cost of delivering public service contracts, according to a poll of members of the Charity Finance Directors' Group.

More than 60 per cent of respondents said they were adequately compensated for the risk involved in delivering services, and 55 per cent said contracts were too short. The survey revealed widespread dissatisfaction with the current state of public sector commissioning.

Many charities said funders imposed pricing budgets on them and refused to accept alternative costings of the cost of the contract.

Chris Harris, chairman of the charities group at the Chartered Institute of Public Finance and Accountancy, which assisted with the survey, said: "Public sector procurement performance is poor, with ill-fitting contracts being imposed without much thought. The beneficiaries suffer because the quality of service is not acknowledged, the charities suffer because compliance is onerous and the public sector suffers because resources are not used appropriately."

Sixty per cent of charities said they did not expect to achieve full cost recovery despite a Government pledge that this would happen by April 2006. One respondent said: "Our funders believe we should use our 'profits' to make up the difference." Others said they tolerated underfunding for fear of the effect on their beneficiaries of losing contracts to other providers.

- See Finance and Governance, page 21

KEY POINTS

- A survey found that more than half of all charities recover 85 per cent or less of the cost of delivering public service contracts

- The poll found widespread dissatisfaction with the state of commissioning.

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