FINANCE NEWS: Treasury calls for funding review

The Treasury has called on Whitehall departments and other government bodies to consider paying grants in advance to voluntary and community organisations and to look at longer-term funding.

A report from the Treasury last week contained new guidance on government accounting rules, which the Treasury hopes will improve the relationship between government funders and the voluntary sector.

Chief Secretary to the Treasury Paul Boateng said the report was aimed at dispelling "confusion and misunderstanding" in how government accounting rules were used by funding bodies.

Getting funding relationships right, he said, "is vital in enabling voluntary and community organisations to engage more effectively in the design, planning and delivery of services".

The guidance is a response to recommendations from last year's Treasury cross-cutting review on the voluntary sector's public service role. The guidance points out that many funding bodies believe government accounting rules are more rigid than they actually are, and that there has been an inconsistent interpretation of the rules.

The Treasury says that the timing of government payments can be varied for a number of reasons and that advance payments can be made in certain circumstances.

The report also acknowledges the need for more longer-term funding of the sector.

"Quite simply, longer-term planning and funding arrangements can often represent better value for money than one-year funding arrangements by providing greater financial stability," the report says.

Because of short-term funding, charities must often spend a lot of time bidding for government funds and this can reduce their effectiveness, the Treasury accepts.

Since 1998 there has been a new fiscal framework in government, which allows longer-term funding. The Treasury recommends that government departments and non-departmental public bodies, such as the Learning and Skills Council, consider three-year funding of voluntary and community groups.

The guidance is available at www.hm-treasury.gov.uk.

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