Focus: Policy and Politics - Spotlight falls on funding structures

Nathalie Thomas

National Audit Office to examine government relations with sector.

The voluntary sector is being courted from all sides. First the Conservatives set up a Social Justice Commission looking at how to empower the voluntary sector; then the Government created an office devoted entirely to third sector affairs; now the National Audit Office is at it as well.

The parliamentary spending watchdog has created a new third sector research team, which, it says, has already started work on several projects scrutinising the Government's funding relationship with voluntary and community organisations.

The first of these is a decision support tool that is aimed at government funders. The project has been set up to improve the design and administration of third sector funding programmes.

Joe Cavanagh, director of business development at the NAO, said it was the tip of the iceberg. "Our interest in this area is continuing and we have three more pieces of work in the pipeline," he said.

The first will address the sensitive issue of full cost recovery, which, Cavanagh acknowledges, continues to be one of the major obstacles in the sector's relationship with government.

The four-strong NAO team has also been looking at how the third sector, particularly local voluntary groups, features in local area agreements.

The third project will assess the Government's relationship with large national charities.

"We have noticed the complexity in the number and types of financial relationships between third sector organisations and government funders," said Grace Williams, an audit manager in the NAO third sector team. "We want to look at how that works with large national charities to see if it can be made into something more sensible."

On all three fronts, the NAO expects to issue reports and make recommendations within the next year or so. But with so many reports and recommendations within the sector, what tangible difference does the NAO hope to make?

"At one level, the NAO has no executive authority," admits Cavanagh.

"We are auditors and the power we have rests on our ability as an independent body to carry out research and reviews, and to put our work into the public domain."

However, he also points out that the watchdog's relationship with the House of Commons Public Accounts Committee has already proved the NAO can be an effective force.

Last year the committee held a hearing on the basis of the NAO's 2005 report Working With The Third Sector. In March of this year, the committee gave a damning review of the Government's treatment of voluntary organisations (Third Sector, 8 March), to which the Treasury has this month been forced to issue a reply.

The NAO consulted the Public Accounts Committee at every stage, Cavanagh stressed. He added that the watchdog would also advise the committee on whether the Treasury's response was satisfactory or not.

Eighteen months to two years later, the NAO will also revisit the issue to see if the Government has made any changes. "We don't go away," said Cavanagh.

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