Futurebuilders faces barriers, warns audit office

Capacity-building programme has had benefits, but was dogged by confusion, spending watchdog says

Futurebuilders has brought about positive change and its management has improved, but barriers remain to the achievement of its objectives.

These are the main conclusions of today's National Audit Office report on the £215m, government-backed fund that helps sector organisations bid for public-service contracts.

The report says some organisations that applied for investment found the availability of contracts unpredictable and failed to win them.

"There was also some confusion at four of the eight organisations we spoke to about whether or not the loan would ultimately have to be repaid," it says.

"Other organisations were willing to accept non-repayable development grants, but not loans."

The report criticises the original management of the fund, which lost the contract last year to the Adventure Capital Fund, for delays in distributing loans.

It says: "Although the fund manager's contractual target of 250 investments was met, it was achieved by counting non-repayable development grants with the definition of ‘investment'.

"These contributed almost half the target by number but amounted to only 2 per cent of finance awarded. Moreover, less than 50 per cent of all funds awarded were actually drawn down and used by recipients."

The report recommends that the Office of the Third Sector should work with Futurebuilders to specify the options when organisations are unable to repay loans. "These options should include enforcing loan repayment obligations," it says.

In a statement, Jonathan Lewis, chief executive of Futurebuilders, said he was pleased interviews with investees had shown that funding had helped third-sector organisations win public service contracts.

"Futurebuilders England takes on board the NAO's recommendations, recognising that further developments need to be made," the statement said. "In particular, we are keen to agree a way to manage the loan book in the long term."

Richard Gutch, chief executive of Futurebuilders under the first contract, said it was always made clear to organistions that were given loans that these would have to be repaid: "But we also reassured investees that if they failed to win contracts we would work with them to find ways of addressing the difficulties this would cause in repaying their loan, for example by extending their loan repayment holiday.

"This reassurance was essential to overcome the understandable concerns TSOs had about loan finance, given the unpredictable commissioning environment.The NAO report doesn't appear to recognise that the idea of loan finance was a major challenge for the TS  when we started."

He agreed that targets for the second contract were more clearly specified, but pointed out that under the previous contract Futurebuilders were embarking on unknown territory and there was only a more general target for the number of investments.


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