The Office for Civil Society has declined to confirm why it put aside more than £40m last year to mitigate against a “potential legal risk”.
The department’s latest accounts were revealed as part of the Department for Digital, Media, Culture and Sport’s annual report, which was published at the end of last year.
According to the accounts up to 31 March 2020, the OCS showed an underspend of £42.8m due to funding held to mitigate a potential legal risk, but which was not subsequently needed.
The OCS declined to comment on the nature of the case, saying only that the legal risk was “commercial in confidence” and had been resolved.
As DCMS funding is voted on annually by parliament, underspends cannot be carried forward to be reallocated in the following financial year.
Public spending at the OCS fell from £176m to £58m, but this was largely due to National Citizen Service funding no longer being included in the department’s budget.
The NCS Trust became an independent, arms-length body in December 2018 with NCS funding allocated directly to it.
As a result, the 2018/19 spend for OCS was much higher than that of 2019/20, as it also included NCS funding for the first eight months of that year.
It is not clear whether the sum set aside for the legal risk related to the dispute between the NCS Trust and former provider The Challenge, which attempted to sue the trust for £26m after it lost a £60m contract to deliver NCS services.
The case concluded with a £2.8m out-of-court settlement after The Challenge went into administration.