The National Audit Office has found that the Cabinet Office and the Big Lottery Fund breached their own procedures and guidelines in the awarding and management of more than £2m of funding to the Big Society Network.
The investigation, which was prompted by questions to the NAO from Gareth Thomas, the former shadow minister for civil society, looked at the awards of two grants from the Big Lottery Fund totalling £1.8m and a grant of £300,000 from the Cabinet Office to the Big Society Network and the Society Network Foundation, its charitable arm.
The report, published today, says that the Cabinet Office expanded eligibility criteria for organisations after the closing date for applications under its £20m Social Action Fund, failed to identify a lead organisation for a joint bid involving the Society Network Foundation, against Cabinet Office guidance, and made a payment to the organisation without referring to its latest financial position.
The investigation also found that the BLF did not challenge the BSN’s "ambitious" recruitment targets on one of the grants it made and failed to consider the effect of the failure to meet those targets, which were crucial to its success.
The Big Society Network is a company that was launched by David Cameron, the Prime Minister, in 2010 to "support and develop talent, innovation and enterprise to deliver social impact".
The NAO report says that the Social Investment Business, which was managing the Social Action Fund, rejected an application from the Society Network Foundation for the children’s fitness project Get In because it did not meet eligibility requirements.
The Cabinet Office then amended those requirements and asked the SIB to reconsider this and three other applications.
The SNF was again rejected by the programme’s advisory panel but the Cabinet Office then asked SNF to submit a bid with the British Sports Trust.
The department subsequently awarded separate grants of £299,800 to the SNF and £900,000 to the BST for similar schemes, but did not appoint a lead organisation to be accountable for the funding, contrary to Cabinet Office guidelines.
The Cabinet Office did not make the final payment of £99,900 of the grant to the SNF in December 2012 because of the programme’s poor performance.
The report says that the BLF made a grant of £830,000 in February 2011 to the Big Society Network for its Your Square Mile project, which was set up to encourage members of the public to take part in community activities, and a further grant of just under £1m to the Society Network Foundation in April 2013 for the Britain’s Personal Best project, which was set up to build on the legacy of the London 2012 Olympic Games.
The BLF subsequently said that it would not pay the final quarter of the grant to the SNF because the initiative was "significantly behind in its projected outcomes".
The NAO report says that the BLF followed its procedures in awarding both grants.
But it says that the BLF awarded the Your Square Mile grant despite assessing the project as high risk and allowed the funding to be transferred to Your Square Mile Ltd, set up to run the scheme, without assessing whether the organisation had the necessary specialist IT skills to deliver the project.
A spokesman for the BLF said it had and could learn lessons from the two projects that it funded.
"As a funder we are committed to supporting riskier projects on occasion, and not just the tried and tested," he said. "It is in the nature of such projects that sometimes they don’t achieve their intended outcomes. And we were disappointed these two awards did not meet our hopes at assessment.
"We make about 12,000 grants each year across the UK, awarding about £650m – the overwhelming majority of which perform very well and achieve great outcomes for the people and communities they support."