OPINION: Hot Issue - Are charities doing enough to avoid subsidising contracts?

The 'topping-up' of public sector contracts from charities' own funds has long bedevilled relations between the voluntary sector and government.

Now Leonard Cheshire has managed to reduce its subsidy by £4 million through a careful calculation of costs - but are enough charities following this lead?

RANILA RAVI, head of communications, ACEVO - NO

As most charities don't know what their full project or contract costs are, it follows that they don't charge an appropriate amount to the local authority.

For years there has been a self-perpetuating practice of assigning an arbitrary percentage as management fees to contracts. Now ACEVO has developed a template to allocate costs, charities can get a clear understanding of them.

Most statutory funders say that they have a fixed pot of money and cannot always meet charities' demands. But they do acknowledge that they would be willing to fund increased costs if there was greater transparency associated with the increase.

If the only way a project can be delivered is by subsidising it with voluntary income, maybe organisations should think twice before they say yes.

DEBORAH HAMLIN, assistant director, partnerships and professional support, RNIB - YES

We avoid subsidising our rehabilitation contracts. We achieve this by producing real cost tenders in which all charges are clearly identified.

Whenever contract negotiations take place we ensure that local authorities understand the true costs of undertaking the work in-house themselves, and we draw attention to the hidden costs which commissioning staff can "overlook" when comparing in-house costs with service provider tenders.

Accounting systems are more sophisticated than they were a decade ago, but it is still difficult to cost one element from a set of services.

This does not help us to combat a situation where power remains with the local authorities.

Authorities can delay payment, have unrealistic ideas of what can be achieved with the money they have available, and often display a lack of understanding of the issues affecting blind and partially sighted people.

We are trying to incorporate within our contract services the standards proposed in Progress in Sight, the Association of Directors of Social Services standards document. Our task is to make commissioners aware of what a good service should look like and ensure that we all have quality assurance systems in place to measure quality and evaluation mechanisms to demonstrate value for money.

VALERIE BARROW, director, Association of Charity Officers - NO

Our members help people of all ages and provide services and grants to hundreds of thousands of people in need every year. In care provision, though, older people predominate and our members will not use these frail vulnerable beneficiaries as bargaining chips in their negotiations with funding authorities.

Not only has the initial fee to be agreed - and there is scope to be far more assertive here - but so also do subsequent increases. These are often quite unrealistic, but you will not find our members threatening frail people with eviction towards the end of their lives.

Of course, statutory agencies rely on this. Charities providing care are subsidising the state, and many more are topping up inadequate fees.

We can all do more alongside older people and their families to challenge this discriminatory approach to assessment.

BRYAN DUTTON, director general, Leonard Cheshire - YES

Some charities have been very successful in achieving full cost recovery. Others, including Leonard Cheshire, are still fighting this battle.

Every service delivery charity seeks to gain the proper fee for the delivery of statutory services, but they are constrained by the attitude of some authorities which see charities as an 'economic' way of providing services. Charities have also been limited in their response by their commitment to vulnerable service users and this has, perhaps, been exploited by purchasers.

Government advocates the Compact and full-cost recovery, but the implementation of this philosophy by independent local authorities is inconsistent. There are many examples of good practice, but elsewhere 'best value' means cheapest.

This is ultimately to the detriment of the service user.

I believe the Care Standards Commission should be charged not only with reporting on service delivery but also on the adequacy of funding by local authority purchasers of those services.

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