Wednesday, 21 December 2011

VCS Funding and the Loch Ness Monster

Two quick questions
  1. Should charities be giving their money to councils? 
  2. Do you believe in the Loch Ness Monster?
Anyone answer yes to both? No? 
Ok, you can come in.

I've just been reviewing a tender specification for an advocacy service. Not the most promising of starts to a blog, but bear with me. The specification has outraged me so much that it even made me get round to start posting.

I've known for a while that a number of voluntary sector groups are subsidising contracts. I even knew that this was happening in cases where there is a legal duty on a statutory authority (local authority, PCT, LHB etc) to fund this service. Shameful but true.

Recently, this was confirmed in the CQC annual report on the Mental Health Act, which showed that many providers of Independent Mental Health Advocacy (IMHA) are not receiving enough funding to meet the need.  (I intend to post about this in more depth soon). The result is that  what was a legal right is now merely a theoretical right...unless advocacy services are willing to eat away at their reserves to close the gap between where funding should be and what it actually is. In effect, charities are giving money to statutory bodies. That seems a bit back to front. 

In the past I've been willing to entertain the idea that this was unfortunate commissioning; a lack of clarity about need and resources, an honest and fixable mistake.The tender I mentioned earlier makes me think otherwise. 

That tender (which is not for an IMHA service) explicitly states that the commissioner expects the successful bidder to contribute to the costs of meeting identified need. In response to one of my queries the contracts officer said that they believed this additional sum was to extend and enhance provision beyond statutory duties. 

I disagree with their interpretation. But even if they are right, they still believed that they were in some way commissioning a service into which they were putting no money. I don't know how they think they can enforce this.

I've just posed the following questions for clarification in that tender:

  1. To what sum is the current service is contributing to the cost of current provision? 
  2.  What proportion of this sum is being used for service provision outside the authorities' statutory responsibilities? 
  3.  In what sense do the authorities intend to have control over provision which they do not fund? 

...and I eagerly await a response, but the issue at stake is bigger than just this contract. 

Nowadays, full cost recovery is like the Loch Ness Monster; sometimes spoken of, rarely seen and with true believers who look a bit wild- around the eyes. 

Some commentators have argued that full cost recovery is already dead. Voluntary organisations are accepting sub-operational contracts in the hope of hanging on in there until the good times re-appear. Reserves are dwindling, margins are getting tight and no-one wants to fund core costs. That's before we even get into the number of unpaid hours worked by staff of charities. 

So back to my original question - do you think charities should be giving their money to councils? Because that is precisely what is happening at the moment and it looks like that trend may start accelerating. 

This model is not sustainable. Charity reserves are plummeting. Strong, high quality services can't be delivered without a sustainable income which covers the cost of providing that service. Widening the pool of providers doesn't work if you require providers to subsidise the work.

Were all charities to refuse to deliver contracts which didn't meet the full costs of providing the service  our justice, health and social care landscapes would look desolately bleak.  Millions would suffer. But without some strong challenges to commissioning practices that is where we will end up.

Distance from should to is?                A lot further than we expected