Strategic Review of the Funding of the Voluntary Sector in Scotland

This paper presents a statement which has been jointly agreed by central government, local government and the Scottish Council of Voluntary Organisations (on behalf of the voluntary sector in Scotland).

The Value of the Voluntary Sector

The voluntary sector is a core part of Scottish community life. 50,000 voluntary groups bring together around one million volunteers and 100,000 paid staff, all seeking to make Scotland a better place. Scottish voluntary organisations generate over £2 billion a year to spend in our communities.

National and local government recognise the added value that voluntary organisations can bring to public services and community life in Scotland, when they are effectively managed and are working in a supportive environment. The voluntary sector and Scottish local and central government share a vision of a more equal, socially just Scotland. Voluntary organisations contribute to achieving our ambitions for Scotland in many different ways.

We know that:

Ø Many voluntary organisations provide vital services in particularly effective ways.

Ø Voluntary organisations create wealth, jobs and skills in Scottish communities.

Ø Voluntary organisations can help cement local communities by providing a wealth of opportunities for people of all ages and backgrounds to engage in community life, while at the same time developing their own skills and experience. They play a key role in developing Scotland's civic society.

Ø Voluntary organisations can use their service delivery experience and close community links to help improve the effectiveness of government policy.

The Scottish Executive, CoSLA and SCVO are committed to working together through the Strategic Funding Review to support the voluntary sector's contribution to Scottish society.

A Strategic Approach to Supporting the Sector

The aim of the Review is to create a shared vision of how the funding of voluntary organisations can support the sector to maximise its contribution to the common good of Scotland. We seek to make a shared commitment to work towards that vision through a mutually agreed set of actions.

The Strategic Review of Voluntary Sector Funding underpins a wide-ranging programme of activity to support the sustainable growth of the voluntary sector in Scotland and build better partnerships between the public and voluntary sectors.

Running alongside this review, the Compact between the Scottish Executive and the voluntary sector has been revised and strengthened. A Volunteering Strategy for Scotland has been developed, led by Volunteer Development Scotland on behalf of the Scottish Executive. The implementation of this strategy will be complemented by a range of activity during 2005, the Year of the Volunteer.

Futurebuilders Scotland, launched in August 2004, is an £18 million investment fund for the social economy in Scotland with the twin purposes of increasing the longer-term sustainability of the sector and contributing to the Executive's commitment to better public services. It aims to support organisations to develop alternative and additional income streams by being better able to deliver modern and effective public services.

Legislation to modernise and improve the regulation of charities in Scotland has been introduced to the Scottish Parliament. The Office of the Scottish Charities Regulator has been established to monitor and supervise charities.

Taken together, this wide range of inter-related activities, engaging a large number of stakeholders in the public and voluntary sectors, creates a rolling programme of change which will significantly improve the landscape for voluntary organisations and their relationships with public bodies. This Review complements and strengthens this programme of activities.

Working towards a shared vision involves resolving policy, cultural and practical issues relating to the resourcing of the sector. It presents challenges to all three partners in this process. The degree of long term commitment required from all three partners should not be underestimated. We also recognise that it will be necessary to draw in others who provide funds to the sector, of whom there are a significant number, and to ask them also to join in this shared approach.

Initial steps have been taken through the involvement of a Steering Group and three working groups who were asked to look at different elements of existing funding relationships and policies, and make recommendations as to how they could be improved. The views of those groups have fed in to the process of review and have helped us arrive at this set of proposals for agreement.

Objectives

A set of core objectives for the outcome of the review were identified by the Steering Group:

• Promote sustainability of the voluntary sector
• Support the voluntary sector to make the best use of resources available to it
• Demonstrate the impact and effectiveness of the voluntary sector
• Promote effective partnership working between and across the voluntary and public sectors
• Ensure that funding policies and practice promote equality and inclusion of marginalised or disadvantaged groups

These are the core objectives which the partners are asked to agree, and to commit to achieving together.

This Review offers a key opportunity to support the sustainable growth of the voluntary sector in Scotland. Government, local authorities and voluntary organisations all have their part to play in achieving this.

Achieving these Objectives

To achieve the objectives of the Review, we will set out a shared agenda to ensure that voluntary organisations have access to the funding that is available; that they are able to make the most effective use of that funding; and that funders have sufficient confidence in the abilities, governance and accountability of the sector that they will continue to invest in it.

A number of key issues have been identified as priority areas for action which will help achieve the objectives:

· Creating a culture change in funding, with funders moving towards an investment culture of funding, based on a proportionate approach to risk and the agreement of shared outcomes. In this new culture, funded organisations will be able to demonstrate their added value, improve efficiency and joined-up delivery, and assess the impact of their work.

· Moving towards 'full cost recovery', so that voluntary organisations realistically cost their services, and funders recognise that, to make organisations sustainable, a legitimate proportion of overhead costs should be included in funding agreements.

· Developing joined-up policy-making and meaningful partnerships between the public and voluntary sectors, so that improved relationships and dialogue allow for better joined-up delivery and better value for public money.

· Improving support services for voluntary organisations, by encouraging co-ordination across the wide range of support providers to the sector, and ensuring that marginalised groups don't fall through the gaps.

· Joining up funding by making funding sources easier to identify, clarifying funding policies and practice to improve efficiency, bringing relevant funding streams together where appropriate and co-ordinating with other funders.

Some of the challenges which achieving these objectives will impose will probably include:

• Some reshaping and restructuring of the voluntary sector as a consequence of funding decisions, which may have a positive effect on some and a negative effect on others.
• Working through the likely financial impact of full cost recovery for service commissioners and voluntary organisations, and jointly supporting the difficult decisions which will be required during the transition stage.
• Encouraging voluntary organisations to improve their financial management, business planning and governance processes, and to diversify their funding sources.
• Establishing a joint process for resolving difficulties as we go forward with implementation.
• Engaging with the wider public sector, the private sector and charitable funders to secure their involvement.
• Ensuring consistency of approach across relationships between the public and voluntary sectors.

Taking the Review Forward

The steering group has considered a detailed set of actions designed to deliver on these objectives. Now that the three partners have jointly committed to the general principles and objectives as stated above, work will commence to move the review to the stage of implementation. This will involve agreeing an action plan designed to achieve the objectives within this joint statement. The joint action plan will include clear priorities and timescales for implementation, and an assessment of the likely impact of these actions on the voluntary sector, local authorities, the wider public sector and the Scottish Executive.