SCOTTISH EXECUTIVE

The Scottish Compact Good Practice Guides

Advice on the Scottish Executive's relations with the voluntary sector

CHAPTER 1

Good Practice Guide on Funding Voluntary and Community Organisations

Compact background

The Scottish Compact sets out the broad principles of the agreement between the Scottish Executive and the sector on matters of funding. They are as follows:

The Government will pursue its interest in promoting a healthy voluntary sector through public funding based on clear measures of performance. It will:

follow best practice in funding and in the administration of grants, including prompt payment of agreed funds;
follow best practice in monitoring publicly-funded work and ensure best value;
support umbrella bodies and the infrastructure of the sector;
target resources, including non-financial resources, effectively in a way which takes account of changing needs; and
respect the confidentiality of commercially sensitive information.'

These principles represent a commitment on the part of the Scottish Executive and its agencies to follow best practice in funding voluntary and community organisations, in developing their funding strategy, in the administration of their grant schemes and contracts, and in the monitoring of publicly-funded work.

The purpose of this Guidance

This guidance develops into a code of practice the commitments on funding given in the Compact by the Scottish Executive. It is based on principles that represent best practice in funding. These are:

the fundamental requirement for the Executive to be accountable for public funds;
openness and transparency in funding policies and practices;
the provision of appropriate funding packages for voluntary organisations, both for service providers at a national level and also for intermediary/umbrella bodies and infrastructure bodies where their work ties into Scottish Executive objectives;
agreeing systems which can monitor organisations' performance to assess how far the objectives for which the Scottish Executive provides funds are achieved and that good value for money is delivered; and
as far as possible within operational requirements, a standard approach to funding practices and the adoption of good practice.

This Guidance applies to all types of direct funding - core and project grants whether revenue or capital, and to contracts - and to all voluntary organisations and volunteering initiatives that the Scottish Executive funds regardless of size, type or area of activity.

Best practice in strategic funding of voluntary organisations

Scottish Executive funding is available:

for those activities that promote Scottish Executive objectives, including major new initiatives;
to support capacity building within organisations on the basis of agreed outputs;
where an organisation has a continuing role in the delivery of particular policy objectives, to fund core management and administrative costs, and relevant training costs, normally on a rolling 3-year basis, with renewal based on review of continuing compatibility with Scottish Executive priorities;
for national generic infrastructure organisations and associated local networks to promote the growth and effectiveness of voluntary and community organisations by providing development, management and training support;
only on an exceptional basis for local service delivery organisations. (Public sector funding for local bodies would normally be expected to come from other agencies such as local authorities, health boards, local enterprise companies and some non-departmental public bodies etc.); and
on a time-limited basis, for innovative projects where the Scottish Executive has a particular interest in taking forward an experimental approach, including local projects which may have potential national application.

Departments should take the following into account:

funding will normally be through grants but may also be through contracts;
all types of funding are subject to satisfactory information being provided on the organisation, its constitution, management structures, financial situation and its experience and expertise in the particular area to be funded;
whether organisations involve volunteers and provide for their training and support;
the organisation's or project's ability to secure other funding so as to diversify its funding base and to secure an exit route;
Scottish Executive funding often enables organisations to attract further funding from other sources;
an organisation or project may receive funding from another funder such as the National Lottery Charities Board, the European Structural Fund, Social Inclusion Partnership Fund etc.;
consistency of procedures is desirable between Scottish Executive grant schemes: core data should be uniform for all schemes as far as possible;
the Voluntary Issues Unit will maintain a comprehensive and up-to-date database of Scottish Executive funding to the voluntary, volunteering and community sector, and will provide an annual overview of funding.

Best practice in the administration of grants

To follow best practice Departments should:

publish and publicise details of each grant scheme, with its policy objectives, information requirements, clear criteria for selection, timetable for applications and decisions, and procedures for review and feedback;
use application forms that are in plain English, avoid jargon, are concise, simple, accompanied by clear guidance notes and not too onerous to complete;
issue application forms by e-mail or on disc as well as on hard copies, if requested and where practicable;
provide a named contact for each grant scheme;
meet at least once a year with core-funded organisations;
keep up-to-date desk instructions for Scottish Executive staff; and
wherever possible, notify the outcome of funding applications well in advance of the start of the funding year, preferably giving at least 3 months notice;
recognise that good financial management includes holding reserves and agreeing a policy on this with each grant recipient. (Where this is a possibility, it should cover up to 3 months expenditure. Reserves should not include Scottish Executive funds as these are awarded for expenditure on particular objectives);
make grant offers in writing with a clear statement of the purpose of the offer, its conditions, duration, payment arrangements, the need for the recipient to comply with equal opportunities and to accept the grant offer in writing;
ensure prompt payments to an agreed timetable, noting that the viability of organisations will sometimes depend on monthly payments;
take into consideration the implications of good employment practice, for example in relation to pensions, salaries, redundancy and equal opportunities policy; and
provide feedback on failed applications where possible.

Best practice in monitoring and evaluation

In monitoring and evaluating grants, Departments should:

agree clear objectives and performance indicators and establish specific outputs for grant-funded activities;
set out these and any other requirements in the initial grant offer letter;
in the interests of proper accountability, ensure that all grant recipients make appropriate arrangements to monitor and evaluate the quality of their grant-funded work and to report at agreed intervals, while taking care that these requirements do not become an undue burden to the organisation and tailoring these requirements to reflect the size of the grant and the resources of the organisation in receipt of funding;
ensure that grant recipients have appropriate systems in place to obtain regular feedback from users or customers on their needs and their levels of satisfaction and views of the benefits/services they receive;
agree a review of performance during the second year of 3-year core funding to ascertain if grant should be renewed and to provide feedback to funded organisations;
carry out an independent external review of major recurring grants of Ł100,000 or more at 6-year intervals and with the active involvement of the organisation concerned;
ensure that where a grant is under-utilised, that the sum is identified as early as possible so that it can be re-allocated within the financial year;
require that grant recipients acknowledge in relevant publicity material the contribution of the Scottish Executive to their costs:
monitor compliance with grant conditions in ways agreed with the recipient;
withdraw grant where the recipient fails to adhere to grant conditions and/or to deliver the agreed objectives, unless satisfactory remedial action is taken within an agreed timescale;
respect the confidentiality of sensitive information, commercial or otherwise, provided by the grant recipient.

Best practice in funding the voluntary sector's infrastructure

Departments should:

consider, in terms of meeting policy objectives, the merits of core funding intermediary/umbrella/resource bodies and generic infrastructure bodies and their national networks that form part of the voluntary sector's infrastructure;
prior to funding such bodies, satisfy themselves that infrastructure bodies have in place systems to establish the needs of their users and to respond appropriately to them; and
ensure that bodies funded for their representative role are in touch with their constituencies and have appropriate authority to represent their views.

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