Triennial Review of the Big Lottery Fund Report - Cabinet Office
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Cabinet Office Triennial Review of the Big Lottery Fund Report June 2014
Triennial Review of the Big Lottery Fund Report
This document is available in large print, audio and Braille on request. Please call +44 (0)800 000 4999 or email firstname.lastname@example.org Cabinet Office 1 Horse Guards Road London SW1A 2HQ Publication date: June 2014 © Crown copyright 2014 or write to the Information Policy Team, You may re-use this information (not The National Archives, Kew, London TW9 including logos) free of charge in any format 4DU, or e-mail: email@example.com or medium, under the terms of the Open Any enquiries regarding this publication Government Licence. should be sent to us at BLFTriennialReview@ To view this licence, visit cabinet-office.gsi.gov.uk www.nationalarchives.gov. This document is also available from our uk/doc/open-government-licence/ website at www.gov.uk
Contents Foreword 5 Executive summary 7 Full list of recommendations 13 Chapter 1 Background and introduction The Triennial Review 17 The Big Lottery Fund 19 Stage One of the Review Chapter 2 Findings on the functions and form of the Big Lottery Fund Context 21 Are the functions of the Big Lottery Fund still necessary? 23 Is an arm’s length body the most efficient and effective way to deliver those functions? 25 Stage Two of the Review Chapter 3 Efficiency Context 39 Operating costs 39 Staffing 41 Technology infrastructure 42 Digital by default 43 Property 44 Shared services 46 Procurement of common goods and services 46 Areas subject to Cabinet Office spending controls 47 Major projects 49 Fraud, error and debt 48 Comparator data 49
4 Triennial Review of the Big Lottery Fund – Report Chapter 4 Improving the effectiveness of the Big Lottery Fund for the future Context 51 Effectiveness as a grant making body 51 Effectiveness of work for third parties 58 Effectiveness of distribution of dormant accounts 61 Chapter 5 Corporate Governance Context 65 Accountability 66 Roles and responsibilities 66 Effective financial management 71 Annexes (published separately) Annex A Summary of responses to the Call for Evidence Annex B Written Ministerial Statement Annex C Challenge Group membership and engagement Annex D Terms of Reference of the Review Annex E Background to the Big Lottery Fund Annex F Big Lottery Fund policy directions Annex G List of stakeholders engaged and evidence used Annex H Assessment of alternative delivery model options Annex I Big Lottery Fund self-assessment of its compliance with the principles of good corporate governance
Foreword by Nick Hurd MP 5 Foreword by Nick Hurd MP In November 2013 I announced the start of whether adequate control and governance the Triennial Review of the Big Lottery Fund arrangements were in place to ensure that (‘the Fund’) by the Cabinet Office. This is the the Fund complies with the principles of first Triennial Review of the Fund and provides good corporate governance, and looked an important opportunity to consider the at the efficiency and effectiveness of the efficiency and effectiveness of its functions. organisation. The Public Bodies Reform Programme is I believe that the Fund is a highly respected leading to the largest restructuring of public and very important organisation and I was bodies for a generation, ensuring that they delighted to see that the evidence gathered are less costly, more accountable and throughout the Review confirms this. It is transparent and deliver value for money clear that the Fund is a valued organisation to the public. As part of the programme, with an important role to play with the Triennial Reviews were introduced to ensure Voluntary, Community and Social Enterprise that those bodies which remained after the sector as well as with public sector partners Government’s wide-ranging reforms are and business stakeholders. I am delighted subject to regular and robust challenge. to support the important ongoing role of Reviews challenge the continuing need for this UK wide NDPB by continuing to provide Non-Departmental Public Bodies (NDPBs), sponsorship of the Fund within Government consider whether functions can be delivered and helping the Fund further enhance what it through alternative models and ensure that does and how it operates. bodies are operating efficiently, effectively and with the appropriate levels of control and The Review does make a number of helpful governance. Rigorous reviews of NDPBs are recommendations about how the Fund can therefore central to the public bodies reform develop, to ensure that it continues to operate agenda. efficiently, effectively and transparently. I am pleased that the Board and Chief Executive In Stage One the review team considered are considering the recommendations of whether the functions of the Fund remained the Review in detail. The Fund is currently necessary, and whether delivery by an consulting on their Strategic Framework for arm’s length body was the most efficient 2015-2021. This consultation will provide and effective way to deliver those functions. an ideal platform to take forward a number Having considered the evidence, they of the recommendations in this Review. concluded that there is a continuing need Cabinet Office officials will be monitoring for the functions that the Fund delivers, and the delivery of the Fund’s agreed actions as a very strong case for those functions to well as ensuring the recommendations for continue to be delivered by an arm’s length Government are implemented. body. Stage Two of the Review considered
6 Triennial Review of the Big Lottery Fund – Report I would like to thank the many stakeholders who contributed to the Review. Nearly three hundred responses were received to the Call for Evidence and the review team spoke to a wide range of individuals or representatives of organisations, some of whom also responded to the written Call for Evidence. I am also grateful to the Fund for the way they have co-operated fully and actively with the review. Finally I would like to thank the Challenge Group which has rigorously and robustly tested the assumptions and conclusions of the Review, and the review team for the work they have done. Nick Hurd MP Minister for Civil Society
Executive Summary 7 Executive Summary Background manner, both helping to ensure that a wide range of views were gathered and also The Triennial Review of the Big Lottery Fund by responding to numerous requests for (‘the Fund’) was launched on 21 November information or policies to review. The Chief 2013 by the laying of a Written Ministerial Executive in particular has been clear that Statement in the Houses of Parliament by the timing of the Review has proved helpful to the Minister for Civil Society, Nick Hurd her in her first few months in the role and will MP. Triennial Reviews are part of the be a useful source of evidence to her as she Government’s Public Bodies Reform work to continues to lead the organisation. provide a robust challenge to the continuing need for public bodies and to review their The tenor of the evidence gathered control and governance arrangements. This is throughout the Review is that the Fund is a the first Triennial Review of the Fund. well respected and valued organisation with an important role to play, particularly as other To reflect the public interest in the work of sources of funding are squeezed. Most of the the Fund the Review published an online comments were made in the context of the Call for Evidence survey during the evidence organisation not being considered ‘broken’ in gathering phase of the Review. A summary any way but with the ability to enhance what of the findings from the survey has been it does and how it operates further. published alongside this report. A full list of the recommendations can be The size of the Fund’s budget and headcount found at the end of this executive summary necessitated that an independent Challenge but this summary identifies the main themes Group be established. The members of this from the Review. Challenge Group were: Ed Welsh, Executive Director, Transformation, Efficiency and Reform Group, Cabinet Office; Dominic Lake, Stage One Head of Arts, Libraries and Cultural Property, Function Department for Culture, Media and Sport; Dame Barbara Stocking, Non-Executive The Review concluded that the Fund’s Director of the Cabinet Office and President current functions are still required and it of Murray Edwards College, Cambridge; and was clear that there is an inter-relationship Mark Florman, Chairman of Time Partners. between the separate functions, because The Challenge Group endorse the findings of the distribution of Lottery funds gives the the Review. organisation the capability and capacity to perform the other functions well. The Review The Fund has supported the conduct of this has therefore concluded that the three Review in a very helpful and professional main functions of the Fund (distribution
8 Triennial Review of the Big Lottery Fund – Report of National Lottery funds, distribution of models set out in the Cabinet Office guidance non-Lottery funds, and distribution of funds on Triennial Reviews. The distribution of from dormant bank and building society Lottery funds continues to pass one of accounts) all remain current and necessary the three tests for retaining NDPB status, (Recommendation 1). evidenced by 94% of survey respondents stating that the Fund needs to be, and be The Fund makes it clear that it only carries seen to be, politically impartial. In addition, out the distribution of non-Lottery funds two out of the five characteristics of an (‘third party work’ and distribution of dormant NDPB were considered essential for the account money) where it is consistent Fund to operate by more than 80% of survey with its mission to “bring improvements to respondents and a further two characteristics communities and the lives of people most were considered essential by more than 60%. in need”, but the Review did find variation in approach to this work within the organisation Some of the evidence gathered by the Review and a concern about taking on new work at has demonstrated a lack of understanding of the moment because of back office system the status of the Fund. There is an incorrect changes. Nevertheless, the Review found assumption that it should be independent of no reason why the Fund should discontinue Government if it is to make impartial funding this function and has recommended that decisions, whereas NDPBs are by definition the Fund develops a more consistent and at arm’s length from, not independent of, more widely understood approach that Government. Although the Fund has a broad helps make more of ongoing opportunities set of policy directions from the Minister for (Recommendation 19). the Cabinet Office (see Annex F), Government The Review also identified a strong is not involved in its funding decisions. It is expectation that the Fund should be playing also important to recognise that any change a leadership role in the Voluntary, Community to the delivery model could have a significant and Social Enterprise (VCSE) sector. The impact on the ability of the Fund to maintain Fund is currently a sector leader ‘by default’ business as usual and so has to be able to – that is by virtue of its size and reach – but demonstrate significant advantages over the the Review recommends that the Fund status quo. should clearly define its leadership role In considering whether the Fund’s and how it expects to proactively fulfil this. governance and accountability might be Although the Fund’s related capacity building improved through another delivery model, and intelligence sharing roles are better the Review has identified that the standards developed, the Review also recommends that of conduct and responsibility in line with the Fund develops a clear, coherent strategy those of Directors of a Company Limited for these (Recommendation 18). by Guarantee would be preferable to the Form Fund’s current arrangements. The Review recommends that these standards are The Review concluded that being a set within the current delivery framework Non-Departmental Public Body (NDPB) (Recommendation 3). is an acceptable delivery vehicle for the Fund. In making this judgement the Review The Review has not recommended that considered the Fund’s functions against the the Fund becomes a Company Limited by three Cabinet Office tests for NDPB status Guarantee at this time because that change and also considered the alternative delivery is likely to require legislation and it is believed
Executive Summary 9 to be possible to secure the benefits in terms at the UK wide level, which came into effect of governance and accountability through the on 1 April 2014, is partly designed to address current delivery model. the issue of duplication (Recommendation 5). Other areas for improvement identified by the Stage Two – Efficiency, Review include a high manager to staff ratio effectiveness, transparency and (up to 1:4) and a very low staff turnover rate (1-2%). In terms of structure there may be governance scope to rationalise office locations, some of The Fund is a large, complex organisation which are historical (Recommendation 8). with staff spread across the UK in six main Business Process Re-engineering (BPR) locations and a number of smaller offices in England and Wales. The new Chief Executive The organisation is part way through has already identified that she feels that the a major BPR programme, of which organisation can be even more than the the implementation of a new Funding sum of its parts and has initiated changes to Management System (FMS) is a key part. achieve this. Although the FMS implementation is the subject of a separate Gateway Review Efficiency process and therefore has not been The Fund needs to be more proactive in scrutinised in detail as part of this Review, driving down costs. Although it has taken it would not be appropriate to pass no the 5% operating cost target seriously, it has comment on it because of the impact it has viewed this as something to be achieved across many areas of the Fund’s work. and does not appear to have identified ways The FMS implementation has not gone to to go beyond it, either to reduce overall plan. The rollout of a customer facing portal, costs or to reallocate investment elsewhere. which would support applicants and grant The Review recommends that the Fund recipients in all their interactions with the develops a performance metric over time to Fund, has not taken place. The Fund has improve efficiencies throughout the business taken the decision to stabilise the system (Recommendation 4). and assess the benefits delivered. It will then The overall headcount of the organisation develop a clear plan for the next phases is on a downward trajectory as a result of of FMS implementation, and for the wider restructuring and the Business Process BPR programme. The separate Gateway Re-engineering (BPR) that has taken place, Review process will provide further FMS but the Fund needs to set out its approach recommendations and capture lessons to staffing over the next five years to support learned, nonetheless the Fund needs to its new Strategic Framework. This needs to be clear about what has been delivered to include how it will deliver already identified date and what remedial or further action is headcount reductions and how it can further needed to meet the programme’s original drive down costs (including the relatively objectives, because the implementation large number of staff engaged on a fixed issues do not take away the need to improve term contract basis in anticipation of further the grant application/making process. This headcount reduction). The change to the should be part of a clear strategy about delivery of the communications, marketing, how the Fund will become ‘digital by default’ strategy, performance and learning functions (Recommendations 6 and 7).
10 Triennial Review of the Big Lottery Fund – Report Shared services and works well with the VCSE sector (87% The Review did not find as much evidence as of survey respondents said the Fund works expected of collaboration and close working well or very well with the sector). Customer between the Lottery distributors. Although service levels are high (the Review survey it is outside the scope of this Review to supported the Fund’s own customer survey) make recommendations which impact on with 87% of respondents satisfied or very other NDPBs, the Review recommends satisfied with their interactions with the consideration be given to scoping the Fund overall. potential for an increased use of shared Although the application processes operated services between the Lottery distributors by the Fund were thought to be proportionate for corporate services and/or grant making by 68% of those who responded to the (Recommendation 9). survey, 32% disagreed while 48% of Data respondents said the time taken in the application process was either unpredictable In all of the analysis around efficiency it or too long. has been difficult to identify benchmarks or comparable data. This is in part due to The Review found that the Fund could the differing natures of all of the Lottery pay more attention to the sustainability of distributors but also due to the fact that the organisations and projects it funds at the Triennial Reviews for the other distributors start of the process. Stakeholders felt that have not yet been carried out. The Review the Fund had a responsibility to encourage recommends that the Fund, the Department organisations to become sustainable after for Culture, Media and Sport and the Cabinet they had stopped receiving money from the Office work out ways to measure cost Fund, even if via further grant funding from effectiveness, to inform the Fund’s approach elsewhere (Recommendation 15). to cost control and to enable better and more An independent survey commissioned by effective comparisons of performance to the Fund in April 2013 found that “greater be drawn in the future (including in Triennial engagement at the end of projects” was an Reviews). Preferably this information should area for improvement for the Fund. Evidence be in the public domain in a format that is provided to the Review reinforced this point, readily understandable to all. The Cabinet with stakeholders feeling that the Fund Office and the Department for Culture, Media pays more attention to getting the money and Sport should also consider whether out of the door at the start of the process, grouping the Triennial Reviews of the Lottery at the expense of useful monitoring and distributors together (even if carried out by evaluation. The Review recommends that the different Departments) would be helpful Fund improves its understanding of impact (Recommendation 12). (Recommendation 16). Effectiveness There is an appetite to share learning The Fund is an organisation which within the organisation, but the Review functions effectively (92% of survey found that this is not hard wired into the respondents said it was effective or very operating model of the organisation and effective), meets its stated mission (89% relies too heavily on the good will of staff. of survey respondents said it was either The Review recommends that the Fund successful or very successful in doing this) establishes more robust ways of ensuring
Executive Summary 11 that learning is shared internally between the Review has identified a number of other the different funding portfolios and externally areas where the Fund should improve its (Recommendation 17). governance arrangements. Increasing transparency The Fund has a large number of non- executive directors to staff both the UK The Review has identified a number of Board and the four Country Committees. ways in which the Fund can increase the Whilst some of this structure does reflect the transparency of the way it works, which devolved nature of the organisation – and it is a key driver behind the Government’s is important that governance arrangements approach to Public Bodies Reform. The allow the Fund to properly take account recent NAO report1 on Public Bodies Reform of devolved policy directions – there does has highlighted the number of public bodies appear to be some duplication in what that fail to meet the three main tests for the respective committees look at. The transparency, which are: publication of an Review recommends that the Chair ensures annual report; publication of minutes of Board the Country Committees are operating meetings; and Board meetings being open to in line with their terms of reference. This the public. Although the Fund is compliant in should also include distinguishing where the first two of these the Review recommends the Board and Country Committees are that the Fund makes Board meetings open carrying out a governance or advisory role to the public. The Fund should also be (Recommendation 24). clearer about the role the non-executives play in funding direction and decisions at a The Review recommends the Fund reduces national level, and publish information about the time it takes for matters requiring the the number and type of complaints received attention of Board members to be considered (Recommendation 27). by them (Recommendation 25). In addition the Fund should provide more The current Board does not reflect the information about the different aspects of Government’s ambitions for diversity in its work – specifically the way it allocates public appointments. There is also a need dormant bank account funds, its to strengthen the financial, commercial and non-Lottery funds grant making, and its risk management capability of the Board, to international work (Recommendation 19). balance with experience in the VCSE sector. The Review recommends the Cabinet Office Governance uses the ongoing recruitment of new Board Following a self-assessment carried out members, and future recruitment rounds, to by the Fund with the Cabinet Office as its address and keep these issues under review sponsor department (and in this case also (Recommendation 22). validated by the Department for Culture, Finally, sponsorship for the Fund lies with the Media and Sport), the Review found the Fund Cabinet Office and financial accountability to be broadly compliant with the “Principles lies with the Department for Culture, Media of Good Corporate Governance”. However, and Sport which has policy responsibility for the National Lottery. Officials in both departments had already identified the 1 Progress on Public Bodies Reform need to better clarify where these roles http://www.nao.org.uk/report/progress-public- begin, end, and intersect. Evidence to the bodies-reform
12 Triennial Review of the Big Lottery Fund – Report Review supports the need to do this and the Review therefore recommends that the Management Statement for the Fund is updated with a clear shared understanding of the role of the Cabinet Office as the sponsor (Recommendation 20). The report includes recommendations for the Fund, the Cabinet Office, and the Department for Culture, Media and Sport. The Fund intends to call an extraordinary Board meeting to consider the recommendations of the Triennial Review. Following this, and no later than three months after the publication of the Review, the Fund will set out how it intends to respond to the recommendations and by when. The Cabinet Office and the Department for Culture, Media and Sport where relevant, will also set out how they will take forward the recommendations of the Review relevant to them, within three months of publication of this report.
Executive Summary 13 Full list of recommendations (FMS), and identifies further or remedial action to address the inefficiencies in the The Review recommends that: grant making/application process, which Function the FMS had intended to address. 1. The three main functions of the Big 7. The Fund sets out, as a matter of Lottery Fund (distribution of National priority, how it will now deliver ‘digital by Lottery funds, distribution of non-Lottery default’ and how this will lead to further funds, and distribution of funds from efficiencies. dormant bank and building society 8. The Fund sets out how and when it will accounts) all continue. meet the government occupancy target of 10m2/FTE and identifies how it can Form exploit different ways of working (such 2. The Fund remains an executive NDPB. as hot desking and home working) more 3. Ministers use policy and financial effectively. directions and the terms and conditions 9. The Cabinet Office and the Department of Board members’ appointments for Culture, Media and Sport scope the to deliver greater levels of personal potential for increased use of a shared accountability, in line with that expected service model between the Lottery of Directors of Companies Limited by distributors and other grant making Guarantee. bodies, for corporate services and/or for Efficiency grant making and the Fund considers shared service opportunities as part of its 4. The Fund develops a performance metric overall cost control. over time which sets out its approach to cost control and how it will continue to 10. Greater clarity is provided about the drive operational efficiencies. In doing applicability of Cabinet Office spending this the Fund should consider whether controls and public body efficiency and the difference in its operating costs reform policies to the Fund by: between grant delivery of Lottery funds (a) the Department for Culture, and third party work is appropriate, and Media and Sport reviewing and separately whether a single operating updating the Statement of Financial cost target for Lottery funds (combining Requirements (2006) and Spending what is included in the current 5% and Controls and Authorisations (2011) 3% definitions) would be more useful to for the Fund, with input from the the organisation and more transparent. Cabinet Office, making more explicit 5. The Fund sets out its approach to which public sector spending staffing over the next five years (to align controls and efficiency and reform with the Fund’s strategic framework for policies are binding for the Fund as 2015-2021) which addresses overall a public body, and where the Fund headcount, staff to manager ratios, has discretion whether to implement turnover and duplication of functions at the guidelines or not; these revised country and UK level. financial directions should cover relevant policy areas such as: digital 6. The Fund sets out what has been by default, transparency, advertising delivered to date by the implementation and marketing, procurement, of the new Funding Management System
14 Triennial Review of the Big Lottery Fund – Report property and estates including Effectiveness occupation benchmarks, etc 13. The Fund increases commercial (b) the Fund updating its financial awareness amongst its staff. regulations and delegations 14. The Fund re-assesses its grant reflecting the updated Statement of application process to make sure it is Financial Requirements, controls and proportionate for smaller groups and first authorisations time applicants. (c) the Cabinet Office reviewing and if necessary updating its policy 15. The Fund promotes the sustainability of directions to the Fund, to reflect how the organisations, where appropriate, the Fund is expected to comply on and the projects it funds, both when it an ongoing basis with key policies makes award decisions and towards the which apply to all Cabinet Office end of funding. sponsored bodies, but that cannot 16. The Fund improves its understanding appropriately be included in the of impact, for example the role of ‘end Statement of Financial Requirements of grant’ monitoring and building this (d) the Cabinet Office and the requirement into projects earlier on, Department for Culture, Media and focusing on outcomes, and tailoring Sport updating their Memorandum monitoring to different organisations, of Understanding to agree in order to ensure they collect more responsibilities for issuing any future valuable information in a way that is less guidelines on public sector spending complex and time consuming for grant controls and other policies relevant holders. to the Fund. 17. The Fund develops a clear methodology 11. The Cabinet Office sponsorship team for sharing the most valuable information continues to engage with the Grants from its funded projects both internally Efficiency Programme so that the and externally, and leads discussions findings from its work about benchmarks with other funders to agree what, how for grant funding costs can be used to and at which level they want to share inform the future work of the Fund. information. 12. The Fund, the Department for Culture, 18. Given its significant influence over grant Media and Sport and the Cabinet making in the UK, the Fund defines its Office work out ways to measure cost sector leadership role, the convening role effectiveness to inform the Fund’s it will play, and how it will help the sector approach to cost control and enable to build capacity. better and more effective comparisons 19. The Fund improves the transparency of of performance to be drawn with other the work it does by: similar bodies (including in future Triennial (a) being as clear about its international Reviews), and consider whether grouping work as it is about its work within the the Triennial Reviews of the Lottery UK distributors together (even if carried out by different departments) would be (b) providing full and clear publicly helpful in the future. available details on the dormant account spending directions,
Executive Summary 15 budgets and achievements for the distinguishing between governance whole of the UK and advisory roles. This may result (c) setting out a clear, publicly available in changes to the number and time strategy and plan for its third party commitment of Board and Country work which is underpinned by clear Committee members. aims and objectives, and deliverable 25. The Chair and CEO ensure that matters over the next strategic framework requiring the attention of the Board are period. considered in a timely way that maintains Governance corporate momentum; and review executive team attendance at Board 20. The Cabinet Office and the Department and Committee meetings, to better for Culture, Media and Sport update their differentiate between the accountabilities Memorandum of Understanding and the of the UK Board and the operational Management Statement of the Fund with responsibilities of executive directors. a clear statement of their respective roles and responsibilities in relation to 26. The Fund improves links between the Fund. staff across the UK at all levels in the organisation, including its Board and 21. The Fund confirms to the sponsorship Country Committee members, in a team when the Accounting Officer cost-effective way. training has been completed. 27. The Fund improves the transparency of 22. The Cabinet Office, during the current the way it carries out its work by: and future rounds of Board member recruitment: (a) promoting the governance arrangements for the organisation (a) increases the diversity of the Board more clearly to ensure customers (b) strengthens the financial, and stakeholders are aware of how commercial and risk management and by whom decisions are made capability of the Board, to balance (b) including management information with experience in the VCSE sector. about the number and type of 23. The Cabinet Office reviews the terms and complaints in the 13/14 annual conditions of appointment to the Board report and ensure that this becomes to: a standard part of the annual report going forward (a) Give Board members a more explicit role to focus on efficiency and (c) holding Board meetings open to the effectiveness. public (b) Be clear around restrictions on (d) reconsidering its approach to acceptance of other appointments. publishing data on spend over £500. 24. The Chair ensures that the Country 28. The Fund completes its ongoing review Committees are operating in accordance of its risk process. with their terms of reference, not duplicating discussions which ought to be had either by the country executive team or by the UK Board, and are
16 Triennial Review of the Big Lottery Fund – Report
Chapter 1 – Background and Introduction 17 Chapter 1 – Background and Introduction This document sets out the findings of the in place to ensure that the public body is 2013/14 Triennial Review of the Big Lottery complying with recognised principles of Fund (the Fund). It describes the purpose of good corporate governance. Triennial Reviews, the process adopted for 1.3 All Triennial Reviews are carried out in the Review and presents findings based on line with Cabinet Office guidance “Guidance feedback from stakeholders and analysis of a on Reviews of Non Departmental Public range of evidence on the Fund’s activities and Bodies”, June 2011. This guidance states that impact. The report draws on this evidence to reviews should be: make recommendations as to the future of the Fund. •• Proportionate: Reviews must not be overly bureaucratic and should be appropriate for the size and the nature of The Triennial Review the NDPB in question. Aims of the review •• Timely: Reviews should be completed quickly – the first stage ideally within three 1.1 It is government policy that a months – to minimise disruption to the Non-Departmental Public Body (NDPB) NDPB’s business and reduce uncertainty should only be set up, or remain in existence, about its future. where the model can be clearly evidenced as the most appropriate and cost-effective way •• Challenging: Reviews should be robust of delivering the function in question. and rigorous. They should evidence the continuing need for individual functions 1.2 In April 2011, the Cabinet Office and examine and evaluate as wide a announced that all NDPBs still in existence range as possible of delivery options. following the reforms brought about by the Public Bodies Act would have to undergo a •• Inclusive: Reviews should be open substantive review at least once every three and inclusive. Individual NDPBs must years. The first year of these reviews would be engaged in reviews. Key users and be 2011-12. These Triennial Reviews would stakeholders should have the opportunity have two purposes: to contribute to reviews. Parliament must be informed about the commencement (a) to provide a robust challenge to the and conclusions of reviews. continuing need for individual NDPBs – both their function and their form – •• Transparent: All reviews should be employing the ‘three tests’ discipline announced and all reports of reviews should be published. (b) where it is agreed that a particular body •• Value for Money: Reviews should be should remain as an NDPB, to review the conducted in a way that represents value control and governance arrangements for money for the taxpayer.
18 Triennial Review of the Big Lottery Fund – Report Context 1.9 The additional costs associated with the 1.4 Encouraging and stimulating growth review are £4500. These relate to travel and is a core principle for the Government, which subsistence costs from visits and meetings is one of the main reasons for seeking to attended by review team members during the reduce regulatory burdens. The potential evidence gathering phase and the costs of for encouraging growth should also be preparing the report for publication. This figure considered. It has relevance to the Triennial includes costs incurred on the review team’s Review programme, which looks at reducing behalf by the Fund. the number of unnecessary bodies, which Evidence and stakeholder engagement may impose burdens on others. 1.10 The review team mapped groups of 1.5 The Fund is currently implementing a relevant stakeholders, in consultation with new Funding Management System (FMS). This the Fund. These included management, is part of a Business Process Re-engineering staff, beneficiaries, other funders, Voluntary, (BPR) project and will significantly change the Community and Social Enterprise (VCSE) way the Fund operates. The implementation umbrella organisations, VCSE organisations, of the FMS is subject to a separate Gateway Government (at all levels), unions, private Review process and the Triennial Review will sector representatives, and media not seek to duplicate this. The Review will commentators. however comment on the expected savings 1.11 The review team visited a number of and benefits from the implementation, as locations across the UK and used a range well as the business change aspects where of engagement methods to ensure they they are relevant to areas that are part of the were able to reach as many stakeholders as Review. possible. Process 1.12 The review team published a Call 1.6 The Review was led by Emma Boggis, for Evidence survey based on the Terms a Senior Civil Servant in the Cabinet Office of Reference which sought the views of supported by a team of three other officials. customers and stakeholders on the Fund. It 1.7 The Review was announced by was available online and in Microsoft Word Written Ministerial Statement on Thursday 21 format. The review team promoted the survey November 2013 (Annex B) and a copy of the on the Cabinet Office and Fund websites, as Terms of Reference can be found at Annex well as proactively sending it to a broad range D. The Devolved Administrations were also of stakeholders. informed of the Review and invited to provide 1.13 The Call for Evidence was also evidence through a variety of means. promoted by other groups, for example the 1.8 In accordance with Triennial Review Office for Civil Society Local Intelligence guidance, the size of the organisation Team, who promoted it to their 2,800 England warranted the establishment of a Challenge VCSE stakeholders, and the Esmée Fairbairn Group to provide robust review and challenge Foundation, who circulated it to the Social to both the content and the process of the Impact Investors Group. Forums such as the Review. Details of the membership and London Funders’ Forum and several of the meetings of the Challenge Group can be sector’s umbrella bodies also alerted their found at Annex C. stakeholders to the Call for Evidence.
Chapter 1 – Background and Introduction 19 1.14 The review team conducted face- Using the evidence collected to-face engagement with stakeholders. A 1.20 The review team used the evidence detailed breakdown of the type of face-to-face gathered to inform conversations and engagement used for each stakeholder group discussions throughout the review process. is at Annex G. All the conclusions and recommendations 1.15 The review team collected a range of made by the review team are based on their other evidence, in order to supplement that assessment of the evidence. Where relevant provided by stakeholders and to provide the specific evidence is highlighted in the statistical information, clarification, and further relevant part of the report. The detail from details on areas of interest. Using existing specific sources, for example the Call for evidence (not produced specifically for the Evidence, is also summarised in the annexes. Review) was also in keeping with the principle of proportionality. A full list of this additional The Big Lottery Fund evidence is at Annex G. Select Committees Overview of the Fund 1.16 The lead reviewer contacted the clerks 1.21 The Fund exists as an executive NDPB of the relevant Select Committees (the Public under the National Lottery etc Act 1993 Administration Select Committee and the (as amended). The Secretary of State for Culture, Media and Sport Select Committee) Culture, Media and Sport has responsibility on Friday 22 November, informing them of for the National Lottery, including the system the Review, providing a link to the Written of distribution of Lottery funds and all pan- Ministerial Statement, and informing them of Lottery matters. Policy and sponsorship the opportunity to provide comments on the responsibilities specifically for the Big Lottery Fund. Fund transferred to the Minister for the Cabinet Office on 13 April 2011, having previously been 1.17 The review team also reviewed a Public the responsibility of the Secretary of State for Administration Select Committee report from Culture, Media and Sport. The Permanent 2007-8 on ‘Making grants efficiently in the Secretary of the Department for Culture, culture, media and sport sector’ which made Media and Sport retains responsibility as mention of the Big Lottery Fund. Principal Accounting Officer for the National Keeping the Fund informed Lottery Distribution Fund. 1.18 The lead reviewer met with the Chief 1.22 The Fund is responsible for distributing Executive of the Fund on a regular basis to 40% of money raised for good causes from ensure that the Fund was kept informed and the National Lottery. The Fund must distribute had sufficient opportunity to comment on the this money to health, education, environment, approach being taken by the team. and to charitable causes. The other 60% of the money raised for good causes by the 1.19 The review team would like to put on National Lottery is distributed equally between record their thanks to the Fund for facilitating sport, arts, and heritage by other distributors. meetings with staff and stakeholders and responding to requests for information to 1.23 The Fund is a UK wide organisation. inform the Review. The Minister for the Cabinet Office has powers to issue policy directions with UK wide effect or which relate to England specifically. The relevant Devolved Administration issues policy
20 Triennial Review of the Big Lottery Fund – Report directions for Wales, Northern Ireland and regulation and accountability was regarded Scotland. as necessary by the majority of stakeholders 1.24 The functions of the Fund include engaged over the course of the Review. distributing 40% of all funds raised for good Structure of the Fund causes (about 11 pence in every pound spent 1.28 The Fund is made up of two central on a Lottery ticket) by the National Lottery; functions providing services to the whole distributing non-Lottery funding on behalf of Fund and four country directorates, each public bodies (such as the Department for headed by a director who sits on the Senior Education and the Office for Civil Society); and Management Team and reports to the Chief distributing money previously held in dormant Executive. The two central functions are bank and building society accounts. Finance and Corporate Services and Insight, 1.25 The Fund is required to report on the Policy and Engagement. The Insight, Policy extent to which they follow the ‘additionality and Engagement function was created on principle’, that is that National Lottery and 1 April 2014 following a merger of the former dormant accounts funds should be used to Strategy, Performance and Learning and fund projects for which funds would be unlikely Communications and Marketing functions. to be made available by the UK Government or the Devolved Administrations. 1.29 The four country directorates cover England, Scotland, Wales, and Northern Lottery funds Ireland. The senior management structure 1.26 Lottery money does not form part of chart is at Annex E. Exchequer funds and is not consolidated as Staffing of the Fund such. However, it is defined as public money because it is subject to public regulation and 1.30 The Fund employed 988 FTE at the end accountability in the following respects: of financial year 2012/13. The average number of staff employed during the year was 980. A •• The money is protected by statute through detailed breakdown of staff numbers including the National Lottery Acts, which ensure year on year comparisons and forecast staff that Lottery money is held in the National reductions is at Annex E. Lottery Distribution Fund (NLDF) in proportions agreed in statute, and shared Big Lottery Fund spend out to the Lottery distributors in these 1.31 At the end of the financial year 2012/13, proportions. the Fund had spent £773,286,000, against an •• The Chief Executive of each Lottery income of £838,688,000. distributor is accountable to Ministers, who 1.32 For 2013/14, the Fund had a funding in turn are accountable to Parliament. budget of £1,044,670,000, and an operating •• NLDF is under the control and budget of £54,700,000 (takes into account the management of the Secretary of State for expected extra FMS costs but does not yet Culture, Media and Sport. factor in any benefits realisation). •• The Comptroller and Auditor General 1.33 A summary income statement and a examines, certifies and reports on breakdown of the Fund’s budget are at Annex E. distributors’ annual statement of accounts. Further information about the Fund 1.27 Given the amount of money available 1.34 References to the corporate documents to the Lottery for distribution, this public published by the Fund are also at Annex E.
Chapter 2 – Findings on the Functions and Form of the Big Lottery Fund 21 Chapter 2 – Findings on the Functions and Form of the Big Lottery Fund Context What are the functions of the Big 2.1 Triennial Reviews examine whether Lottery Fund? all the functions fulfilled by a public body are 2.5 The Fund’s functions are set out in the still necessary, and if they are, whether the National Lottery etc Act 1993 (as amended). current form of the organisation is the most In addition it has functions conferred on efficient and cost-effective delivery model for it under the Dormant Bank and Building those functions. Society Accounts Act 2008 (“the Dormant 2.2 When considering the form of the Accounts Act”). organisation, review teams are required 2.6 The principal functions of the Fund to consider both a checklist of alternative comprise: delivery models that is provided in the guidance,2 and consider whether the •• distribution of National Lottery funds functions pass one or more of the ‘three (“Lottery funds”) to meet expenditure tests’ of whether the functions should be which is charitable or connected with delivered ‘at arm’s length’ from Ministers, ie. health, education or the environment by an NDPB. •• distribution of non-Lottery funds for these 2.3 It is important to note that NDPBs purposes are not independent of Government – rather •• distribution of funds from dormant bank they are at arm’s length from it. Some of the and building society accounts (“dormant evidence gathered as part of the Review accounts funds”) to meet expenditure that was predicated on the view that the Fund has a social and environmental purpose. was independent of Government, which is incorrect. 2.7 The business objectives and key performance indicators to deliver these 2.4 Annex H sets out information about the functions are set out in the Fund’s Corporate key characteristics of delivery models which Plan 2013/14.3 The Fund also reports to the may be applicable to the Fund. Cabinet Office against its policy directions for England and the United Kingdom, issued to the Fund on 2 April 2012. Scotland, Northern Ireland and Wales also have their own arrangements for informing the Devolved Administrations about their performance in relation to their country-specific directions. 2 https://www.gov.uk/government/uploads/ system/uploads/attachment_data/file/230191/ Cabinet-Office-Guidance-on-Reviews-of-Non- 3 Corporate Plan 2012/13, Big Lottery Fund, July Departmental-Public-Bodies.pdf 2013.
22 Triennial Review of the Big Lottery Fund – Report 2.8 Within the functions and corporate strategic interventions. They offer the objectives the Fund has 5 ‘portfolios’ of opportunity to trial new approaches investment across England, Northern Ireland, that have the potential to scale up into Scotland, Wales and UK wide. These can be strategic work and have included social broadly categorised as including demand- investment and trusts work. Flexible led, strategic interventions, third party work investments have been made in a range and dormant account funds. The UK portfolio of areas of work that subsequently includes an international funding programme develop into strategic, collaborative or called International Communities. third party work. 2.9 However, there are some overlaps in 2.11 As part of its UK funding portfolio how elements of the Fund’s work are defined, the Fund is running an ‘International for example in Scotland the dormant bank Communities’ programme. In 2012/13 the account distribution has the characteristics of total value of the Fund’s international work third party work. was £14,415,462. The Fund’s current policy directions state that organisations funded Function 1 – Distribution of National should include “those with a base in the Lottery funds United Kingdom and working overseas.” 2.10 The Fund divides its Lottery The Fund is fourth in a table (by grant award distribution into demand-led/responsive (open size) of the ninety UK based international funding), strategic interventions and flexible development funding foundations. The Fund’s investments as follows: work and staff are respected in the sector •• Demand-led/responsive funds (including and engage with relevant organisations smaller individual grants (up to £10,000)) including with Department for International to address a wide range of issues that Development (DfID) and Comic Relief. have been identified by organisations. Function 2 – Distribution of non-Lottery Programmes include ‘Reaching funds – third party work Communities’ in England, ‘Awards for All’ 2.12 Using powers introduced by the that operates in all countries, ‘Investing in National Lottery Act 2006 the Fund has also Communities’ in Scotland, ‘Reaching out- had power to handle non-Lottery funds on Supporting Families’ in Northern Ireland, behalf of other organisations, in line with its and ‘People and Places’ in Wales. core purpose to fund projects supporting •• Strategic or targeted interventions are health, education, environment and charitable evidence based, focused pieces of purposes. For example, it distributes ‘Coastal work designed to make a significant Communities’ funding on behalf of Department difference to a small number of deep for Communities and Local Government. It is rooted social issues over a longer period also able to pursue joint funding schemes (e.g. of time. Interventions include ‘Fulfilling the ‘Advice Services Transition Fund’ with the Lives – Supporting people with multiple Cabinet Office). This work is delivered under and complex needs’, ‘Impact of Alcohol’, the name of the Big Fund. It is underpinned by ‘Talent Match’ and ‘Mental Health a third party strategy and was later endorsed Matters’. by the ‘Fresh Thinking’ document in 2012.4 •• Flexible Investments are described in England as work that can’t be addressed through demand-led/responsive or 4 BIG’s Strategic Framework Refresh, Big Lottery Fund, April 2012.
Chapter 2 – Findings on the Functions and Form of the Big Lottery Fund 23 Part of this function also includes the Fund’s the development of strategic programmes work with the private sector. was highlighted as needing to be more Function 3 – Distribution of dormant collaborative with key local partners and account funds commissioners. 2.13 In November 2008 the Dormant Bank 2.17 Third party work partners whom and Building Society Accounts Act was the review team interviewed described the passed enabling banks and building societies importance of the Fund to the delivery of their to transfer money held in dormant accounts grant programmes. The ability of the Fund to a central reclaim fund for reinvestment in to use its existing grant and decision making the community. The ‘Reclaim Fund’ started processes, provide access to experienced transferring funds to the Fund in March 2011 and knowledgeable staff, and the opportunity to distribute in accordance with the Act and to be procured relatively quickly, were all key directions issued to the Fund by the Minister factors. for the Cabinet Office and the Devolved 2.18 The distribution of the dormant Administrations. accounts funds has different operating models across the UK. In England the Are the functions of the Big transfer of funds to Big Society Capital (BSC) is a straightforward financial transaction Lottery Fund still necessary? whilst in Scotland the resources are directly 2.14 The majority of comments received by administered by the Fund on behalf of the the Review about the Fund and its functions Scottish Government. related to the Fund’s distribution of National 2.19 The trust and specialisms that are Lottery funds. However, the team received necessary for the Fund’s delivery of third sufficient information across the piece to party work and dormant accounts work rely draw appropriate conclusions on all three on the knowledge, systems and expertise functions. that are core to the Fund as a National 2.15 The Fund is highly valued and Lottery distributor, with the exception of the respected for the delivery of its smaller England dormant account distribution. demand-led grants to the voluntary and 2.20 The review has concluded that: community sector. The Review evidence •• The distribution of demand-led funding endorsed the results of the Fund’s own VCSE is an important source of support for the survey of high levels of customer satisfaction. VCSE during a time when other sources Many stressed the need for the continued of grant funding are reducing. Strategic role of the Fund and to deliver local funding to investment funding provides ongoing high standards. opportunities to tackle key issues facing 2.16 Stakeholders involved in the Fund’s society in a coordinated and joined up strategic programmes reported positive local way in localities. impact, enabling good partnerships and •• The third party work is an important helping to make investment more focused. function for a range of government As facilitators of this process, the strategic departments which have benefited from programmes had increased the importance the systems, experience and scale that of the Fund’s role locally. The Fund’s the Fund has been able to provide. approach to initial partnership working during
24 Triennial Review of the Big Lottery Fund – Report •• The dormant accounts work provides Review for the continued need for the three further funding sources to deliver key functions to be fulfilled. The Call for Evidence strategic policy priorities. Whilst the survey found that 96% thought that some or administration of this in England is at the all of the Fund’s functions should continue, moment purely an accounting exercise with over 80% saying all three of them were and is therefore not interdependent on needed. the Fund’s other functions, the review 2.23 There is good awareness amongst the team do not feel it is practical for this to Fund’s stakeholders of the Fund’s functions. be carried out separately as a function Of those responding to the question in the outside the rest of the dormant account Call for Evidence 95% recognised the three function (not least because in the future functions of the Fund. the treatment in England may change). 2.24 Even those who were not aware of the 2.21 However, the Review found that there three functions were familiar with the Lottery are opportunities to improve the delivery distribution function and it appears that most of the functions and services currently people see this as the main function of the undertaken by the Fund in order to improve Fund. Comments from the Call for Evidence their effectiveness. The opportunities for included: functional improvements are described in Chapter 4. “Funding from Big Lottery Fund is an absolute lifeline to community groups and Recommendation 1 charities across the country.” The three main functions of the Big Lottery “Because as the largest and best Fund: nationwide funder Big Lottery Fund is well managed, well-structured and ideally •• distribution of National Lottery funds to positioned to make a real difference to meet expenditure which is charitable or deprived communities through a mixture connected with health, education or the of large and small and long and short environment term grants (for both capital and revenue •• distribution of non-Lottery funds for projects).” these same purposes “The Big Lottery helps an extremely wide •• distribution of funds from dormant and varied community. Without the Big bank and building society accounts, to Lottery many worthwhile organisations meet expenditure that has a social and would not exist.” environmental purpose 2.25 The importance of the grant all continue. distribution to small VCSE groups was heard many times throughout the Review with people saying that the demand-led Evidence and analysis of Big programmes are important sources of Lottery Fund functions funding for voluntary groups. One respondent to the Call for Evidence said: Evidence provided on the Fund’s functions and analysis “Big Lottery Fund is ideally placed to continue to distribute this funding due to 2.22 There was strong endorsement from its established infrastructure, knowledge, all sources of evidence gathered by the
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