In the following blog, the Wales Audit Offices Local Government Manager, Nick Selwyn explores the importance of the relationship between local government and the third sector in Wales, following the release of the Auditor General for Wales’ report Local Authority Funding of Third Sector Services. Nick shares his thoughts on this and a new self-assessment tool designed to help the sector maximise value for money.

Most of us realise how significant the third sector has become to communities across Wales. They support the arts, they help the poor, they care for vulnerable people, and they advocate for better government, they support education and the environment providing the link between citizens and the state. The third sector is an essential element of our day-to-day life but often goes overlooked in the delivery of public services across Wales.

What is the third sector?

The ‘third sector’ is the term used to describe the range of organisations which are neither state run, nor part of the private sector and includes voluntary and community organisations, registered charities and other not-for profit organisations. Third sector organisations are diverse in both size and scope, ranging from small, locally based community groups, to large, multi-national charities.

From little acorns grow big things

The Wales Council for Voluntary Action estimates that the third sector in Wales consists of over 32,000 different organisations, employs over 50,000 people and has 1.13 million volunteers. Third sector organisations draw funding from a range of sources including local authorities who currently invest roughly a quarter of a billion pounds a year in the sector.

The third sector is also expected to grow significantly as the Welsh public service landscape changes in coming years. Whilst the pace and outcomes of this change will vary across the country and between local authorities, one consistent theme will be the provision of services through a mix of public, business, third, community and social enterprise sector organisations rather than previous models of local authorities and other public bodies providing and directly managing the bulk of services.

Turning acorns into trees

As all gardeners know, there are some things that all plants need to survive. These common elements – light, water and air – provide the plant with basic nutrients, the conditions to grow and survive.

The third sector in Wales is no different.

To support the sector to grow and blossom requires local authorities to develop corporate wide strategies that are based on good quality and accurate needs data to drive decisions, plans and activity. Some form of financial support for third sector organisations to finance infrastructure support, organisational development, community building, and other important activities is also vital.

Given the scale and importance of the third sector, the amount of funding invested and the anticipated growth in activity in the future, the Auditor General for Wales has recently completed a review of local authorities funding of third sector services which was published in January 26^th 2017.

Helping the trees blossom or cutting down the forest?

We found that despite local authorities’ increasing their funding of the third sector, strategic working with the third sector has many weaknesses. Few local authorities have comprehensive corporate wide strategies or frameworks that are based on the good quality and accurate needs data necessary to drive their decisions, plans and activity for the third sector. Even where strategic intent is developing, translating local authority aspirations into action varies widely.

Better performing local authorities are beginning to undertake comprehensive reviews of Third Sector funding to accurately identify the overall level of expenditure and to bring consistency and direction to investment decisions. However, this approach is not something that all authorities have undertaken.

Local authorities also need to have good administration processes for awarding and managing the third sector work fund. Done badly, the funding processes can impose heavy burdens on the third sector and result in resources being wasted. Despite local authorities recognising the importance of creating efficient and streamlined systems to manage their funding, many weakness exist and it is unclear if local authorities are securing value for money from their investment.

In addition, many third sector organisations lack clarity about what is required from them and require better support from local authorities.  Poor performance-management arrangements are also weakening accountability and limit effective scrutiny of activity and performance by Elected Members. Most local authorities have not set measures to enable them to consistently judge the impact of their work with the third sector and inconsistencies in risk management arrangements make it difficult for local authorities to evidence how well they are working with the third sector.

Turning trees into forests

Local Government has had to deal with unprecedented funding reductions in recent years. Coupled with the changing political landscape of local government reform and the demands of implementing wide reaching legislation such as the Well-being of Future Generations Act, local authorities have significant challenges ahead.

One common theme of the changing landscape local authorities operate in is the expectation that they will be working ever more closely with the third sector; and the third sector will have a growing role in delivering vital public services across Wales. These changing expectations present both an opportunity and a risk.

To help address these challenges we have made a series of recommendations to local authorities and Welsh Government. In addition, we have developed a detailed self-assessment checklist to enable local authorities to evaluate and identify where the processes and systems that underpin and support their work with the third sector need to be strengthened.

Using this assessment will help authorities to set up the right systems to maximise value for money in their investment choices. This will enable them to then turn the acorns into trees and trees into forests for the benefit of all of us.

About the author

Nick Selwyn is a Local Government Manager at the Wales Audit Office, with responsibilities for our programme of all-Wales studies. He has worked for the WAO for eight years in a variety of roles and is a Fellow of the Chartered Institute of Housing.