Monday, August 13, 2007

What is acceptable risk for the Council when it comes to giving out Grants?

I have been working with some residents on the case of the Citywide Co-op, which recieved quite a large City Council grant just weeks before ceasing trading and folding up entirely. Although the council say that they had no idea that the Co-op was in bad shape, it does raise the question of how certain the council should be about the viability of such companies and groups before Grants are made. This issue is bought into sharper context when you consider that this is taxpayers money that we are handing out and City Hall is on the brink of handing out £50,000 to community projects in the next few weeks. What is acceptable risk in these cases?

The Community Grants programme provides seed corn funding for community based groups to develop local provision which meets the Council's corporate objectives. It does not provide long term funding, but groups can get up to a maximum of £1000. Before you exclaim that this is short change in the council coffers, ask yourself what can be done in your area for £1,000. Originally the maximum was a whopping £5k, and the rational for this change was to ensure that the maximum number of grants possible could be awarded from the budget available and also to reduce the risk to the Council of such awards to community groups. So when the amount was reduced it was accepted by the council that there was a risk. But is reducing the amount paid out really reducing the risk?

At the time that the Council made a Community Grant award to the Citywide Co-op there was no knowledge that the organisation was at risk of closure, therefore a grant was awarded as the group provided the appropriate information and met the criteria for the grant programme. This begs the questions - how many checks were made? Was the group turned upside before we happily handed out taxpayers money? Or was this an episode in box ticking where somebody had filled in an application form really, really well and thus got the cash? Who is looking after the taxpayer here?

The types of groups that the community grant programme supports are often small with limited reserves, as was the case of the Citywide Co-op. When I challenged the council about the risks involved here, I was told that community run activities do bring a degree of risk because of the limited capacity of volunteers to run a project. So, we are admitting that on occassions we hand out cash to people incapable of using it properly or spending it wisely. Now I'm sure there are dozens of groups who use the cash well, but this success shouldn't hide those schemes which fail and waste money.

The council argued that because of this risk, each application is evaluated by an appropriate officer to provide the Council with as much information as possible, such as track record, financial balances, governance arrangements and whether the proposal is SMART. The evaluation of the Citywide Co-op did not identify any problems and an award was approved. How rigerous was the system and, given hindsight, could we have been expected to spot the mistakes?

This area of council finances looks like a minefield to me and we are lucky that John Wyatt is our man on Small Grants Panel - he'll soon dig out any problems.

But, to conclude, we admit that these grants are risky by their very nature. However the co-op case must ask us if we have become resigned to the risks or if we are still being as rigerous as we can in checking how we spend taxpayers money. I'll be disappointed if it isn't the latter. In the meantime, we have to ask what can learn from the co-op disaster.

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