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Let’s look at what you need to think about when you have an idea for a new grant scheme.
Good planning and getting things right from the very start will go a long way towards ensuring the eventual success of your scheme. It is important to do your research, develop your plans, identify your resources and target potential recipients. You will benefit by having a scheme which is well defined, realistic and clear about why funding is being given. Rushing a new scheme risks launching it without a solid foundation – this is inefficient and can prove very costly in terms of wasted resources, negative publicity, strained relationships and even failure of the scheme itself. For a long-running scheme, an interim evaluation can be planned to identify any lessons which can be learned to make the later stages run well.
Use the questions below as prompts. Click on each question to see our answer which sets out:
- what you ought to do as a minimum;
- for certain matters, the extra steps for good practice you can consider; and
- the benefits that good practice should bring.
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What’s my purpose of grant and desired achievements?
Firstly, ask yourself ‘Why is the grant needed?’ This helps you be clear about your scheme’s aims and objectives. Are you ‘shopping’ (buying a service), ‘giving’ (supporting a worthy cause), or ‘investing’ (building capacity in a sector)?
Set out in writing your scheme’s purpose and what it intends to achieve. While your initial anxieties might be about how to issue the offer letters and make payments quickly, you also need to focus on what the expected outcomes should be as this is critical to the success of your investment and how your scheme will impact on the needs which must be addressed.
Your expected outcomes should support the sustainable development aims of the public sector in Wales. This means development which meets the needs of the present without compromising the ability of future generations to meet their own needs. It emphasises the importance of a balanced and integrated approach in our response to social, economic and environmental needs and aspirations. It also emphasises the importance of the balance between the developed and developing parts of the world.
The strategy should do this by embedding the five inter-linked guiding principles from the United Kingdom’s shared framework for sustainable development:
- living within environmental limits;
- ensuring a strong, healthy and just society;
- building a strong, stable and sustainable economy;
- promoting good governance; and
- using sound science responsibly.
This would include action to promote social cohesion, addressing equalities issues and treating the Welsh and English languages on the basis of equality.
Make sure there is a clear need for your scheme and whether any other bodies offer similar funds – if so, there will be a potential overlap and it may be possible to
co-operate with them and work in a complementary way.
Clarity now will help you later on, at the ‘bidding and award’ stage, when you will set out:
- your selection criteria for assessing bids and applications; and
- your terms and conditions, which will need to be robust and practicable.
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How will I meet the policy objective and arrange for evaluation?
The aims of your new scheme should match your organisation’s strategic and policy objectives. Think about:
- the possible options for service delivery; and
- the relative advantages, costs, risks and disadvantages of each.
This will help you to decide the best means of achieving your policy objective.
Evaluation is an essential aspect of any scheme - it cannot be incorporated as a later 'after-thought'. Evaluation let you assess your scheme's effectiveness. Decide whether evaluation should be done while activities are running ('interim' evaluation) as well as after their completion ('final' evaluation). Then draw up a proper plan for evaluation - another point often overlooked!
A plan helps you to avoid difficulties much later on as it helps you ensure that all of the necessary information can be collected and recorded from the moment activities begin - saving everyone time and frustration. You may want to capture information such as:
- baseline data about how things stand before your programme's intervention;
- outputs, outcomes and impacts on beneficiaries, stakeholders and the wider community;
- innovations and what effect these had on the programme's success;
- the 'additionality' provided by the programme and whether it duplicated any other current provision;
- the programme's cost-effectiveness and value for money; and
- compliance with the original programme ideas.
Data collection and recording should also be linked to monitoring requirements.
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How will I gain ‘additionality’?
Often, you will want your grant to provide something new or extra rather than merely fund existing activities – although ‘core funding’ is very important to voluntary sector bodies as it is hard for them to obtain.
In your early publicity (and in your later scheme guidance and offer letters) make ‘additionality’ a key issue. You can see what additional activities or spending will arise from your grants by appropriate questions in the application forms.
Perhaps you’ll want bidders to submit detailed spending and delivery plans for your approval too – these would show the current position (the ‘baseline’) and the new levels of activity. After that, the offer letter can set performance targets which can then be monitored regularly.
As extra good practice, consider how your grant can be linked to performance explicitly, by a payment mechanism based on the delivered outcomes. There is then a financial reward for good delivery.
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Can I use an existing grant scheme?
As every grant scheme entails administration, check if an existing scheme (or a merger, rationalising and integrating other schemes) can meet your objectives.
This might let you offer your grants easily, quickly and without undue risk.
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Can I learn from existing schemes?
As a minimum, use the knowledge you have from any other grants you are running now or have run previously.
As extra good practice, why not seek what you can learn from colleagues and other funders too? Look for their advice and any findings from consultation, monitoring and evaluation exercises on other schemes. Your internal auditors will be another useful source of information and advice as they may cover other schemes in their routine work programmes.
As grant making can be a risky and complex affair, often done under time pressure with limited staff resources, any help you can get from others will prevent mistakes being repeated as well as saving your time.
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Will I rely on match funding?
Your grant will have more ‘spending power’ (sometimes referred to as ‘leverage’) if recipients have to provide other funding alongside it, either from their own resources, project partners, or other funders. This ‘match-funding’ can be in cash or in kind – for example, donation of staff time, volunteers’ efforts, and access to buildings and equipment.
As extra good practice, consult other prospective funders to ensure that the various grants will dovetail and work in a complementary manner.
Seeking formal confirmation from recipients and other funders about the amounts they could make available for projects will help you determine the total sum your scheme needs to be worth. Working with other funders by pooling resources, project monitoring will promote effectiveness and save effort for all.
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Have I minimised complexity?
As much as possible, aim to meet the principles for good grant giving:
- simplicity and proportionality;
- consistency;
- clear and effective co-ordination; and
- transparency and accountability.
Check that your proposed arrangements will not place any unnecessary or disproportionate burdens on recipients.
Addressing all of these issues will help you address any criticisms, promote the take-up of your scheme and help recipients focus on project delivery without being diverted by bureaucracy.
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Have I decided what’s eligible and ineligible?
Your grant’s policy objective and aims will direct you as to what costs you should view as eligible for funding. Is your grant just for ‘running costs’ (revenue), ‘investment in buildings or equipment’ (capital) or for both kinds of cost? And are you prepared to offer ‘core funding’ to meet part of the recipients’ basic and ongoing expenses like office accommodation and central administration?
You should also think about whether you would like to define any costs as expressly ineligible for grant – these might be ‘political activities’, non-cash costs like depreciation, everyday revenue expenses on a capital grant for buildings or equipment, and financing costs like interest. When it comes to general ‘administration and management’ you may want to limit claims to a small percentage (5-15 per cent) of the total grant you award.
Clarity about eligibility will make it much easier for you to hold recipients to account and settle claims without dispute. Ruling out unacceptable costs will help your money go further by preventing its misuse.
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Should I give a grant or a loan – or purchase services directly?
Grants, loans and contracts are all means of getting something provided. You need to understand the implications of each route to be able to choose the right one for your particular circumstances. Take specialist advice on Value Added Tax as there are different rules for grants and contracts.
Grants are in the nature of ‘gifts’ or ‘donations’ – though you are entitled to set reasonable terms and conditions which, if not satisfied by recipients – can lead to grant (and assets acquired from grant) being reclaimed/withdrawn. The grant option is likely if funding is in the nature of ‘giving’ or ‘investing’. Other pointers towards grants include:
- the paying body not having a power to undertake the work or deliver the services;
- services are going to be provided to a wide range of recipients and not directly to the paying body;
- the project proposal being initiated by a third party and its ownership rests with them; andonly a proportion of funding being provided by the paying body.
Purchasing involves contracting – setting a legal relationship between the funder and the recipient providing for remedies such as damages and specific performance, which can be enforced by a Court. The procurement option is likely if funding is meant to cover a specific ‘purchase’. Other pointers towards procurement include:
- the paying body having a power to undertake the work or deliver the services itself;
- outcomes being mainly for the benefit of the paying body itself;
- there being a choice of alternative providers;
- the paying body picking up the whole cost; and
- the paying body needing full discretion over specifying the works or services and the final outcomes.
Beware that a ‘Service Level Agreement’ can arise in both options. Whether or not a Court can enforce it will depend on whether the agreement can be construed as a contract.
Loans differ from grants – loans are money repayable to you, though there will be a risk that some recipients will default. Loans will allow you to recycle cash over the years and they may give you more control than a grant would.
Refer to your legal advisers and to the Office of Government Commerce website – it is an excellent source of advice and good practice on the dos and don’ts of procurement, providing model terms and conditions for you to adapt when purchasing.
These steps will ensure you receive the advice you need to make the correct decision about the route you should take and avoid pitfalls which can arise from inexperience or a lack of diligence about specialist tax and legal matters.
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Have I checked legality and regulations?
Public bodies awarding grants must always check they have a statutory authority for providing funding, or some other basis for its legitimacy.
Always check whether you have to comply with requirements set by another organisation (eg the European Commission, Government Departments) as this may limit what you can do or determine the procedures you adopt. This is especially important where there are issues connected with ‘State Aids’.
It’s also well worth checking sources of guidance (eg, ‘Managing Public Money 2007’ and ‘Guidance to Funders’, both published by HM Treasury, and any Compact with the voluntary sector).
This will ensure that your scheme complies with the law and is fully legitimate.
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Have I obtained approvals and budget?
You need to plan how you will obtain the necessary resources (budgetary, staffing, consultancy and IT).
For grant-paying bodies in the public sector, approval may need to come from a Minister or a Cabinet and the budget will need to be approved too.
Securing budgets for the medium term means that grants can be offered for several years, giving a degree of protection and continuity for recipients and their project delivery staff.
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Have I consulted as appropriate?
Good grant making results in an effective partnership between the paying body and recipients, delivering benefits for all. This makes proper consultation a key step in planning a new grant scheme.
Consulting stakeholders helps you to decide:
- who you should give grants to;
- what terms and conditions you will set; and
- what expenditure will (or will not) be eligible.
It will also help you to check whether your proposed scheme can be easily understood and used. There is a delicate balance between making your scheme easy and attractive but also sufficiently rigorous and accountable.
As extra good practice, take care to write documents clearly, in plain language and issue them early enough to allow time for meaningful responses. Give adequate publicity to your consultation exercise.
Understanding each other’s needs and requirements should help you avoid or overcome problems and achieve your desired outcomes. Consultation helps you identify barriers to project delivery and assess how risks can be passed to the party best able to deal with them. It can also generate new ideas and approaches as well as helping ensure that relevant parties are ‘on board’ right from the start.
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Have I liaised with auditors/the Wales Audit Office?
Always inform your own internal and external auditors of proposed new schemes. They are a source of expert advice on the proper financial procedures and sound controls you will need to operate. They will need to consider if your scheme should be included in their audit plans.
They can also advise you about how to avoid (or manage) conflicts of interest and help you ensure that you follow the ‘Seven Principles of Public Life’ (selflessness, integrity, objectivity, accountability and stewardship, openness, honesty and leadership). (Nolan report)
If you’re considering that recipients must provide auditor certificates, then you need to consider:
- the form of the auditor (or independent accountant’s) certificate, as this needs to be agreed early, so that it can be incorporated into the eventual claim form; and
- which auditors (or independent accountants) you will specify as able to certify claims (examples might be the auditor appointed by the Auditor General for Wales, the company’s external auditor, or a registered auditor).
You will need to be clear about the respective roles of the paying body, recipients, and auditors. For bodies covered by the Wales Audit Office, reference should be made to the Auditor General for Wales’s Statement of Responsibilities for grants (copy here).
When giving grants to local authorities, local NHS bodies and central government bodies in Wales, contact the Compliance Team at the Wales Audit Office (e-mail: waogrants@wao.gov.uk) to find out the existing protocols for certification and secure the Auditor General for Wales’ written agreement to make certification arrangements for your grant before your terms and conditions are finalised.
The Wales Audit Office will provide you with help in devising a new scheme to decide the eventual arrangements for auditors’ work by
- discussing whether auditor certification is desirable and practicable;
- determining if the level of assurance you’re seeking can reasonably be expected from auditors;
- providing a timely assessment of whether the provisions for a new or revised scheme are capable of being certified without incurring excessive cost;
- discussing whether certification timetables are practicable; and
- advising you on draft claim forms and scheme guidance.
(For grants to the private and voluntary sectors, please refer to the Institute of Chartered Accountants in England and Wales’ guidance on grant reports to public sector bodies, which covers engagement letters and defined procedures).
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Have I set a realistic timetable?
You need to define the period during which you will support eligible expenditure and set specific start and end dates. Remember that closedown can be complex – especially for partnership grants – and involve critical deadlines.
Draw up a timetable, setting out the main tasks and deadlines for your management of the scheme. This would cover budget setting, inviting applications, appraising applications; making offers; notifying applicants; making payments; monitoring progress; any interim evaluation and closing down/finally evaluating the scheme.
You should ensure that:
- terms and conditions and claim forms are available in sufficient time to enable recipients to collect information and complete their claims by the prescribed deadline; and
- you set payment profiles for instalments of grant and the final settlements.
Allowing sufficient time for consultation and for recipients to gear up to deliver their projects both help to ensure your scheme’s success. By issuing comprehensive terms and conditions before your scheme starts, recipients can plan their activities and use grant monies to maximum effect. They can arrange from the outset to collect any data required for project monitoring and claims.
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What happens at the end of grant (exit strategy)?
As a minimum, government bodies giving grants which will be used to acquire or improve capital assets must set special conditions to protect their position in the event of any disposal by a recipient.
As your grant may only run for a limited time, often with funding levels falling off towards the end of the scheme, you should consider what future arrangements may be needed to ensure that activities will continue.
Doing this allows you to retain a say in how assets are used or disposed of into the medium term, or how future income streams should be shared with you if projects move into financial surplus.
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