Communities and Culture Committee
CC(3)-01-08 (p3) : 23 January 2008
Evidence presented by Community Enterprise Wales
Community Enterprise Wales - Background
Community Enterprise Wales Ltd (CEW) is a Not for Profit organisation providing membership services to the Social Economy Sector and undertaking trading activities by providing business planning and development support to organisations in the sector. CEW is a social enterprise and delivers services which are either paid for by the client or through a contract or service level agreement with a Local Authority, agency or other body who is funded to support the development of the sector.
The company was set up 14 years ago to establish a membership support service and was initially funded by the Welsh Development Agency, and then later by the Welsh Office and finally until April 2004, by the Welsh Assembly Government. Due to reducing levels of resources, CEW’s core funding was lost in 2004, and since that time CEW has developed new partnerships and contracts with the aim of securing its future and achieving long term sustainability.
Community Enterprise Wales - Activities
CEW has a track record in mapping and developing social enterprise across Wales, it holds a database of 500+ members which includes existing social enterprises, local organisations that support community development, training organisations, education providers at community, FE and HE levels, local and central government and agencies and organisations that support the social economy in Wales. CEW sits on the national Social Enterprise Network, and numerous funding, community, government, regional and thematic committees and boards.
CEW provides development support to emerging and existing social enterprises, its core remit is to identify and develop trading activities to support community benefit. Over the last 14 years, CEW has supported hundreds of community groups and organisations and promotes best practise through its skill share programme. Through it’s membership services CEW provides information, support and advice to it’s members, and will be extending these service in the next few weeks to include discounted professional services, a funding and strategy resource and a 'shop’ for social enterprises to sell or exchange their goods or services. CEW also works with local and central government, funders and other development agencies to deliver a co-ordinated approach to business support for social enterprise and more efficient and effective use of resources.
The CEW offices are located at the Innovation Centre, Ebbw Vale, which is opposite the Corus site currently being developed through the Heads of the Valleys strategy; this is also the location of the site office that is home to the HOV team.
CEW is managed by a volunteer board which is representative of the sector and includes Local Authority representatives, social enterprise practitioners, other support agencies and funders. CEW is committed to partnership working and the effective and efficient use of resources, to this end CEW works with an extensive list of partners including BTCV, Coalfields Regeneration Trust, The Scarman Trust, Wales Co-operative Centre, The Development Trust Association, Social Firms Wales, Wales Disability Association, The Rise Network, The University of the Valleys, Communities 1st, Princes Trust, South Wales Probation Service, Heads of the Valleys Programme amongst others.
CEW Core Staff team is based at Ebbw Vale but the company also has a portfolio of associates who are commissioned on a job by job basis to ensure that the company has as wide a range of expertise as possible to deliver a tailored service specific to the needs of the client. Social enterprise encompasses a wide range of businesses and activities, to ensure we meet the clients’ needs, associates are carefully matched to the client and the particular skill requirement; they are line managed through the core staff to ensure there is quality control and customer satisfaction
CEW deals primarily with community organisations that are trading, however with more emphasis now being placed on sustainability many voluntary organisations who have been grant dependant, are now looking to CEW and its partners for assistance in developing trading activities and new income streams. With this in mind, this paper will deal specifically with the issues that the support organisations and social enterprises face in funding their activities and development. The information and opinions have been compiled through feed back from members, partners and associates, and CEW’s experience through involvement and participation in the following funding schemes:
Hidden Dragon Fund
Carmarthenshire Loan Fund
Vale Rural Development Fund
Blaenau Gwent Social Enterprise Fund
CRT Social Enterprise Grant Scheme
CRT Welsh Grant Panel
New and emerging Social Enterprises and Development Support.
In recent years there has been a sharp increase in the number of agencies and organisations who claim to support social enterprise development, some with little or no background or experience in the sector, or an understanding of the difficulties this transition presents to community groups and voluntary organisations. One of the reasons that this situation has arisen is procurement.
Support for the sector has been tendered out and in some cases has resulted in support being 'made to fit’ instead of fit for purpose, it has also resulted in a fragmentation of support which has not improved access but further confused the situation, making it increasingly difficult for community organisation to know where to go for support, or indeed, which route to take in the face of conflicting advice.
There is a wealth of expertise in Wales, which is at risk of being lost if established organisations with a track record in developing social enterprise and community organisations is not supported and realistically funded. Convergence funding threatens to further exasperate the situation, support organisations who submit applications are required to demonstrate that the activities which they require funding to deliver are not currently part of their core operation, the result of this could be the loss of an existing support organisation with trained staff and management which would be replaced by a new organisation who would have to learn all the lessons, develop the relationships and gain the experience that already existed previously. This displacement is a real threat to the sector.
To provide funding to new and emerging social enterprises without quality business development support will result in inefficient use of funding, and a high failure rate. The Coalfields Regeneration Trust Social Enterprise Scheme is a model of best practise which successfully co-ordinates support and funding, and continues to support groups and organisations with targeted interventions appropriate to the organisations development.
This staged development approach provides on-going support which is not time limited and funding options which range from minor capital grants and associate support for business planning to larger revenue and capital grants. By developing this type of long term relationship, funding is used as growth investment, risk is minimised and the social enterprise follows a set development plan in line with agreed targets and outputs.
Another strength of this approach is the co-ordination and rationalisation of existing provision through partnership working. Through the panels set up to assess the applications to the fund, duplication is avoided and added value can be achieved, and where the applicant did not meet the criteria of the fund, referral was made to other agencies or organisations that could support the applicant.
To be successful in securing grant income, new social enterprises are required by funders to demonstrate how the grant will be used as investment income, and to demonstrate how they will develop income streams to become sustainable. To move an organisation from a grant mindset to a business and trading culture requires funding that is realistic and long term - the average social enterprise will take 5-7 years to become fully established and achieve acceptable levels of sustainability - you cannot plan and develop a business if funding is short term, or if service delivery is not funded at full cost recovery.
Existing Social Enterprises
Many of the issues mention above affect more established social enterprises; however there are additional challenges and difficulties. To attract further investment to grow and diversify is often difficult as many organisations will have already accessed many funds in the earlier stages of their development; this is particularly difficult in respect of state aid and de minimis.
Procurement offers opportunities for social enterprises to move to more formal contractual arrangements and become more in control of their own futures, however many have little expertise in the procurement process, may not understand how to commercially cost their service and because they have historically been viewed as voluntary organisations, are often seen as a 'cheap option’. There are several issues that need to be addressed to ensure social enterprises are able to fully engage in procurement:
Tender notices on Sell to Wales and other sites ask for evidence of delivery of contracts of a similar size and scale - how do social enterprises with no previous experience break through that barrier and gain experience.
Social enterprises have to demonstrate an added value that private sector organisations do not, where quality of delivery is equal, weighting should be given to organisations who demonstrate community benefit.
Discrimination against organisations who have previously provided 'free’ services under a grant and donation regime needs to be addressed - there is evidence that if these organisation start to charge for their services they will cease to be referred to.
Size of contracts and payment arrangements still seem to be an issue despite undertakings to break down the contracts. Cash flow for social enterprises is a major problem when securing a new contract, and delays in payments, or the need for upfront expenditure can deter management committees made up of volunteer directors from entering into contractual arrangements. CEW has managed a fund for Carmarthenshire County Council for 8 years, which provides interest free loans to ease cash flow problems to social enterprises who have secured funding which is retrospective. There is a quick turnaround process and this fund has allowed many projects to progress which otherwise would not have been completed. A similar fund for social enterprises who have secured a contract would remove the initial investment barrier many organisations face. Further development support could be offered to help with cash flow and financial planning and to establish robust management accounting systems and financial reporting.
Revenue funding continues to be the one of the greatest challenges faced by social enterprises wishing to expand and diversify. Organisations are expected to plan strategically but there is a history of short term funding which makes long term planning impossible. Short term revenue funding invariably affects staff posts, the implications of this approach for staff includes lack of employment security, reduced opportunities for career development and less investment in training. For the organisation there are increased costs for recruitment and training, reduced delivery time while new staff is being brought on board, and loss of experienced staff due to uncertainty about the future. If the expectation is for a five year business plan or five year delivery programme, the funding should match the duration of the project. In reality annual funding is a poor investment - the actual delivery time is sometimes as little as 6 months, with the first three months spent on recruitment and induction and the last three months spent searching for future funding.
To balance that argument, there needs to be greater accountability for funded posts such as business development managers. If a social enterprise secures funding for a business development manager, the organisation should be able to demonstrate what the expected impact of that post would be, with set targets for increased turnover or similar. Generalist statements which have served in the past were not commercially driven, if social enterprises are to succeed in becoming successful businesses the return on investment in those type of key posts has to be measurable.
Funding and Progression
As discussed previously, the model of the Coalfields Regeneration Trust Social Enterprise Fund bringing together partners and resources provides a seamless funding and support package for community organisation undertaking social enterprise activity.
In addition, the fund has been one of the key referral bodies to the Community Investment Fund, supporting and encouraging more established social enterprises to consider loan finance to develop their business.
There is potential to rationalise funding and maximise best value through this type of co-ordinated approach. From an end user perspective, the task of securing funding and support would be simplified through a single portal utilising existing provision. A portfolio of funding, centrally administered would be able to target thematically and geographically, would reduce administration costs and could link with a wide range of partners who currently operate in the sector. This approach would also enable sharing of resources and promotion of best practise across Wales.
Monitoring and Evaluation
CEW is currently undertaking several monitoring and evaluation studies, one of which extends the remit of the standard study to incorporate assisting the project to improve reporting systems within the organisation through the development of impact studies and improved performance measurement techniques.
This particular project had the foresight to include realistic budgets within its funding bid for monitoring and evaluation, however many bids submitted by community organisations do not include any budget for this activity or else the budget is unrealistic.
External monitoring and evaluation in additional to that undertaken by the funding body, has the potential to become another development tool, providing an objective view of the progress of the organisation, identifying potential issues and problems and recommending timely solutions to keep the project on track and protect the grant investment, as such, it should be viewed as a legitimate cost centre, and funded accordingly.
Match Funding
For most community led organisations, match funding is a huge problem. Understanding what can be used as match funding, how the match funding will be administered and how to account for it is often beyond a community group just starting up, and can deter them from applying for funding in some instances.
Even when there is an understanding of the requirements of match funding, many organisations do not have 'clean money’ they can match, so have often relied on in-kind match, which in itself requires resources to record and evidence.
Match funding can also be a barrier to accessing support, the business support which has been offered to social enterprises through mainstream business advisors has not been utilised because of the 50% match funding requirement.
In order for community organisations and social enterprises to take advantage of Convergence funding, the issue of match funding will have to be addressed, and funders will have to do more to ensure that grant recipients understand the original source of the funding they are receiving.
Social Enterprise and WHQS
Given the significance that WHQS and stock transfer will have in Wales over the next 5 years, it would be remiss not to include a reference on it for consideration by the committee.
The opportunities to address social exclusion, poverty, worklessness and low skills in our communities through the WHQS should not be taken for granted. Planning and investment in community based organisations that already have the ability to engage with the most disadvantaged in these areas is essential to ensure a lasting legacy is achieved.
CEW is currently working with some of the contractors, Jobmatch, agencies and training organisations to maximise the opportunities for new and existing social enterprise, but fast tracked and flexible support and funding to begin the process of engagement needs to be introduced to get organisations ready to engage with the contractors. Social enterprises have an opportunity to secure long term contracts which will create a ripple effect of benefit to the communities they operate within, the investment in these organisations at this time will be an investment in the future of Wales.
