Research and Analytics

General Finance

External Funding Statistics


October 2006
Introduction

Non-mainstream funding, external funding, grant funding - whatever you call it - are all valuable sources of income that can be used to help ease the pressure on valuable local authority resources. For the purposes of this survey, external funding is defined as discretionary money not accounted for within the local government finance settlement. External funding is distributed by various UK and EU agencies on a business case or competitive basis requiring an application.

Is your authority optimising successful applications to sources of external funding?

Is your authority optimising the successful delivery of grant received?

These are the two key questions that every authority should be able to answer and prove. Whilst there are groupings of local authorities meeting regularly to share and compare practice and experience, there are by no means comprehensive national or regional networks in place. As a result, there is currently no national information available for local authorities in relation to external funding.

This new survey, now in its second year, was developed in partnership with a number of local authorities in order to help fill the gap and provide the evidence. It is hoped that authorities can start to compare their external funding operations with others who may be more successful in the bidding process and be better informed on how to optimise their external funding.

In addition to those who took part in this survey, comments were received from several local authorities that were unable to respond or only partially respond stating that the survey has generated significant interest. This could provide a much needed impetus to encourage local authorities to develop effective external funding performance management frameworks to ensure that these data are recorded in future years.

Comprehensive Performance Assessment (CPA)

The overwhelming message to come from the 2005 Comprehensive Performance Assessment is that single-tier councils are seen as failing to give value for money, but that most are working hard to meet the latest round of efficiency targets. While this CPAís focus on value for money is contentious, the results cannot and should not be ignored.

At a time when the government is challenging local authorities to work creatively to find solutions to resource challenges and to adopt a more entrepreneurial approach, being able to attract non-mainstream sources of finance in a structured and strategic way is more essential than ever.

CPA 2005 made specific reference to councilsí ability to attract external funds by following a more strategic approach. External funds are defined as money paid to local authorities not accounted for within the local government finance settlement and distributed by various UK and European Union agencies on a business case and/or competitive basis requiring an application. Many councils proved they met these criteria by successfully generating non-mainstream funding and having policies, systems and processes in place to support this activity.

For further statistical information about the funding of local government please refer to the CIPFA Finance and General Statistics. A description of the grants funding system can be found in TISonline Grants atwww.tisonline.net.

Management of External Funding

While the CPA makes specific reference to external funding and partnerships, other key lines of enquiry (KLOE) relate to the way a council manages external funding. For example, the corporate business plan must drive the councilís medium-term financial strategy and internal resource allocation, with any changes determined in accordance with policies and priorities; there must be project appraisals, business plans and affordability tests for new policy and capital developments; and budgets must be linked to risk assessments of material items of revenue and capital income and expenditure.

Too often, councils fail to risk-assess the implications of agreeing to provide lead or accountable body functions as part of a council-led external funding bid; many fail to understand properly the full resource implications and liabilities of a successful bid. Furthermore, governance arrangements are often overlooked. These include agreeing service level agreements with partnerships and ensuring robust delegations are in place. In addition, a number of KLOEs in the revised CPA corporate assessment focus on partnership governance arrangements and the approach to risk assessment relating to partnership activity.

The lack of a strategic approach to the management of external funding should be of major concern for finance directors because an uncoordinated approach can have damaging consequences. For one thing, when authorities fail to consider which project ideas should be supported and resourced to progress to the bidding stage, the project development and project delivery implications (for successful bids) can dislocate from the councilís medium-term financial planning.

Many councils find themselves delivering projects that do not meet corporate priorities, or providing lead and accountable body services to myriad partnerships without properly understanding the resource implications or ensuring that bidding is aligned to the financial planning process.

Survey

This publication provides background information on local authority external funding operations, including an examination of the number of bids submitted, bid success rates, the value of external funding awarded and details of bids operated in partnership.

It should be noted that totals shown throughout the publication are representative of responding authorities only and have not been 'grossed' to account for missing or incomplete data returns. Caution should therefore be used if attempting to draw conclusions based on results by the class of authority, region or nationally.

Background Information

Figure 1 illustrates the role that external funding currently has within local authorities, showing the proportion of councils that have specific strategies and resources relating to external funding in place.

Figure 1: The role of external funding within authorities
83% of authorities that responded to the survey employ specific officers with responsibility for external funding, which is perhaps not unsurprising, given that authorities with resources spread across the council may find it harder to collate the information together. This figure compares to 91% in 2003/04.

Another interesting point to note from figure 1 is that less than half the responding authorities had either an external funding co-ordinating group in place, an internal database of funding sources, a co-ordinated bid tracking mechanism or formally approved external funding corporate bidding protocols, all aspects that are key to good external funding management.

The average number of staff with responsibility for external funding across authorities in 2004/05 is 5.1 FTE, with a high of 47.0 FTE in Southwark and a low of 0.2 FTE in Tamworth. The average compares to 6.0 FTE the previous year. Of this amount for 2004/05, 41% of the officers are employed in central co-ordinating groups, with the remainder placed elsewhere across the authority. Following this pattern, only 29% of applications submitted are co-ordinated centrally.

Bidding Process

An average of 38.2 bids for external funding were made by each authority during 2004/05, ranging from a high of 197 in West Sussex to a low of 1 in Carlisle. The bid success rate is shown in figure 2.

Figure 2: Bid Success Rate
A high 81% of those bids submitted in 2004/05 were successful. Of the remainder, 5% are still pending a decision and 14% were unsuccessful. A breakdown of the average number of bids and the bid success rate over the last two years is shown in table 1.

Table 1: Bid Success Rate
A higher number of bids are submitted, on average, within metropolitan districts and London boroughs, whilst a lower number are submitted, perhaps unsurprisingly, within non-metropolitan districts. The average number submitted during 2004/05 of 38.2 has fallen by 4% on the corresponding number of bid applications submitted the previous year of 40.0.

Total success rate, excluding bids pending a decision, at 84% has dropped slightly from the 87% success rate achieved for 2003/04. As with the number of applications, bid success rate is at its highest within metropolitan districts at 90%, whilst success rate is at its lowest within non-metropolitan districts at 75%. We look at the breakdown of bids submitted and won by service area during 2004/05 in table 2.

Table 2: Bid Applications by Service Area 2004/05
Almost 50% of bids submitted were within cultural, environmental and planning services, with the next highest area, education services, accounting for 17.4%. Rates of success varied by service, reaching 100% within both fire and police services, although the small number of submissions in these areas should also be noted. There was also a high success rate within central services of 96%, with the lowest in support services at 67%. We look at the cost of the bidding process in table 3.

Table 3: Cost of the Bidding Process
As with the previous year, the average cost per bid for 2004/05 is highest within metropolitan districts at £4,588, more than three times as high as the average cost per bid within English Counties of £1,274. The overall average cost per bid in England stands at £2,678, 7% down on the average for 2003/04 of £2,867 per bid.

32% of authorities overall made use of external consultants to assist them with their bidding process. Despite having higher average costs, a very low percentage, just 11%, of metropolitan districts made use of external consultants as compared to 83% in London. The average cost of external consultants per bid in non-metropolitan districts at £943 was nearly double the overall average of £476 per bid. The largest change is within London boroughs, where the average consultancy costs have fallen by nearly 60%.

Partnership Bids

We now look at bids operated in partnership with other bodies, starting with table 4, which illustrates the proportion of total bids operated in partnership during 2004/05 and who the partners are.

Table 4: Bids Operated in Partnership 2004/05
53% of the total bids submitted in England for responding authorities were operated in partnership with other bodies. Of these, the local authority was the accountable body in 68% of the cases. 56% of total partnership bids were operated in partnership with the third sector, 43% with other public bodies, 30% with other local authorities and 14% with the private sector. This proportion differs by class of authority, particularly for London boroughs, with a higher than average proportion of bids operated in partnership with all bodies. The success rate of partnership bids as compared to bids as a whole is shown in figure 3.

Figure 3: Success Rate* of Partnership Bids as Compared to Total Bids
Although the overall success rate of partnership bids (excluding those pending a decision) is virtually identical to the success rate of bids as a whole at 85%, this differs when we look closer at the class of authority. In non-metropolitan districts, a high 92% of partnership bids were successful as compared to 75% success in total. In contrast, only 65% of partnership bids were successful within English counties, lower than the total success rate of 85%.

Value of External Funding Bids

The value of external funding grant bids applied for and subsequently won during 2004/05 is detailed in table 5.

Table 5: Value of External Funding Bids
The average value of external funding bids applied for during 2004/05 was £35 per head of population, ranging from £16 per head among English counties to £98 per head within London boroughs. The average value of grant bids actually won totals £27 per head of population, 79% of the total applied for. The value per bid is shown in figure 4.

Figure 4: Average Value of Bids Applied For and Won
The average value of bids applied for at £276k is marginally above the average value of bids won at £273k. As would be expected, the value of bids both applied for and won within London is much higher than elsewhere, with the lowest bid values falling within the non-metropolitan districts.

Delivery of External Funding

We have looked at the number and value of bids submitted, but what does this mean in terms of the amount of external funding awarded to local authorities? From the authorities that responded to the survey this year, £394.2m of external funding was awarded, with a high of £59.1m in Southwark to a low of £0.1m in Fareham. We look at the average value awarded to authorities in table 6.

Table 6: External Funding Awarded
The average value of external funding awarded to authorities during 2004/05 follows a similar pattern to both the value of bids applied for and value of bids won. Overall, £38 per head of population was awarded to local authorities in England, of which 53% was revenue funding and 47% capital.

The average value awarded for 2004/05 marks a 37% reduction on the £60 per head awarded for 2003/04. Whilst, the average for London boroughs has more than doubled from £51 per head of population to £105, there have been falls for English unitaries, counties and in particular, metropolitan districts, which have seen a drop from £155 per head to £52.

81% of the money awarded during 2004/05 was spent during the year, with 92% spent within English counties and a low 65% spent within non-metropolitan districts. It should, of course, be noted that not all funding awarded will be available to spend during the same financial year, particularly that awarded later in the period.


October 2006

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