Select Committee on Public Accounts Fourth Report


The Committee of Public Accounts has agreed to the following Report:—



1. The National Lottery Charities Board (the Charities Board) was established by the National Lottery etc. Act 1993 to distribute money raised by the National Lottery. As at 30 November 1999, the Charities Board had awarded some 28,000 grants totalling over £1.5 billion to charities and voluntary groups throughout the United Kingdom. The Department for Culture, Media and Sport (the Department) is responsible for setting the overall policy framework; issuing Financial Directions that set out the broad framework of financial and management controls; monitoring the performance of the Charities Board; and providing best practice guidance.[1]

2. Over 88 per cent, by value, of the grants awarded by the Charities Board have been made through seven main grants programmes. The value of grant awards ranges from £500 to over £1 million, and has averaged £93,000. Unlike projects funded by the other lottery distributors, there is no requirement for grant recipients to provide matching funding for projects.[2] Examples of funding provided by the Charities Board are set out below.

  • (to cover salaries and production costs for three years) to set up and run a youth arts team to target disadvantaged young people. The main activities of the project are theatre productions and supporting and developing youth theatre groups. The overall aim of the project is to empower young people by giving them a voice in the community, raising awareness of relevant issues, providing training, and developing positive attitudes and behaviour.

  • (to cover salaries and running costs for three years) to provide 'outreach support' for young women who have suffered sexual abuse. The project provides individual and group support aimed at helping young women remain in the community, develop their skills and break down social isolation. The overall aim is to lessen the effects of poverty.

  • (to cover salaries, running costs and publicity material for two years) to harness the creativity of disabled people. The project involves the creation, by disabled people, of a range of resources, including plays, sculptures, music and a CD, to provide positive images of disabled people, increase disability awareness, and challenge prejudices. A longer term aim of the project is to empower disabled people to have more control over their lives.[3]

3. On the basis of a report by the Comptroller and Auditor General[4] we examined the Department and the Charities Board about the distribution of lottery grants, the achievements on projects funded by the Charities Board, and the management of grants programmes. This is our third examination of an individual lottery distributor. Our previous examinations covered the English Sports Council[5] and the Arts Council of England.[6]

4. Our main conclusions and recommendations in this case are as follows.

  • Although the Charities Board already take account of social exclusion when distributing grants, they need to do more to ensure that grants reach the most disadvantaged areas. Access to lottery funds should be improved by making the application and monitoring processes as simple as possible; by helping less capable organisations improve their capacity to prepare successful applications for funding; and by tapping into local knowledge, for example through closer working with local authorities.

  • The Charities Board's grants programmes have done much to help those in society at greatest disadvantage and over 80 per cent of the projects examined by the Comptroller and Auditor General are progressing much as planned. However, up to £145 million on the first three grants programmes may have gone to projects that are not progressing as planned. The Charities Board need to identify more fully the risk factors in projects and ensure that in future these are addressed adequately both when considering applications and when carrying out subsequent project monitoring.

  • The Charities Board have strengthened their management arrangements, but could achieve greater efficiency and impact by targeting their grant management resources on the areas of risk, and developing a structured scheme of programme evaluation to inform their future plans. Some of the problems at the Charities Board (projects not progressing as planned, failure to ensure compliance with their terms and conditions of grant, and insufficient information about the progress of projects) are similar to those occurring at other lottery distributors examined by the Committee. The Department for Culture, Media and Sport need to ensure that lessons and good practice are identified, disseminated and implemented throughout the sector.

5. In more detail, our conclusions and recommendations are as follows:

On the distribution of lottery grants

      (i)  Some of the most deprived areas have yet to see the full benefit of lottery money. The National Lottery Act 1998 gave lottery distributors new responsibilities and powers to address this issue, for example by soliciting grant applications, and the Charities Board should take full advantage of this change. The examples they gave of their work to target areas of need in Wales and Glasgow are encouraging signs that they are moving in the right direction (paragraph 14).

      (ii)  The Charities Board do not consult local authorities about individual grant applications because they are properly concerned about the added bureaucracy and the perceived threat to the independence of the grant approval process. They have tried approaches such as joint seminars, and are in discussion with authorities in Scotland about a more strategic way of working. But although they have now been making grants for nearly five years, they have yet to develop a clear system of working with local authorities to make sure that lottery funds reach the neediest areas. The Charities Board should give priority to finding ways of capitalising on the knowledge and expertise of local authorities (paragraph 15).

      (iii)  The people who most need help from the Charities Board can be those least able to seek it. The Board are prepared to provide practical support to help smaller groups prepare bids, but their NOP survey has confirmed that their processes are a potential barrier. The Board should take steps to make their application and monitoring processes less onerous for applicants, while maintaining an appropriate degree of control. (paragraph 16).

On achievements on projects funded by the Charities Board

      (iv)  Analysis of a representative sample of 150 projects from the Charities Board's first three grants programmes shows that over 80 per cent were fully or mostly delivering the level of service set out in the original grant application, albeit later than planned in some cases (paragraph 22).

      (v)  The scale of the Charities Board's grant giving means that any shortfall in performance puts large sums of money at risk. Out of grant awards totalling £460 million over the first three grants programmes, between £65 million and £145 million could have been given to projects which were not delivering the intended level of service or activity at the time of the National Audit Office examination. The Charities Board have assured us that they have followed up the specific cases identified by the National Audit Office as not having progressed as planned, and in one case they have withheld grant of £30,000 and sought repayment of a further £22,000 (paragraph 23).

      (vi)  The difficulties experienced on some projects appear to reflect the special risks involved in the acquisition or refurbishment of premises; and not all projects have been approved on the basis of realistic estimates of the costs or the likely number of beneficiaries. The Charities Board have now taken steps to address these issues, including the introduction of a new two-stage approval process for capital projects. It is important, however, that they identify the risks to all projects at the grant application stage, and take account of the risks in their subsequent grant monitoring. Drawing on the analysis already undertaken by the National Audit Office, the Charities Board should identify the key risk and success factors on the projects they have funded to date to ensure that they are not overlooked in considering future applications (paragraph 24).

      (vii)  The Charities Board are aware of ten cases of suspected fraud, and several factors underline the need for the Board to be vigilant in this area. There is the sheer volume and value of grants awarded by the Board, and the likelihood that some applicants have limited experience of managing projects and operating financial control systems. It is important therefore that the Board see through their programme of fraud awareness training for their grants officers (paragraph 25).

On the management of grants programmes

      (viii)  The Charities Board's arrangements for monitoring how lottery grants are used have not taken account of all the risks associated with projects; their visits to projects have not always been timely; and the key self-assessment reports from grant recipients are often late - sometimes a year late and more. The Board are now adopting a more robust line with those grant recipients who are late providing self-assessments, and are now piloting a risk assessment system. A risk based system is important both for effective grant management and monitoring, and in making the most efficient use of the Charities Board's own staff resources (paragraph 38).

      (ix)  The Charities Board have attached terms and conditions to grants but then failed to ensure that grant recipients meet them. The special conditions set by the Board in some cases are there to ensure that risks which might compromise the project are addressed early on, yet in one case the Board paid out the full grant of £95,000 without the special conditions being met. The Board need to be more robust in their enforcement of grant conditions in future (paragraph 39).

      (x)  The Charities Board's monitoring arrangements have been evolving over time, and have now reached the point where they are fully staffed. Nevertheless, in the five years since the Board started making grants, they have been slow to meet those aspects of the Financial Directions set by the Department which require them to monitor the use of assets beyond the period of grant and to evaluate their grants programmes. The Board spend large amounts of money on supporting good causes (over £1.5 billion already), and it is essential that they learn from experience and apply the lessons to their future activities (paragraph 40).


6. Figure 1 shows the spread of grants across the United Kingdom for the first seven grants programmes. Grants under the Charities Board's first main grants programme were awarded in late 1995, and the seventh programme began in January 1999.[7] Asked about grants to deprived communities, the Department told us that the National Lottery Act 1998 had made important changes. For the first time, distributors were required to produce strategies for addressing the needs of their sector, and were allowed to solicit applications to address those needs. Through Policy Directions laid down under the Act the Department requires distributors to ensure that all parts of the country have access to funding, and to focus on social exclusion issues, including young people in particular.[8]

1  C&AG's Report, HC 378 of Session 1999-2000 Grants made by the National Lottery Charities Board, paras 1.1, 1.3 Back

2  ibid, paras 1.6, 1.8, 2.3 Back

3  ibid, para 2.3 Back

4  ibid Back

5  68th Report from the Committee of Public Accounts, HC 873 (1997-98) The Distribution of Lottery Funds by the English Sports Council Back

6  6th Report from the Committee of Public Accounts, HC 129 (563 - I (98-99)) of Session 1999-2000 The Arts Council of England: Monitoring Major Capital Projects Funded by the National Lottery Back

7  C&AG's report, p11 Back

8  Evidence, Q74 Back

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Prepared 16 February 2001