Applying for funding for business support
This article is meant to encourage charities to apply to the Investment and Contract Readiness Fund (ICRF), whose money comes from the Government, for funding to help them be in a position to bid for public service contracts, i.e. to have the professional skills or resources necessary to make a bid including organising the finance to make that bid credible.
Charities are a growing force in the UK, improving the delivery of public services and creating jobs and wealth in the communities they serve. Around the country the charity (and social enterprise) sector is worth £55 billion, supporting more than two million jobs.
These frontline organisations provide services tailored to the specific needs of their community, often in highly innovative ways, which is why the Government is making more social investment available to help them grow and is encouraging them to bid for public sector contracts.
But as opportunities to increase their impact grow, charities are increasingly coming up against a glass ceiling. Lack of specialist skills limits their ability to raise significant amounts of investment to scale up their services and to compete for public sector contracts on a level playing field with commercial rivals.
Tackling the problem
The new Investment and Contract Readiness Fund (ICRF) is now tackling this problem, and has already helped eight organisations raise investment and win contracts worth a total £35 million. One of the first success stories is Pure Innovations, a charity which delivers innovative services to support disadvantaged people on behalf of local authorities.
Doug Cresswell, CEO of Pure Innovations, says: “Whilst we have always believed in the quality of our direct offer to service users and local authorities, we knew that we were not set up well enough when it came to competitive tendering and in preparing for further growth. Our growth strategy was fairly disjointed and our track record of winning tenders relatively poor.”
The charity received a £52,250 grant from the new Investment and Contract Readiness Fund (ICRF), which offers grants to ambitious charities and social enterprises to buy in specialist support such as legal advice, financial management, corporate finance and public service commissioning. With its help the charity went on to win a five-year contract worth £11.7 million from the Royal Borough of Kensington to take over the running of its learning disability service.
Doug Cresswell says: “The ICRF grant has made a very tangible and positive difference. It enabled us to undertake a focused review of our growth plans and crucially to secure high quality tendering and bid-writing support. As a result of winning the Kingston contract we have significantly increased our revenues and rapidly extended our reach to vulnerable people.”
Acquiring the skills needed
The £10 million ICRF, funded by the Cabinet Office and managed by the Social Investment Business, is the world’s first fund dedicated to helping charities (and social enterprises) acquire the skills they need to raise investment and compete for public service contracts. Organisations looking to raise at least £500,000 of investment or win contracts worth £1 million or more can apply for relatively modest grants of £50,000 to £150,000 to purchase the specialist support they need from a pool of approved providers.
This can also be the legal and financial expertise necessary to set up sophisticated financial products bringing in funding for very significant schemes. The Consortium of Voluntary Adoption Agencies (CVAAUK) recently raised £2 million through a social impact bond to fund adoption services for hard to place children thanks to a £140,972 ICRF grant, which allowed it to work with with financial products organisation Social Finance to structure the investment and place the deal.
About 2,500 children are placed on the National Adoption Register each year and up to 80% are not adopted and remain in care. They tend to be over four years old, have black or minority ethnic backgrounds or are seeking a home with their siblings. The 10-year scheme “It’s All About Me” will see CVAAUK charities find, train and support families to adopt these children. They will work with 100 children a year at first, but hope to raise an additional £3.5 million allowing them to help 300 children a year.
Local authorities will pay around £54,000 for a successful adoption in instalments over two years, around half their savings in fostering fees. This income will be used to pay investors a return of 4% a year, together with a final payment of up to 9%. Additional income will be used to set up an endowment so the scheme can continue to run beyond the 10-year life of the bond.
Lynn Charlton, CEO of After Adoption, one of the charity service providers in the consortium, and vice chair of CVAAUK (Consortium of Voluntary Adoption Agencies), says: “The social impact bond de-risks the finance around adoption and provides a healthy financial model for agencies to plan effective services resulting in a significant social impact investment in children's lives.”
Lack of enterprise skills
The ICRF is addressing a key issue identified by Dame Mary Marsh’s recent review of the social sector - its lack of enterprise skills. Her report for the Government, published last year, found that many charities and social enterprises had grown through grant funding for specific projects, and they had not developed the skills needed to bring in finance from a range of sources.
Many had an impressive record of creativity and innovation in delivering services, achieving a lot with limited finance, but their reliance on grant funding had created “a culture focused on the short term and rooted in a dependency on having the next project similarly funded,” according to her report.
It went on: “Some of the most creative and innovative service delivery is from organisations that are not ‘enterprising’ insofar as they tend to be stuck in one mode of income generation. This can lead to organisations over-promising, under-costing and developing unrealistic expectations of delivery.”
The ICRF aims to help change this culture. Since its launch in May 2012, 94 charities and social enterprises with high potential for growth have received grants worth £8.9 million, 74 of which are still actively carrying out their business support programmes.
Impact of the funding
It’s early days, but a report by The Boston Consulting Group (BCG), released on 9 April 2014, concluded that the fund has already made a “significant and positive impact”. Ventures which have received business support say their skills and knowledge have increased significantly and 70% thought they would require less help in the future. All felt confident in their ability to approach legal issues compared with only 25% before receiving support; 69% were confident that they could measure their impact, up from 15%; and 84% felt that they could build a case for expansion, up from 35%.
BCG says the fund has increased the professional support available to social ventures, and that ventures are becoming more willing to pay for these services as they become aware of the benefits they can bring. The ICRF has already started introducing repayable components of grants, which will allow business support to be spread more widely.
BCG also made recommendations on how to make business support work better for charities. Many organisations seeking grants reported that it was hard to choose between the 40 approved providers, so there is now published data on the fund website that gives an indication of providers’ performance. Also ICRF is looking into what else it can do to help charities make a more informed decision.
Ventures also said that it would help if the ICRF investment panel gave them clearer reasons when it turns down applications for grants, so ICRF is planning to do this and issue more guidance on what the fund looks for and common reasons for rejections.
Scaling up and increasing impact
By linking up charities (and social enterprises) with effective providers, the idea is to address skills gaps that can limit a charity’s ability to scale up and increase the impact they are delivering in their communities.
I believe this is the start of something big and I want to build on this promising start. I hope many more charities will think beyond the grant and follow the success of Pure Innovations and the Consortium of Voluntary Adoption Agencies.
