Take nothing for granted.

    The subject of grants is one area of financial management that
    can quickly bring a glazed expression to the face of any service
    manager. But they are undoubtedly big business. In 2004-5, 15 per
    cent of government funding for adult social services is made up of
    grants (£1.498bn). For children’s services the figure is lower
    at 6 per cent (£258m), but still significant. On top of these
    social services grants come £1.8bn of Supporting People money
    and grants for asylum costs.

    So be warned: neglecting your grant position will allow precious
    resources to be frittered away by wily corporate finance
    colleagues, possibly without you even knowing it.

    The key question about a grant since time immemorial is: “Is it or
    is it not included in my cash limit?” You need to be confident of
    the answer to this wearisome question for all the grants covering
    your service area.

    Drawing up a cost centre report is the first step. Cost centres –
    100 or more in most directorates – are the basic building blocks
    for preparing budgets, monitoring spend during the year, and
    preparing the final accounts. There are three important points to
    note in any cost centre report:

    First, most grants provide additional funding for mainstream
    services, a top-up if you like. So it does not really make sense to
    try and split off the grant-funded part of the service into a
    separate cost centre. It will prove complicated to operate (which
    invoices do you pay on which code?). Before long you will have two
    unintelligible cost centres instead of one.

    Second, many grants are used to boost services across a wide range
    of services and client groups (carers grant being an example). The
    budget for this grant income therefore needs to be shared out to
    the appropriate cost centres too. If this is not done, service unit
    costs will be messed up. Managers will not see clearly in their
    budget reports that they have grant funding. This point needs
    particular attention as risk-averse accountants much prefer to pay
    the entire grant into one easy-to-account-for cost centre.

    And lastly, check the grant income figure is up to date. Lazy
    finance sections may be using last year’s figure plus inflation, or
    some other figure altogether. It is easy to check the up-to-date
    allocations yourself on the website of the relevant government
    department.

    To fence or not to fence.

    Until recently, most social services grants were ring-fenced. This
    meant:

    • Complicated conditions as to what the money could or could not
      be spent on.
    • Councils needed to claim their grant at the end of the year
      depending on how much they had spent within the conditions (up to
      the maximum available).
    • Claims were audited by the external auditors and any ineligible
      expenditure would be deducted from the claim.

    But for 2004-5, most grants are no longer ring-fenced. Such
    unrestricted grants are known as specific formula grants. They have
    no conditions attached, require no claim at year-end and are not
    audited. This means that the receiving council has virtually
    unfettered discretion as to how the grant is used. High value
    grants falling into this liberalised category include access and
    systems capacity, and safeguarding children.

    Before celebrating the government’s good sense in eliminating those
    tiresome grant rules, we need to consider the wider perspective.
    Safely ring-fenced social services grants might have been a hassle
    administratively. But they had to be spent on – you guessed it –
    social services. Specific formula grants on the other hand may
    legitimately be diverted into the corporate council pot; or the
    basic social services cash limit reduced to achieve the same
    effect.

    A further complication on the grant rules is that councils with an
    “excellent” rating under comprehensive performance assessment are
    exempt from ring-fencing anyway. Similarly councils with a high
    star-rating for social services are allowed more flexibility to
    carry over unused entitlements. But so many grants now come as
    specific formula grants that these freedoms and flexibilities are
    not as valuable as might appear.

    As well as a transparent budget, it is very useful to have a clear
    grant plan for the year ahead. This is no longer a formal
    requirement for most grants, but it helps greatly with monitoring
    progress during the year.

    A grant plan might include details of who is the lead officer or
    accountable manager, the size of the grant, and which cost centres
    have a share. It should also detail the main projects and
    programmes on which the grant will be spent, the account codes and
    budgets for the planned projects, and whether there are any
    conditions attached to the grant. In preparing a grant plan, you
    should ask whether the systems and procedures are in place to
    produce audit information if required, and whether it is possible
    to claim indirect costs or overheads.

    Grant plans should ideally be prepared well ahead of the financial
    year. If you don’t know your council’s precise current allocation,
    prepare a draft plan based on your best knowledge of the likely
    increase over last year. Progress on grant plans should be
    monitored by senior management quarterly.

    Plans should be concise and to the point or they will soon be
    gathering dust on a shelf. Grant plans usually prove invaluable in
    budget rounds, being a good first defence to losing out on those
    specific formula grants. They allow management to demonstrate a
    full understanding of how and why they are spending grant
    money.

    Confidence and command scores well with resource allocators, so be
    prepared with those punchy grant plans.

    Monitoring hazards.

    Specific formula grants do not take a great deal of monitoring as
    they come as a fixed annual total. But ring-fenced grants with
    conditions need careful attention:

    • Make sure supporting records are in good order. If you leave it
      to the year-end audit it may be too late.
    • Make sure any criticisms or disallowed items from last year’s
      audit have been sorted.
    • Work through in-year forecasts with finance colleagues to get
      them as accurate as possible. There should be no surprises once the
      final claim is prepared.
    • Be particularly careful with grants such as the unaccompanied
      asylum seeking children grant that are based on client numbers and
      unit costs. The entitlement can move significantly over a few
      months. Don’t fall into the trap of routinely repeating an old and
      obsolete forecast; make time to do this key task properly.

    That ends our brief review of grant finance. By using some
    finance common sense, you can go a long way to protecting this
    valuable resource. 

    Abstract.

    Social services income is heavily dependent on a variety of
    grants, and knowing how to keep track of them is important. Good
    financial control is becoming even more critical with the loss of
    some of the ring-fencing and other checks and controls surrounding
    grant income. This article looks at some common pitfalls and how to
    avoid them.

    The rest of the series.

    • 1 July: Weak forecasting and monitoring are the main financial
      danger areas for social services managers. How can you avoid
      disaster?

    Previous articles.

    • 3 June: A look at the common financial systems used to keep
      track of social services spending.
    • 10 June: Closing the accounts – how to avoid the dreaded
      year-end overspend.
    • 17 June: Unit costs have a big influence on star ratings – so
      how can you keep them under control?

    Further Information.

    Contact Paul Cook at dagnallcottage@ukonline.co.uk

     

     

    More from Community Care

    Comments are closed.