Where does the money go?

THE WELSH GOVERNMENT’s use of third-sector bodies and grant funding has created an unaccountable network of supposedly “independent” bodies that rely on public funding for their survival. Welsh Government accounts indicate that, at a time when public spending is under extreme pressure, the Welsh Government shovelled out over £688m in grants to third-sector bodies.

The sums involved are huge. Putting the £668m allocated to the third sector in 2024 in further context is instructive. That sum is £126m more than the Welsh Government allocated to the whole Economy budget (capital plus revenue) and over £230m more than it allocated to the Rural Affairs budget in 2023-24.

THE DATA

One set of key data shows payments made by the Welsh Government with a value of over £25,000. We examined that data, which does not capture all Welsh Government grants to third-sector bodies.

In one month, August 2024, and looking only at transactions over £25,000, the Welsh Government made cash grants to third-sector bodies totalling almost £5.5m. The same month, it made further capital grants of over £4.7m to Wales’s third sector.

However, that is not the end of the story. The Welsh Government also makes grant payments to private sector bodies and what it euphemistically calls “sponsored bodies”. Sponsored bodies are arm’s length bodies of the Welsh Government, such as the Arts Council Wales or Natural Resources Wales. Those bodies also award grants to third-sector bodies.

THE MONEY TRAIL

In effect, the Welsh Government gives grants to bodies to give grants to other bodies, who, heaven knows(!), might well give grants to other bodies. At every stage of that process, the grant scheme’s administrator will extract an administrative charge. That means that if every grant administrator in a simple chain extracted a 10% admin fee, the value of what reaches the end of the grant line has been reduced.

Suppose NRW gets a grant pot of £1,000,000. It distributes it in ten equal portions to ten different third-sector bodies. It charges a 10% admin fee for the grant process. £900,000 hits the second stage. That is £90,000 each. Now, the second stage grant administrator must filter down that money to a final end user. It charges a 10% admin fee. It allocates the cash in equal instalments to another ten bodies. The amount it disburses is, therefore, £81,000. Of the original £1,000,000, almost £200,000 is lost in admin costs.

That is a crude example, but consider this: the Welsh Government, NRW, the Arts Council for Wales, and the Welsh Council for Voluntary Action all appear as separate funders on several charities’ or NGOs’ websites. That is a duplication of effort and bureaucratic waste writ large.

Now, consider that across 428 organisations and £668m in funding. The potential waste is staggering and raises questions about transparency and allocation priorities.

Going back to August 2024, the Welsh Government also made grants of £240,000 to the Wales TUC and of £400,000 to Cardiff Airport, both scheduled under “grants to the private sector”.

THE GRANT MACHINE

A key challenge in scrutinising these data lies in their density and recording method.

The Welsh Government cannot provide a breakdown of every line item it allocates to third-sector bodies within the scope of a Freedom of Information Act request as the number of organisations involved and the number of individual grants is too large to capture. To address that issue, we focused on one organisation: The Welsh Council for Voluntary Action (WCVA).

The WCVA is the national membership organisation for the third sector and volunteering in Wales. It provides services and support to charities, community groups, voluntary organisations, social enterprises and volunteers.

In the ten months of 2024 for which the figures are available, and bearing in mind only expenditure over £25,000 is recorded, the WCVA received over £23.25m from the Welsh Government.

To get an idea of what the missing two months’ data might look like, we checked the previous year’s figures. That adds another £3.1m to the ten-month total.

There is no suggestion that the WCVA engages in sharp practice or is doing anything wrong. However, the money it receives as grants from the Welsh Government is public money, but the public has no say over where it goes or what it’s spent on. However, the Welsh Government does. Funding comes from defined pots for defined purposes that advance Welsh Government policy priorities. The bodies to which the WCVA makes grants, the amount they receive, and the purposes for which they are put are unidentifiable in the WCVA accounts. We can, however, say with certainty that there is little or no democratic accountability about where that money goes.

Even though the Welsh Government directs which funding pot gets the dough, ministers are not accountable for it. As we shall examine next week, the third sector operates alongside the public and private sectors and competes with both for scarce public money.