The government is ‘urgently exploring’ a radical plan to turn a £70m fund for community enterprise into an endowment.
The £70m Communitybuilders Fund, provided by the Communities and Local Government (CLG) department and administered by the Adventure Capital Fund, is due to come to an end in March.
Organisations taking loans and grants from the fund must draw down their investment by then or the money will go back to the Treasury as part of the annuality rules – however this is putting pressure on community groups to speed-up or change their business plans around the funding.
As a result CLG is looking into a solution that could see the money endowed to the Adventure Capital Fund (ACF), which is the charity, which is the parent company of The Social Investment Business.
This means the full £70m would be used by the end of March and it also opens up the possibility of the loan repayments coming back to ACF which would recycle the money for future investment in social enterprises.
A CLG spokeswoman told Social Enterprise: ‘We are committed to ensuring that as much money and support as possible gets to the community projects that have applied to the Communitybuilders Fund – and that we get the best possible value for money for the Fund as a whole.
‘We are urgently exploring the best way to do this, including considering an endowment approach. We hope to have a resolution on this soon.’
ACF managing director Caroline Forster said she was confident that the organisation would be able to disperse all the £70m by the end of March but the situation was ‘not ideal’ for the 30 community groups currently effected by the looming accounting deadline.
‘It would be better to have the flexibility of an endowment so that the whole focus wasn’t on the end of March,’ said Forster.
She also pointed to the long-term benefits of recycling the loan repayments into an evergreen social investment fund.
‘We’ve used this approach with ACF’s own money in the past and it’s been really beneficial with the amount of money we’ve been able to lever in from outside sources, which has in turn helped community organisations take a long-term strategic approach.’
Forster said that an endowment opened up the possibility of talking to banks, private philanthropists and charitable foundations about adding money to the fund in a way that they couldn’t when delivering a traditional government contract.
‘We’re really pleased CLG is keen to do this work. Right from the moment this problem was identified they’ve been great at working with us looking for a solution.
‘If it goes through hopefully this is something that other departments pick up on and make work in other contexts.’