Progress Update: Four years on since the Quadrenniel Review

Every four years, the organisations distributing Dormant Assets funding in England are independently reviewed. Each review, commissioned by the Oversight Trust, assesses the effectiveness of the organisations that have received funding to date.

Access was last reviewed in 2021. The outcome was encouraging, highlighting our impact and the positive views held by our stakeholders. The report was a significant factor in the board of Access deciding that the organisation should continue past its originally planned ten-year life.

One aspect which the report touched on was the respective delivery models of Access and the social investment providers who we fund. Stakeholders generally praised Access for having a lean delivery model as a wholesaler but highlighted challenges and hidden costs in the delivery model of social investment at the retail level. The panel recommended greater transparency about the cost of delivering blended finance throughout the system. In our response to the review Access committed to “More clearly demonstrate the overall delivery costs of our programmes via partners, how we set and manage those costs, and explain the choices which lie behind Access’s delivery model”. This blog provides some additional commentary on top of the range of data sets which we regularly publish about out work. 

Access costs

By the end of 2023, Access managed an overall portfolio of £188m. This includes: 

• Since its inception in 2015 Access has been managing an endowment of £60m.
• Management of a £45 million blended finance programme called the Growth Fund (on behalf of external funding partners (Better Society Capital and the National Lottery Community Fund).
• Since 2019, a series of (four) releases of Dormant Assets directly for Access to manage totalling £83m

We have increased the scale of our own operation somewhat in recent years, and now employ 13 staff members (12.6 fte).  Together with our governance and other operating costs, our own running budget p.a. is around £1.38m – this equates to a fee of 0.7% of the funds we are overseeing.  This percentage would benchmark on the lower end of typical ranges in terms of the private market of the management of wholesale investment funds, but would not be a total outlier.

It is also worth noting that, since base rates started rising in 2021, we have started to achieve a material amount of bank interest on some of the funds we are holding, prior to disbursal to partners.  In the past year or two that bank interest has been such that a substantial proportion of our running costs are effectively met from that source, ensuring that most of the money we receive in, can get passed onto partners.

Operating costs of our partners as the rest of the finance flows to them

Our comprehensive dashboards and published accounts paint a picture of how our funds, net of our own costs, flow to our partners. Our published investment policies for different programmes demonstrate the priorities and design choices which sit behind each of those programmes (for examples this one for Enterprise Growth for Communities). Below we set out some examples of how we make these choices and what Access is seeking to achieve and link to relevant published data. 

It’s worth being clear about some fundamentals. Access is established as a wholesaler. Our funders (DCMS, and the Dormant Asset Scheme via the National Lottery Community Fund) require us to act in this way. It is therefore not our role to make funds directly available to charities and social enterprises.

Rather Access’s job is to help build a resilience overall investment ecosystem for all charities and social enterprises. In so doing we seek to build the resilience and capacity of a wide range of social investment providers and delivery partners. This capacity building is often focused on supporting networks which expand the reach of social investment to deprived communities and marginalised groups – those who need it most. We also seek to use our programmes to leverage the flow of more resources into the sector from other sources. 

Therefore, we do not see our role as simply supporting a machinery for getting money out of the door, and a like for like comparison between how costs are borne in the wholesale/retail model, and some sort of centralised single retail model is not a helpful one. 

We use our grant to support programme delivery in three main ways, depending on the overall objectives, underlying products and the roles of other funders.  We’ll explain next how cost coverage tends to work in each of these.

1. Funds into blended social investment funds

Firstly, in our blended finance programmes, the main costs of delivering loans are met by the fund manager through interest (and in some cases fees) paid by charities and social enterprises on the loans made. This is in the context where Access has usually provided a significant layer of grant to cover the costs of loans which default, so the fund manager does not need to also pay for defaults out of interest and fees. 

We typically see fund managers drawing fees equivalent to between 2-3% of the overall funds being managed, in order to cover their own costs of delivering social investment.  However, in the early life of these loan funds they won’t have made enough loans to earn enough interest to cover these costs, and so in most cases we also provide a grant directly to cover costs, usually for around 18 months or so, to close any gap.

Our detailed “use of subsidy reports” explain the specific dynamics of fund costs and our direct grants to support fund delivery across a wide range of funds in the Growth Fund and Flexible Finance. 

For example, on the growth fund:

14% (£3.02m) of the total grant provided to fund managers was used to directly support operating costs

This grant on average funded 41% of the operating costs of the fund managers during the programme, the balance coming from interest charged on loans made (this figure of 41% was higher than anticipated because of additional support which we provided to fund managers at the start of the Pandemic in 2020, enabling them to pass on repayment holidays to their investees at that critical time).

The grants we make available in blended funds are also playing a critical role of leveraging and de-risking investment into the sector from an increasingly wide variety of investors wanting to serve a market of community-based charities and social enterprises, but otherwise unable to. Again this means that any comparison with a central distribution model is an unhelpful one. 

2. Funds into multi-faceted development programmes

Secondly, as well as funding the grant layer in blended finance programmes, we also grant fund a range of social economy development programmes (such as Local Access and our Enterprise Development Programme) again at a wholesale level. In these programmes we are working with a range of partners to provide a combination of grant and support. Key to our theory of change here is incentivising a range of partners (often sector based or place-based infrastructure organisations) to play a greater role in developing social enterprise opportunities. That may be us funding organisations like Homeless Link to better understand the role that enterprise plays in the business models of their members and how they can best support it over time. Or it may be about facilitating the coming together of different partners in a place to grow access to markets for community organisations. 

In this way we are again trying to do much more than just get money out of the door and we consider our investments in that infrastructure to be a critical part of the change we want to see. A comparison with some sort of larger centralised distribution model is again unhelpful. 

To provide a sense of scale, on our £13.7m Enterprise Development Programme 325 grants were made to charities and social enterprises across the six sector themes totalling £8.48m (62%). We funded the six lead sector partners with a total of £3.23m (24%) to deliver advice, training, sector capacity building and peer networking activity, and other direct costs totalled £0.43m (3%).  Grant management fees were £1.58m (11%).

Of the £10m Local Access for Blended Finance just over £9.1m is committed into funds currently (91.1%). Around £700k (7.0%) is expected to be retained by Access for costs, including the delivery of national events and conferences. The remainder of just under £200k (1.9%) is currently uncommitted. Just under £2.3m of the £9.1m commitment into funds is expected to be provided to cover fund delivery costs (24.9% of fund allocations, 22.7% of the total £10m pot). 

The extent we are successful in our goals, and therefore judgements about value for money, is assessed through our programmatic evaluations. 

3. Funds into more straightforward grant disbursement programmes

Finally, our Investment Readiness Programme, the Reach Fund, is perhaps one programme where an in-sourced delivery model is conceivable, even if still not desirable to us (or permitted under the terms of our upstream funding agreement with DCMS). 

Social Investment Business run this programme for us and over the last year fees were c. 8.8% of the total grants distributed. This figure benchmarks relatively well across sector given the fact Reach Fund grants are relatively small and the need for liaison with both applicants and the prospective social investor adds some complexity to the process. We have run several competitive tender processes for grant management partners over the years and therefore we are confident in our assessment of value for money. 

Overall

We will continue to publish data about the flows of our resources through the system. Crucially we don’t feel that staying relatively lean ourselves is inefficiently pushing work and cost onto our partners.  We have learned that to build a social investment ecosystem which can deliver for all charities and social enterprises we must see our partners as more than a means to an end, just a way to deliver money to the sector. Rather they need to be resilient themselves to best support the sector.  Therefore, we remain committed to building an appropriate level of cost coverage for our partners to ensure the overall health of the system and focusing our work at the Wholesale level on only the tasks which are best undertaken at this level.