Charity funding changes result in 'worse service'
Changes to the way charities are funded result in a worse service, according to a group which represents them.
The Wales Council for Voluntary Action (WCVA) told BBC Wales that a move from grants to contracts left charities facing bills for VAT, specialist tax advice and preparing bids for work.
It added that the tendering process could result in bare minimum services.
The Welsh government said contracts may be "the most appropriate way" sometimes but grants were better "in many cases".
The WCVA said grant income fell by over two thirds to £291m from 2006 to 2009, with charities increasingly looking to contract work to make up for the lost funding.
But chief executive Graham Benfield told BBC Wales the procurement process of offering and awarding contracts for work is "enormously expensive and it tends to destroy collaboration, local community ownership and ends up in a worse service than you had before using grant aid".
He said on average it takes between six months and a year to procure a service and that the European Union estimated the cost as around £25,000 per procurement.
Mr Benfield said grants were a better way of supporting voluntary and third sector organisations while there was often a loss of service with a shift to contracts or procurement.
He highlighted the "meals on wheels" service as one traditionally provided by voluntary organisations which often did more than their remit strictly required.
They provided hot meals and also checked to ensure the people receiving them were OK, he said.
When one service was contracted out to providers who offered to do it for a "rock bottom" price, Mr Benfield said the service became a week's worth of frozen food and the provision of a microwave.
He said: "They've fulfilled the contract, but have they lost the service."
Changes to funding had posed problems for Clybiau Plant Cymru Kids' Club (CPC), a charity which helps support 1,500 kids clubs across 18 local authorities in Wales, according to its director Wendy Hawkins.
She said: "Now everyone wants to not pay you until after the work is done.
"We have to then get payments through the bank and then we're able to claim it back from the funders, so it has a big effect on our reserves which are diminishing all the time."
Almost a third of the funding for the £1.6bn voluntary or third sector in Wales comes from government sources.
With around 33,000 such organisations, charities employ around 51,000 people in Wales with support from around one million volunteers.
'Bridge too far'
Liz Maher, a director at Centurion VAT Specialists, said as charities moved from a system of grants to contracts, many did not appreciate they could treated as a business for VAT purposes.
She said Her Majesty's Revenue and Customs (HMRC) had not issued general guidance on this because each case was looked at on a case-by-case basis.
But Mrs Maher said she had sympathy for the challenges funding changes were causing for charity personnel.
"These are organisations where they're not VAT experts, they're volunteers," she said.
"It's a vocation, they're trying to do the best with the money you and I have given to them as donations or local authorities have given to them as grant.
"To expect them to be able to deal with this added complexity is really on occasions a bridge too far."
A Welsh government spokesman said: "There has not been any decision to move away from grants, which still remain the best means to provide funding in many cases.
"However, procurement is sometimes the most appropriate way to ensure that funding achieves the desired results.
"It is vital that resources are used to the best possible effect, especially given the cuts to our budgets and we will need to make some important decisions about these issues later this year."