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Voluntary and Community Sector

Code of Good Practice on Funding

Compact Funding Code Booklet Download Acrobat Reader to view this PDF 148kb

A guide for the relationship between Hampshire County Council and the voluntary & community sector.

This Code accompanies the general principles of the One Compact for Hampshire. However, the Hampshire Funding Code only applies to the relationship between HampshireCounty Council and the voluntary & community sector and not to any of the other public sector bodies listed as partners to the One Compact.



1.1 This code of practice is a supporting document to the One Compact for Hampshire - a framework for the working relationship between Hampshire County Council and the voluntary and community sector.  It aims to have a positive effect on the relationship between the County Council and its voluntary and community sector partners.  It builds on:

1.2. For the purposes of this Code, funding includes: grants and contracts.

a) Grants

A grant is a contribution towards an organisation’s core activity, individual activities or services. Subject to negotiation, grants may be approved in principle to fund the same activity or service for more than one year (up to a maximum of 3 years) and an application will have to be renewed annually, subject to financial need.

In certain circumstances, Hampshire County Council awards grants in order to ensure the continuity of services – for example, maintaining the continuity of a stable and robust infrastructure for the voluntary and community sector. As such, these grants will not usually be open to general applications, but in the interests of openness and transparency, the Council will publish details of such grants on its website (

b) Contracts

A contract should be used when the Council purchases or commissions a service from a voluntary or community organisation.

All contracts awarded by the Council will be subject to Hampshire County Council’s Standing Orders in order to ensure that the Council is indemnified for activities undertaken by other organisations on its behalf.

c) Other Funding Arrangements

Some voluntary and community organisations may have service agreements with the Council, which should really be classified as either grants or contracts, and this has caused some confusion. Any funding arrangements already in existence at the time of publication of this Code will be covered by the terms of this Code. However, when those existing arrangements come to an end, any future funding will be awarded on the basis of a grant or a contract, and service agreements will be phased out.

1.3. Key principles of the Funding Code:

1.4. Undertakings:

a) The County Council will:

b) The Voluntary and Community Sector will:

c) Both parties will:


2.1 Fair play (fair and equal access)

The intention is to ensure fair and equal access to funding.

2.2 Clarity of funding conditions

Each Council department will be responsible for publishing and marketing information about its funding programmes to a common format detailing:

2.3 Reserves

In assessing how much assistance an organisation may require, the Council will  take into account the level of reserves held, the extent to which they are unrestricted or restricted and the purposes for which they may be restricted. Reserves are defined here as any funds which are not required in order to cover the day-to-day running of the organisation in the current year. Reserves may be 'earmarked', i.e. held for a specific purpose such as a planned building project.

Where an organisation holds more than 3 month’s of unrestricted reserves, the County Council may ask for justification for this.

Those organisations receiving recurring funding which hold in excess of three months' running costs may receive a reduced grant.

2.4 Consistency

3.1 Overhead costs

a) Overhead costs of voluntary and community organisations should be treated in the same way as those of the private sector, or of any internal provider.  This means Council departments should fund not only direct project costs but also seek to include an appropriate proportion of core or support costs required to sustain the project. These costs should be clearly identified by the service provider using a method that both funders and service providers can calculate easily. Costs should only be recovered once. The County Council supports the principle of full cost recovery and the County Council and the voluntary and community sector endorse the ACEVO Full Cost Recovery template as a basis on which to assess or negotiate existing and future funding arrangements where required.

b) Associated or support costs of activities crucial to achieving final outputs or outcomes include: front-line activity (e.g. project workers); direct support work (e.g. managers of project workers); indirect support work (e.g. payroll, finance and HR); governance and strategic development (e.g. costs of regulatory obligations like SORP accounting or research and development activities).

c) Contract pricing should be on a competitive best value basis. The Council will ensure contract pricing reflects service quality and cost (service quality will take these factors into account).  When tendering, voluntary and community organisations are entitled to fix a price that makes a surplus for reinvestment, though they should be mindful that normally they will be in a competitive tendering scenario. Decisions on contracts will be made on a best value basis. 

d) If funding has to be scaled down for any reason then this will be undertaken between the relevant department and the organisation in such a way as to maintain the continued viability of the service, and the organisation.

3.2 Duration & sustainability

The length of funding terms is important to the quality, efficiency and sustainability of services.  Short-term – i.e. one year agreements - are generally less efficient, undermine the stability of voluntary and community service providers and service user interests, and the security of service for departments. 

a) The duration of a contract should be made clear before any agreement is reached. The duration should reflect:

b) Contracts will include notice periods to ensure the various needs of providers, purchasers and service users will be met.  Notification of an intention to renew or terminate contracts should be given at least six months in advance. This is to ensure that proper arrangements can be set in place for clients' needs and staff contracts.

c) The voluntary and community sector recognises that funding may end as priorities change or if outcomes are not delivered. The sector undertakes to plan in good time for different situations to reduce any potential negative impact on both beneficiaries and the organisation.

d) In line with the government’s introduction of 3-year settlements for local authorities, the County Council undertakes, where possible, to implement longer term financial arrangements with voluntary and community organisations when these represent good value for money.

3.3 Late Payment

Funded organisations can expect prompt and regular funding payments. Any advance payments will be the subject of discussion between Departments and organisations. Voluntary and community organisations rarely have the level of unrestricted reserves at their disposal to cover the costs of funding projects in lieu of payment (see HM Treasury "Guidance to Funders").  The Late Payment of Commercial Debts (interest) Act 1998 also applies to contracts with voluntary and community organisations.

3.4 Risk and insurance

When a voluntary organisation contracts with the County Council, the risk legally lies with the service provider. The County Council has standard levels of insurance for any service being contracted out. However, in certain circumstances, a different level of insurance may be appropriate, in which case the County Council will give access to a risk assessment process.

3.5 Disputes

Contracts should set out a fair and proper procedure for the resolution of disputes, encouraging their resolution by mutual agreement. If this fails, the contract should make provision for the dispute to go before an independent person. 

3.6 Termination

The circumstances in which contracts may be terminated before their expiry date should be made clear before any decision is made.  Contracts will provide a fair and proper procedure for speedy termination in the event of default by either party.   

Non Cash Support

4.1 Advice and expertise

a) The Compact will help make the most of the wealth of knowledge, expertise and experience available in both sectors, by developing mutual advice and support networks to avoid duplication of effort (See the One Compact for Hampshire Network of Contacts, and providing opportunities for staff secondments.

b) Voluntary organisations will normally be charged when the County Council supplies staff to undertake the work of the organisation.

c) Where the County Council has agreed that Council officers will be advisers to a voluntary organisation, advice will normally be given freely and without charge.

4.2 Joint training

The Compact Development Group will identify and develop ways of sharing and spreading learning across the County Council and other public bodies, and the voluntary and community sector, in order to ensure continuous improvement in the way the two sectors work together. Activities might include joint training in areas such as information technology, equality and diversity, quality issues, contracting and negotiation, and risk management.

4.3 Premises and buildings

Both sectors will assist each other with buildings, premises and equipment.  Charges may be appropriate.  Voluntary and community organisations will normally be expected to pay for accommodation provided to them in accordance with the scale of charges or the rent set for the property. Where, however, the County Council provides accommodation either freely or at a subsidised amount, the organisation responsible for the service will normally be expected to budget and account for the subsidy.

Monitoring and Evaluation

Monitoring is the routine collection and recording of information, sometimes against statutory performance indicators, on the activities of an organisation. It provides information on what an organisation is doing, but makes no judgement about the value of the outcome or results of those activities.

Evaluation is the assessment of the value of a project, piece of work, or service.

a) Monitoring and evaluation are an important part of the funding process because:

d) Staff in funded organisations must be clear about the extent of monitoring and evaluation in connection with contract compliance, and when, for example, monitoring is carried out to ascertain unmet needs that may require further funding.

c) Monitoring and evaluation is only meaningful if an organisation has objectives against which to measure its achievements. These objectives will be based on a clear assessment of needs and how the organisation can meet them. 

d) The County Council and the service provider will agree in advance what information is needed and what will be passed to the department as part of the monitoring process. This will include:

e) It is likely to be agreed that some or all of the following areas will form the basis of the monitoring and evaluation process:

f) However, the monitoring and evaluation process in relation to grants and contracts will be appropriate to the amount of funding in question.

Financial Reporting

As with supporting information, financial monitoring reports and their frequency should be commensurate with the scale of the funding involved, while taking into account the importance of addressing financial problems as soon as possible.

a) Information requirements should be clearly stated before funds are agreed, and include the roles and responsibilities of each party.

b) The charity SORP (Accounting by Charities. Statement of Recommended Practice) and the Charity Commission provide guidance and recommend best practice for financial reporting. The County Council is mindful of this and will aim to avoid duplicating or demanding more stringent accounting and auditing requirements than those defined already.


The following general arrangements will apply on the costs of inflation. For non-recurring grants no separate addition will be made as these grants are approved at a set amount. For continuing grants the County Council will determine the amount to be included in the approved grant having regard to the estimated cost of inflation and the amount that will be paid.  In estimating the cost of inflation the Council recognises that in the event of not meeting the real-terms cost of inflation to the voluntary and community service provider it might potentially be necessary review service levels to ensure quality and sustainability to service users.

It is the County Council’s policy, so far as budgets allow, to apply a similar inflation base to in-house and voluntary sector provision. i.e. based on expected pay increases and a set amount for non-pay inflation, offset by any efficiency savings required.


Both the County Council and the voluntary and community sector have a shared responsibility for the expenditure of public funds.

8.1 Responsibilities of the County Council

The County Council must provide for the effective protection of, and proper accountability for, public money and seeks evidence of procedures that support good regulation. Individual departments in relation to other demands on their budget determine the amount of the budget available for supporting voluntary and community organisations. Individual applications for support are assessed against the following criteria:

a) How the grant would contribute to achieving the key aims of Departmental priorities within the County Council's Corporate Strategy. The key aims are:

Copies of the strategy are available at:

(Nb. The revised Corporate Strategy is due to be launched in Autumn 2006)

b) The priority and affordability of the activity for which funding is being sought compared with other applications for support. 

c) An assessment of the organisation's past performance and achievements.

d) How the grant would deliver best value for money in meeting service needs.

e) The Charity Commissioner's advice on the minimum reserves that should be held.

8.2 Responsibilities of the voluntary and community sector

The voluntary and community sector recognises that receipt of public funds carries with it responsibilities to the funding body and to the public who benefit from the services provided. The sector undertakes to pursue good practice in the use and administration of public funds appropriate to the scale of funding and operation covering:

a) Clear and effective employment policies, management arrangements and procedures.

b) Effective and proportionate systems for the management, control, accountability, propriety and audit or examination of finances.

c) Compliance (by organisations that hold charitable status) with the accounting framework for charities and appropriate guidance from the Charity Commission on funding, as well as on political activities and campaigning.

d) Systems for planning and implementing work programmes.

e) Systems for monitoring and evaluating activities against agreed objectives.

f) Systems for quality assurance and accountability to service users, including complaints procedures and the involvement of users, wherever possible, in the development and management of activities of services.

g) Policies for ensuring equality of opportunity in both employment practice and service provision.

h) The involvement of volunteers in service provision.

i) Ensuring Compact principles are applied when passing money originating from Hampshire County Council on to partners or other voluntary and community organisations. In situations where any voluntary or community organisation is in receipt of money for which the original source is evident as the County Council, Compact principles should apply to the spending or distribution of this money.


The Hampshire Compact Mediation and Conciliation Procedure relates specifically to the operation of the Compact framework and associated Codes of Practice (details of this procedure are available on request or on the website It is recognised that organisations will have their own mechanisms in place for dealing with other disagreements that do not relate to the operation of the Compact framework.
As far as possible, disagreements over the application of the framework of the One Compact for Hampshire and this Code of Practice should be resolved directly between the parties involved. However, where there is still disagreement, both parties have access to the Hampshire Compact Mediation Procedure.


There is a need to balance the desire for consistency with the need for flexibility and the differences in contracts and grant giving. This document will evolve as the working relationship between the voluntary and community and public sectors develops. To find contact details for those people who can help if you have a query over any contracts, or wish to enquire about a grant, visit the County Council’s grants website at or telephone 01962 846011/854971 or the County Council Information Centre on 0800 028 0888.

Reference can be made to the Hampshire Compact Development Group if it is considered that this code has not been followed. Furthermore, the Hampshire County Council Complaints Procedure is available.


One Compact for Hampshire
c/o Chief Executive’s Department
Hampshire County Council
The Castle
SO23 8UJ

01962 846011/854971

Please note: A large print version of this document is available on request.


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