New guidance for VCSE organisations working with councils in financial difficulty​

In October, NAVCA and the Lloyds Bank Foundation for England and Wales (LBFEW) released new guidance to assist smaller and local voluntary, community, and social enterprise (VCSE) organisations operating in financially pressured local authority areas.

The guidance outlines six key stages in the journey of a Section 114 (s114) notice, detailing how VCSE organisations can respond to each. Alongside this, NAVCA and LBFEW issued a policy report offering further context, insights, and recommendations for the VCSE sector, local governments, and central authorities.

The Six Stages of a Section 114 Notice

An s114 notice signals a council’s belief that its expenditure will exceed its income within a financial year, limiting its ability to make new spending commitments. This situation endangers non-statutory funding, including grants and contracts vital to VCSE organisations.

The guidance breaks down six key phases observed before, during, and after an s114 notice is issued:

• Early Warning Signs – Funding to VCSE organisations may begin to decrease, and formal consultations on possible cuts could start.
• Potential Cuts – The risk of VCSE cuts intensifies as the council's financial challenges grow.
• Cuts in Progress – Non-essential services and VCSE funding cuts are implemented.
• Risk of s114 Notice – The council formally acknowledges a potential s114 notice.
• s114 Declared – The council issues an s114 notice, restricting spending.
• Ongoing s114 – The council continues to operate under s114 constraints, affecting long-term funding for VCSE organisations.

These phases provide an informal framework for VCSE organisations to assess their current situation and consider strategies for adaptation, especially if experiencing repeated cuts or operating in a high-risk area.

Strategies to Navigate s114 Notice Challenges

The policy report advises VCSE organisations to:

• Showcase Local Impact: Gather evidence on their role and contributions to the community, helping illustrate the potential effects of cuts on beneficiaries.
• Strengthen Local Connections: Engage collaboratively with the local authority and VCSE networks to create a unified approach to supporting the community through shared information and resources.
• Communicate the Wider Impact: Reframe narratives to emphasise how funding cuts would affect the broader community and local well-being.
   

The report also urges local governments to build early, meaningful relationships with VCSE organisations, involving them in financial planning to recognise and support the sector's holistic value to communities.

Through these collective actions, the guidance and report aim to equip VCSE organisations with tools to advocate for their critical role, helping them adapt during periods of financial instability within local councils.