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SCOPE AND IMPACT OF THE THIRD SECTOR Presentation to Good Practice in Action Seminar Wellington,16 March 2007 Mark Lyons, Adjunct Professor University.

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Presentation on theme: "SCOPE AND IMPACT OF THE THIRD SECTOR Presentation to Good Practice in Action Seminar Wellington,16 March 2007 Mark Lyons, Adjunct Professor University."— Presentation transcript:

1 SCOPE AND IMPACT OF THE THIRD SECTOR Presentation to Good Practice in Action Seminar Wellington,16 March 2007 Mark Lyons, Adjunct Professor University of Technology, Sydney

2 Todays Journey Why a third sector? What is it/where is it? What does it contribute? How does it work? Government relationships with third sector As enabler and regulator As direct funder (grant maker, third party purchaser) As object of advocacy What is wrong with the relationship and what might be done?

3 Why a Third Sector? (we know about government, we understand business, so why a third sector) A name for vast number of organisations that are: Private (ie not government), but Not run primarily for-profit (as a conventional business)

4 Third sector Comprised of organisations formed/supported by groups of people to provide services for themselves or others to advocate their own or others interests to worship a God or Gods

5 Third sector organisations (TSOs) Differ from other private organisations by: Prohibition on distribution of profits to members (or owners/initiators) and/or Democratic governance

6 Other Names Nonprofit Sector Voluntary sector Social Economy Civil Society Each term focuses on different parts or different aspects of third sector No agreement means low recognition. Third sector not yet invented as was business 40 years ago

7 Where is the Third Sector? In Australia (and New Zealand?) Everywhere! 86% of adult Australians belong to at least one TSO (most popular: automobile clubs, credit unions, sports clubs, social (registered) clubs, hobby clubs [eg gardening, fishing, reading, walking]); Also: 87% donate; and 41% volunteer for at least one TSO.

8 Most likely to be found (ANZSIC 2006 Divisions) P Education and Training Q Health Care and Social Assistance R Arts and Recreation Services S Other Services (eg unions, business and professional associations, religious organisations)

9 But also in H Accommodation and Food Services (eg hospitality clubs, some uni colleges, school canteens) I Information, Media and Telecommunications (eg community radio) K Financial and Insurance Services (eg. credit unions, endowed charitable trusts)) L Rental, Hiring and Real Estate Services (eg. housing associations, owners corporations) and M Professional, Scientific and Technical Services (eg. medical research institutes) And a few scattered through all of the remaining 11 Divisions.

10 In Australia around 700 000 TSOs 350 000 incorporated 35 000 employee people (ie 95% volunteer only!!) Summary: huge variety in size and activity. But in that respect, no different to business government

11 How/What does third sector contribute? To Economy (Australian data): 7% of jobs 3.3% to GDP (4.8% when volunteering valued and added to numerator and denominator)

12 Revenue: 50% sales to individuals and private businesses 30% government grants, contracts and vouchers) 20% private donations

13 If we value volunteering and add it to donations (and total): 40% sales 23% government 37 % donations

14 So, TSOs mobilise almost $20 billion of money and time that might not otherwise be committed to the provision of services – or at least not to anything like the same extent.

15 How/What does third sector contribute? To Society Product of and reproduce social capital (networks, norms and trust that enables participants to act together to pursue shared objectives – Putnam) Not only source of course, and different TSOs better than others at reproducing different types of social capital (bonding, bridging, linking)

16 A source of social learning People learn how to work together, acquire and practice skills of organising and leadership may not learn elsewhere elementary schools of democracy de Tocqueville (1837)

17 A source of social innovation Many new ways of addressing social problems emerge from third sector and are addressed (initially) by third sector organisations Some Aust egs: surf rescue (1900s) housing finance for working families (1930s) aged persons accommodation (1950s), group training for apprentices (1980s) landcare (1990s)

18 How/What does third sector contribute? To a democratic political system Aggregating and representing/advocating interests to government, corporations, TSOs, and wider public Also Encourage interest in politics and participate in political system (members of any TSO are 2.7 times more likely than non members to participate in political activity)

19 Individual TSOs Add to one or more of these contributions to varying degrees. but We lack an overarching theory of the third sector of the kind economics provides for the for-profit or business sector nonetheless Important to be aware of all three types of contribution.

20 Is the third sector growing? Some say yes (eg Salamon) and some no (eg Putnam) In Australia: overall no faster than economy, but Many parts in decline (trad Christian denominations, unions, political parties, community service clubs, local sports clubs) Other parts growing (eg health charities, schools, Pentecostalist churches, non-Christian religions, philanthropic foundations) Basically a transformation: charities grow, mutuals decline.

21 Many reasons for transformation Social: Demog change, longer working hours and commuting, higher incomes, value changes (individualism, consumerism) Political: government encourages for- profit competition, and demutualisation. And internally TSOs: fail to adapt to changing tastes and expectations; badly managed.

22 Behaviour of TSOs Shaped by defining characteristics: nonprofit distribution &/or democratic governance; But also: size, activity (industry) and whether primarily public or member benefit.

23 How are TSOs structured and governed? Huge variety of ways… Most have members, but many have only a few and some (charities) do not (non-owned entities) Mostly, most members not very involved in organisation

24 Most TSOs Rely on effort of a few volunteers to keep them going A few big ones have sophisticated management and governance Most are part of larger networks – eg of a religious denomination, a sport, a federation, a peak or umbrella organisation.

25 Challenges to effective TSO management No simple bottom line to evaluate performance; Complexity of third party funding Multiple accountabilities to members, clients, funders, communities? and for what: expenditure, quality of provision, responsiveness to members?

26 Common failures of TSOs caused by: Amateurism, Particularism (closed group) Poverty of resources, especially capital Misallocation of resources (too much on direct service) Oligarchy Secretiveness

27 Implications of all this for governments (think about government business relations as a counterpoint) How does government interact with third sector?

28 Government as enabler/regulator Via incorporation, Via regulating fundraising (maintain reputation by keeping out impostors) Via tax concessions These are the most common ways of interaction

29 In Australia A light regulatory touch, but confusing (and burdensome for some). NOT an area of any policy attention and not well done. Eg: Incorporation and fundraising- 40 to 50 different pieces of legislation and regulators for the third sector cf with vast reform activity to facilitate business where one act and regulator controls incorporation and fundraising

30 tax concessions: a complex muddle- no principles or theory, not well understood, seeming contradictions, opportunities for political patronage and score settling policy review limited in scope and frequency and ignored by government

31 Government as funder Affects relatively few TSOs – But a majority of employing TSOs (c20-25 000) A focus of much attention from both sides Especially in health services and social assistance industry

32 Government as object of advocacy Very few TSOs seek to pressure government, but Governments find dealing with interest representation difficult – Welcome the expertise and aggregation of interests that TSOs provide, but A tendency to stamp down on those interests that are critical and weak.

33 Main problems in current approaches to TSOs by Australian governments Focus only on a few organisations: those that are funded, and those that criticise. Fail to recognise that these are part of much larger whole; Believe their only value lies in ability to serve the government.

34 Some Australian contradictions in government approaches to TSOs Favour TSOs as close to the community and responsive to individual need – but Remove any capacity for flexibility by contracts, favour large multi-site organisations as more efficient, disparage representativeness of community organisations that criticise policy. Confuse community with community organisation or TSO.

35 Conclusion For governments to work with third sector, it is important: To realise extent and scope of sector that only a few bits of it are funded by or lobby governments Think about third sector in same way as business sector. To recognise that main role of government is to enable and facilitate sectors prosperity, but that means it must understand the dynamics of sector and how it produces the effects that it does.

36 Conclusion Governments should acknowledge (in policy and publicly and frequently) importance of sector in all its variety; Understand the indirect effects of government action, (and also other social changes) on the third sector.

37 Conclusion Needs many policies (UK a model) Encourage giving (of time and money) Encourage business and third sector partnerships Build capacity in sector Address capital access problem Encourage innovation in sector

38 Conclusion Require and facilitate public accountability (and thus knowledge) of sector. Assist different parts of sector to come together (ideally this happens first and is facilitated by foundations) But in final analysis, third sector organisations have to be able to review and renew themselves, individually and collectively.


40 Two current areas of greatest angst in Australia funding social services (assistance) and silencing dissent.

41 Funding Competing perspectives or frames TSOs and Government Product of the intersection of expansion of welfare state and community development movement of late 1960s/1970s. In reality: Two TSO perspectives

42 Funding (continued) One TSO perspective: TSOs are major providers of services Many have initiated a service &/or provide it to disadvantaged groups that cannot access it elsewhere. They look to government for help to maintain and expand this endeavour. Sometimes pick up services previously provided by government employees

43 Funding (continued) Second TSO perspective: encouraged by government to start, performing a public service, remain closely tied to the funding department Both groups see themselves as partners of government – but feel exploited

44 Funding (continued) Government perspective: Days of governments starting or simply helping TSOs are past (ie government as philanthropist). But TSOs can help government deliver public services An instrumental perspective

45 Funding (continued) Under pressure to massively expand services (for children, families, disabled, aged) Governments moved from grant in aid to purchase of service without being clear about the changes, the reasons for them and their implications. And therefore without explaining or justifying them.

46 Funding (continued) Consequently, governments: exploit TSOs – abuse monopsony power, shift all risk, add unnecessary and burdensome red tape, In some cases encourage for-profits to compete with TSOs (ie treat TSOs simply as another business); Create in many small/medium TSOs a victim mentality and dependency on government.

47 Funding (continued) Governments Talk of partnership but practice command and control. Fail to recognise that TSOs were there first, and TSOs frequently have more expertise, and Fail to recognise that many TSOs receive funds from many programs, and so make no effort to coordinate reporting requirements.

48 What to do? No simple solution Governments should Recognise how TSOs work and what they contribute (more on the big picture below)

49 What to do (continued)? In the context of the bigger picture Think about whether they want to encourage TSOs by assisting them to provide services, or to ensure services are delivered, whether by for-profit businesses or TSOs Be clear about benefits and losses of each option; Develop clear distinction between grants and purchase of service payments;

50 What to do (continued)? Apply the same rules for red-tape reduction to their relations with TSOs as they do with business. Do a lot of talking and listening (to build a genuine partnership) Move toward a single act for incorporation and fundraising to define and ensure accuracy and public availability of all appropriate information re TSOs – ie a single filing).

51 Silencing dissent Recognise TSOs are a central part of a civil society. Support those representing disadvantaged groups, but sufficiently, and via a commission responsible to parliament to remove tendency of ministers/public servants to threaten funding But set standards for representation for all TSOs – part of the basic information that should be publicly available; Do not make criticism of government policy a breach of a contract to deliver services

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