The Changing Environment of the Community Sector Address to Board/CEOs Meeting, National Anglicare Conference Newcastle 24 October 2004 Mark Lyons, University of Technology, Sydney

Summary The community sector within the wider third sector Changes to the community sector environment –Government –Business –Households –Rest of Sector A few creative responses What should happen next?

How Many Types of Organisations/Sectors? We are familiar with… Business organisations Government organisations But what about: The Australian Football League The Australian Workers’ Union The Uniting Church Australian Society of CPAs; Geelong Grammar Dairy Farmers Cooperative; Mission Australia The Mater Hospital; Greenpeace Canine Council of NSW i.e. organisations known variously as: societies, charities, churches, unions, clubs, associations cooperatives etc. These constitute a distinct third sector

EitherNonprofit and/or Democratic Most are democratic and nonprofit A few are democratic but not strictly nonprofit A few are not democratic but are nonprofit Many are primarily public serving Many are primarily member serving Third Sector Defining Features

Nonprofit Defined Nonprofit organisations have a clause in their constitution that prohibits distribution of an annual surplus. Many also prohibit, on winding up, distribution of net assets to their members. Because of this prohibition on profit distribution, they are not run to maximise profit. It is a sign of their commitment to serve their community (either their members or others). Both have goals that are social as well as economic. Third Sector includes nonprofit and some other democratically controlled organisations (eg Credit Unions, Trading Co-ops) that omit the nonprofit clause.

Third Sector 700,000 approxorganisations 320,000of these incorporated 35,000of these employ people 2,500of these do not meet the nonprofit criteria (finance and insurance mutuals and trading co-operatives) Turnover ( ) Nonprofit Sector$33 billion Employment ( ) Nonprofit Sector600,000 Dimensions

Contributes to Australia’s ECONOMY – generates employment, provides services that for-profit firms and governments fail to supply. SOCIETY – expresses people’s capacity to join together, to work together for self (mutuality) and others (altruism): it encourages such pro-social behaviour: it is a product of, but also regenerates social capital. POLITICAL SYSTEM – enables ordinary people to participate in the political process; “elementary schools of democracy”, the most important manifestation of civil society. The Third Sector

Highlights (focus on nonprofit sector) In 1999/2000 The nonprofit sector contributed about $21 billion or 3.3% to the gross domestic product. This is more than twice the contribution of all economic activity in Tasmania It is a larger contribution to GDP than the agriculture industry. When volunteering is valued and added in, the nonprofit sector is more important than the mining industry Nonprofit organisations contributed 7% of all jobs in Australia.

In 1997, 8.6 million Australians belonged to nonprofit organisations, approximately 65% of the adult population. More than one third of the population belonged to two or more organisations. Australians describing themselves as active members numbered 3.25 million; 25% of the adult population. In 1997, 8.6 million Australians donated $2.8 billion to nonprofit organisations. In 2000, 3.7 million Australians volunteered a total of 600 million hours for nonprofit organisations. This was the equivalent of another $8.9 billion donation. Deeply embedded in the Community

Nonprofit Sector Employment June 1996 – Total 580,000

Nonprofit Sector Revenue by Source 1995/1996 Total $27.4 Billion

International Comparisons Australia’s nonprofit sector Almost as large as the United States’ nonprofit sector (7.2% of employment versus 7.8%) As large as the United Kingdom’s Strong across several fields (education, health, community services, sport and recreation) cfUSA – concentrated in health UK – concentrated in education Volunteering marginally higher than US, Canada, UK But giving significantly lower

Community Sector = Nonprofits in the Community Services Industry To understand an organisation’s environment, focus on industry/market Our interest here is the community services industry Children's services Aged accommodation Other accommodation (for people with disabilities; refuges) Other non-residential care (e.g. home care, personal support, counselling, community development etc.)

Revenue and Sources of Revenue 1999/2000 Children's services revenue $0.4 billion government – 43%; fees – 52%; fundraising – 2%; business ventures – 1%; other – 2% Aged accommodation revenue $1.5 billion government – 58%; fees –31%; fundraising – 3%; business ventures – 2%; other – 6%

Revenue and Sources of Revenue 1999/2000 Other residential care revenue $0.8 billion government – 71%; fees – 14%; fundraising – 8%; business ventures – 2%; other – 5% Other non-residential care revenue $3 billion government – 47%; fees –11%; fundraising – 24%; business ventures – 8%; other – 10%

Changes No. of organisations Employment Revenue Government funding Fees Fundraising Business venturing Children's services 4% up 4% down 1% up 24% down 37% up 74% up 42% up Aged accommodation 2% down 100% up 48% up 85% up 41% up 20% down 29% down Overall: 1.Children’s services nonprofits becoming niche players, concentrated in family day care etc, as for-profits capture all growth in long day care 2.Growing dependence on both government’s and users in aged accommodation

Changes No. of organisations Employment Revenue Government funding Fees Fundraising Business venturing Other residential care 39% up 48% up 70% up 94% up 61% up 7% up 36% down Other non-residential care 9% up 24% up 50% up 52% up 72% up 44% up 6% up Overall: 1.Organisations in other residential care becoming more dependant on government (63% in 95/96 – 71% 99/00); means decreasing independence and financial vulnerability. 2.Despite interest in social enterprise, organisations in both fields are earning a lower percentage of revenue from business ventures.

Changes in Community Sector Environment Affected by: Changes in government policy and procedures Changes in business approach to sector Changes in household attitudes Changes in behaviour of other nonprofits

Changes in Government Embrace of markets; attempt to create markets –Redefine funding from support or partnership to a purchase of service contract Competition between providers Hostility between purchaser and provider Purchaser abuses monopsony power No privilege to nonprofits (charities) over business Diminishing competence in government –High staff turnover –Interference by ministerial staffers Result: increased costs in “doing business” with government

Changes in Legal Environment (Judge and government-made policies) Directors’ responsibilities OHS Duty of Care Client rights Insurance crisis Result: more complex, more time consuming demands on managers and directors. Hard for small organisations to cover all bases.

Changes in Business Slow adoption of CSR/SRI models (imp in long term) Less philanthropy more a business relationship – i.e. sponsorship; some move to seek partnership More competition to nonprofits in community service and other industries More complaints about competition from charities in conventional markets

Changes in Households More demand for services and changing expectations Modest increases in giving Volunteering increasing, but a different, more self-centred volunteer Less trust in “charities” (response to sexual abuse charges; diversion of donated funds)

Changes in Nonprofit Sector (incl. Community Sector) A few growing large – helped by good relations with government, partnerships with big corporations. Many small and medium nonprofits face exhaustion, are bitter, are suspicious of business and of the bigger, apparently more successful end of the nonprofit sector. Run down of capital stock; few capable of reinvesting Some slow moves to come together as a sector (following example of UK, Canada, US). National Nonprofit Roundtable. One thing has not changed: most organisations are strapped for cash.

A Few Creative Responses Review and renew Sharpen/refocus mission, reorientate programs (e.g. Smith Family, ARU, a few Credit Unions) Build Expertise – especially by partnership with business

Get more funds - Spend more on fundraising - Business ventures (social entrepreneurship) - Creative financing Form alliances, network organisations - to gain advantage of size without losing autonomy – e.g. Job Futures

What should happen? Overall message - Nonprofits need to collaborate. 1.Small community organisations to form network organisations or merge with larger organisations. (a radical proposition: encourage government to save everyone money by contracting with five or six prime contractors for the delivery of services to people with disabilities – or an even wider range of community services. They then subcontract with smaller local organisations. This would reduce the cost of government incompetence in the system).

2.Community Sector collectively protest abuse by government of monopsony power. (i.e. sole purchaser paying below cost for services) Solution: Independent pricing tribunal hearings to set fair prices - the same solution as is used to guard against government monopoly power.

3.Individually and collectively: Explore creative fundraising/ resource mobilising. from public, by seeking donations in different ways (payroll giving is growing). from financial institutions, by issuing debentures, bonds etc. from business via partnerships.

4. Encourage and join “whole of sector” initiatives to educate public about the huge varied and vital contribution of nonprofit sector. to educate public about damage wrought to sector by certain government policies. to entice government (at whole of government level) to sign a treaty with the sector (similar to UK Compact, Canadian Accord).

Thank you