Australian governments have never been so dependent on the organisational capacity of not-for-profit (NFP) enterprises to deliver their policies. Conversely, Australian NFPs have never been so dependent on governments to fund their operations.
These bold propositions, two sides of the same purchaser-provider coin, are symptomatic of what some have termed ‘the contract state’.
A competitive market has been established for the provision of public goods. The delivery of governance, particularly in the area of human services, is becoming increasingly distributed.
Of course, statements which are intended to provoke always need to be qualified. Of Australia’s 600,000 NFPs only around 10% are economically significant. Most, entirely voluntary in nature, get no or little government support. Many of the most successful are clubs, run commercially, which reinvest their surplus in the interest of members and community activities.
The NFPs to which I’m referring are really a subset – those, both religious and secular in orientation, which exist to deliver benefits to the wider community. They are the organisations, large and small, which are driven by mission to provide support in multifarious ways to those who remain excluded from society.
Many have their origin as charities, some tracing their heritage to the mutualist ethos of the nineteenth-century. In order to supplement their philanthropic support, they’ve always had a commercial impulse. Trading is not new, as all of us who have ever visited op-shops or bought ‘good cause’ cookies know.
Of course, change is afoot. Coffee-carts to employ homeless youth, print shops that give work to ex-prisoners, mattress recycling factories that provide training to Indigenous youth – these tend to be the visible face of exciting new forms of social enterprise which pursue community benefit through the market.
The truth is, however, that by far the greatest source of ‘trade’ funding for NFPs still comes from governments. Indeed payments for the delivery of public services are increasing year by year. Business with government is now worth more than $26 billion annually.
Over the last generation governments have increasingly outsourced the delivery of human services to community organisations – from employment provision to disability support, from family relationship counselling to aged care, from emergency services to health care. Public servants, who in the past delivered many of those services themselves, have become contract managers.
My sense is that many NFPs moved to government-funded ‘trading’ without appreciating sufficiently the scale of transformation it would create. Receiving government grants to help subsidise community-driven activities, it seemed a relatively small step to instead receive payments to deliver government programs. In fact they are quite different ways of funding public benefit.
Herein lies the foundation of a profound and as yet unresolved tension. If the NFP operated as a ‘trader’, it would ensure that the payments received should fully cover the costs of the delivery of the government program. Indeed, well managed, it would enable a small surplus that could be converted back into social mission. Sometimes that is the case.
However too often both sides, public service contractor and non-government deliverer, continue to operate as if the payment is a subsidy. As a consequence we frequently have the unacceptable situation in which the delivery of government programs is effectively subsidised by the community organisations, supported by donations and volunteers. That is why it is estimated that community organisations paid to deliver government services often face a 20-30% funding shortfall.
Government and community organisations may be becoming mutually dependent but the balance of that relationship is skewed by asymmetric power. Contractual ambiguity – and organisational interpretation – nearly always work in the favour of those who hold the funds, write the terms and administer the contract.
It is perhaps this challenge, even more than the consequent burden of administrative micromanagement imposed on the deliverers, which poses the thorniest dilemma for those community organisations which now receive much of their funding from government.
Most only deliver government programs that they assess accord with their social mission (although there is an ever-present danger of ‘mission-drift’).
They are loathe to step away. They fear not just the adverse financial consequences they would suffer but, more important, they sense that to do so would require abandoning their clients, on behalf of whom they often advocate. Yet they are able to deliver the government’s program only by supplementing costs.
Not surprisingly, the dedicated staff who work in this sector, predominantly female, find themselves earning some of the lowest wages in the country. If, as widely anticipated, the equal remuneration case presently before Fair Work Australia awards significant wage increases to community and social workers, the pressures on NFPs will only intensify.
How will community organisations meet a likely 30% award increase over 3 – 4 years if it’s not supplemented by government? Yet, as the Gillard government noted in its submission to the tribunal, an increase of that level will place pressure on the level of human services that can be delivered when there is commitment to balancing the budget.
I remain persuaded of the benefits of governments outsourcing delivery to community organisations.
Even if full costs are paid, it is likely to remain cost-effective on a value-for-money basis. More importantly those who deliver the services, coming from a position of the heart, tend to provide a more empathic, individually-focussed service.
There are advantages to NFPs too. They have more funding and with that comes the opportunity to improve organisational scale and capacity. The large NFPs who now deliver many government services have become efficient and well-managed social businesses. Their importance to government program delivery has increased their political influence.
Yet the full benefits of the new relationship will remain constrained by the dual obstacles of inadequate payments and unnecessary red-tape.
The expectation of governments must be that they pay a realistic price for service delivery; set the outputs, outcomes and impact measurements that are required;establish the framework of accountability necessary for the expenditure of public funds and then allow the community organisations to get on with the job. Sectoral productivity can be improved by cutting out unnecessarily prescriptive administrative oversight.
Only in this way will it be possible to build the levels of trust required to establish a genuine partnership between governments and community organisations. Only when NFPs are able to contribute to the policy that they implement and are given greater autonomy in the manner in which it is delivered, will their natural tendency to social innovation be empowered.
The recent establishment of an Office of the Not-for-Profit Sector in the Prime Minister’s Department, an Office of the Community Sector in Victoria and a Partnership Forum (which I chair) in Western Australia suggest there is a willingness by governments to move forward. The 2010 National Compact – and similar state instruments – provide the principles of greater collaboration.
I very much hope that practice can follow. If NFPs can be given a real opportunity to collaborate in the delivery of government services, including in designing the programs they are contracted to deliver, then one can envisage a more participatory and networked form of governance.
That, rather than a ‘contract state’, should be the ambition.