The Changing Environment of the Community Sector

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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
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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?

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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

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Either Nonprofit and/or
Democratic Most are
democratic and nonprofitA few are democratic
but not strictly nonprofitA few are not
democratic but are nonprofitMany are primarily
public serving Many are primarily member
serving
Third Sector Defining Features
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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.

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Third Sector 700,000 approx organisations 320,
000 of these incorporated 35,000 of these
employ people 2,500 of these do not meet
the nonprofit criteria (finance and
insurance mutuals and trading
co-operatives)Turnover (1999-2000) Nonprofi
t Sector 33 billionEmployment
(1999-2000) Nonprofit Sector 600,000
Dimensions
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Contributes to AustraliasECONOMY generates
employment, provides services that for-profit
firms and governments fail to supply.SOCIETY
expresses peoples 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
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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.

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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
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Nonprofit Sector Employment June 1996 Total
580,000
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Nonprofit Sector Revenue by Source
1995/1996Total 27.4 Billion
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International Comparisons

• Australias nonprofit sector
• Almost as large as the United States nonprofit
  sector
• (7.2 of employment versus 7.8)
• As large as the United Kingdoms
• Strong across several fields (education, health,
  community services, sport and recreation)cf USA
  concentrated in health
• UK concentrated in education
• Volunteering marginally higher than US, Canada,
  UK
• But giving significantly lower

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Community Sector Nonprofits in the Community
Services Industry

• To understand an organisations 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.)

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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

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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

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Changes 1996-2000

• No. of organisations
• Employment
• Revenue
• Government funding
• Fees
• Fundraising
• Business venturing

Aged accommodation 2 down 100 up 48 up 85
up 41 up 20 down 29 down

• Children's services
• 4 up
• 4 down
• 1 up
• 24 down
• 37 up
• 74 up
• 42 up

• Overall
• Childrens services nonprofits becoming niche
  players, concentrated in family day care etc, as
  for-profits capture all growth in long day care
• Growing dependence on both governments and users
  in aged accommodation

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Changes 1996-2000

• No. of organisations
• Employment
• Revenue
• Government funding
• Fees
• Fundraising
• Business venturing

Other non-residential care 9 up 24 up 50
up 52 up 72 up 44 up 6 up

• Other residential
• care
• 39 up
• 48 up
• 70 up
• 94 up
• 61 up
• 7 up
• 36 down

• Overall
• Organisations in other residential care becoming
  more dependant on government (63 in 95/96 71
  99/00) means decreasing independence and
  financial vulnerability.
• Despite interest in social enterprise,
  organisations in both fields are earning a lower
  percentage of revenue from business ventures.

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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

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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

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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.

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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

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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)

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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.

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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

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• 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

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What should happen?

• Overall message - Nonprofits need to collaborate.
• 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).

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• 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.

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• 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.

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• 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).

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• Thank you