This review is another small step away from hard line economic rationalism. It reviews the width and breadth of the not-for-profit sector in Australia. It acknowledges its large economic footprint and at the same time recognises the enormous contribution which the sector makes to the community. The major contribution to social capital is acknowledged. It recognises that the vast majority are focused on service and community activities and not on profits. This means that they focus on the the use of their economic resources for the benefit of members or of the community.
In many instances their financial behaviour is not relevant to the wider community. Where a not-for-profit group is in receipt of government or community funds or volunteer assistance, then their financial conduct and effective operation is relevant. They are expected to be accountable. They must show that they are using the funds prudently and for the purpose they were provided for.
The problem for this review is that ever more strongly strongly profit focused entities have entered some sectors such as health and aged care. While the review does not address this many have come to see themselves as competing for customers rather than cooperating in the provision of a needed service.
Because of the vulnerability of those served competitiveness was in the past controlled by a system of ethics among providers and by regulations (eg. probity requirements) that sought to constrain the market and shield these sectors. Private operators were expected to adopt not-for-profit and community values and were subjected to strong community pressure.
After 2.5 thousand years of shielding care from self interest by making it illegitimate to exploit the vulnerable, and in the face of disturbing evidence from the USA, Australia adopted a National Competition Policy.
In 1996/7 health and aged care were turned into a market and regulators sought to control undesirable conduct by focusing on the way selfinterest of participants could be manipulated (eg. Hogan review in 2004). They made it legitimate. Not-for-profit organisations were expected to conform but many had difficulty. Some could not bring themselves to do so and vacated the sector. Others brought in managers from the market accommodating to the new culture and strategies.
I argue that the consequences of this have been profound for the morale of staff, for the trust in and the trustworthiness of providers, and for the large contribution to social capital that the sector once made. The community has been disenfranchised and disempowered so permitting an unrestrained market culture to dominate the sector. As a consequence cherry picking is not frowned on and, as it is not illegal, it seems likely that kickbacks are being paid to give better paying seniors preference.
It is reassuring that the review recognised the difficulties faced by not-for-profit operators in these sectors. While it examined the relationships between not-for-profits and the market, the sections I read did not suggest ways of restoring a not-for-profit focus and culture to the sectors. In fact these matters were not fully confronted.
Once again in this era of an information highway we find that the review is limited by the lack of collected information. The review examined the difficulties experienced by not-for-profits and suggested reforms which would benefit them.
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That there is a trend away from hard line economic rationalism since the labor government gained power in 2007 is suggested by the nature of the reviews and reports as well as the briefs for the recent review committees.
This review is an examination of both the financial, and, more particularly, the critical social role played by not-for-profit organisations in serving society and in building social capital. It addresses their many problems and seeks ways in which to address these, foster these organisations and advance the sector.
In one sense it is a breath of fresh air and shows that, while the not-for-profit sector may have bent before the winds of economic rationalism, it has continued to flourish in Australia. Overall it has grown.
The great majority of nursing homes are not-for-profit and this review and its findings are consequently relevant to what the productivity commission will decide. I will be suggesting a community based accreditation, complaint and data collection system. If my suggestion that we foster the development of a community based structure with a central organizing body is taken seriously then this is likely to be a not-for-profit organization or a joint government/not-for-profit venture part funded by government.
In bygone years for-profit operators were under pressure to conform to the norms of the not-for-profit nursing home sector rather than the market. This slowly changed as marketplace thinking and national competition policy was introduced. Every sector of society was forced into one mould. The not-for-profit operators lost the leverage that they held over discourse in the sector. Not-for-profit nursing home operators now operate in a marketplace where they are expected to behave like market entities. The worry is that some (as has happened in other countries) are likely to have lost their sense of mission in the pressure to adopt new ways of economic thinking. My proposal goes some way to addressing that.
The reviews supportive approach, its finding that the community no longer understand the important role that these organizations play in society, and its recommendations that steps be taken to redress this are particularly interesting. It differs from the Hogan report of 2004 in that it is more accepting of the complexity of our society and does not try to make everything more market like.
The report is over 400 pages long. There were 319 submissions and multiple consultations. I have only had time to read the introductory sections and the comprehensive overview. These illustrate the thrust of the report. The extracts give the flavour of the report and the issues. The commentary includes my own views and interest.
The Productivity Commission was tasked by the Australian Government with assessing the contribution of the Not-for-Profit sector and impediments to its development. This sector has grown rapidly over the past decade, and now makes up just over 4 per cent of GDP (just under $43 billion), with nearly 5 million volunteers contributing an additional $14.6 billion in unpaid work. (Page iii)
While the future of the sector rests largely in its own hands, a wide range of regulatory, institutional and funding reforms are needed to enhance its effectiveness and achieve even better outcomes for the community. (Page iii)
The Government is committed to finding the best solutions to problems of social exclusion by ensuring the not-for-profit, private and government sectors work together effectively, and by using evidence-based programs and policies. In this context, measurement of the contributions of community organisations, and identification of ways to enhance those contributions, are important. (Page iv)
The brief for the study focused its attention. It was requested to perform a study of
contributions of the not-for-profit sector with a focus on improving the measurement of its contributions and on removing obstacles to maximising its contributions to society. (Page iv)
They were more specifically asked to seek to capture the sector's full contributions to society, identify unnecessary burdens and impediments, examine funding, explore relationships with business and government, and examine tax issues.
The report briefly listed the many important sectors where not-for-profits operated and contributed and looked at its economic implications.
The not-for-profit (NFP) sector is large and diverse, with around 600,000 organisations.
The ABS has identified 59,000 economically significant NFPs, contributing $43 billion to Australia's GDP, and 8 per cent of employment in 2006-07.
The NFP sector has grown strongly with average annual growth of 7.7 per cent from 1999-2000 to 2006-07.
4.6 million volunteers work with NFPs with a wage equivalent value of $15 billion.
The level of understanding among the wider community of the sector's role and contribution is poor and deserves attention (Page xxiii)
Growth has not, however, been even across the different activity areas. Importantly, there has been strong growth in employment (on average 5.7 per cent per annum from 1999- 2000 to 2006-07), however, growth in total volunteer hours has been substantially lower (only 1.6 per cent per annum). And while the share of the adult population volunteering has risen significantly (especially among younger volunteers), the average number of hours has fallen. (Page xxviii)
Role in society
They sought to understand the sector rather than to impose an external point of view on it,
The NFP sector has different motivations and faces some different constraints to the government and the business sectors.(Page xxix)
The report indicated that they
Focus of the research
The review sought to find ways to
The research recognized the diverse nature of the sector and suggested a separate "central policy and implementation unit" to manage the reforms it proposed.
Efficiency and Effectiveness
The research recognised that efficiency and effectiveness was not a priority for many not-for-profits - but in other situations it did matter.
Nor should it matter to government, provided NFPs' participants are happy with the services they receive and the processes undertaken. Where it does matter is where public funds are involved - whether by tax concessions or direct expenditure - as governments have an obligation to get the best value for taxpayer money. It also matters to many donors who want to see their funds, and time in the case of volunteers, well used. (Page xxx)
That said both employees and volunteers do seek do express themselves and define their lives through their activities in ways that differ from, and to a far greater extent than, employees in the marketplace. When drives for efficiency and accountability become onerous and impact on their ability to live out their mission then employees will be alienated and leave. Volunteers will go elsewhere. As in all things balance is key.
Aged care is an excellent example where I believe this has happened. As a society we have connived in attempts to maim if not kill the goose that laid the golden egg of compassionate care. I did not however see any reference to this in the report!
There is a push for greater accountability by NFPs from governments and the community. Business and other major donors increasingly want evidence of the effectiveness of the activities, and prefer NFPs that can provide robust business cases for the investments they seek. (Page xxx)
- - - - NFPs report being swamped by contractual regulation, a multiplicity of reporting requirements, micro management, restrictions on other activities and significantly greater compliance burdens. (Page xxxii)
Difficulties for not-for-profits
The report found that there were difficulties for not-for-profits in part funding causing them to squeeze salaries to the point that staff left.
Contracts often required the return of any surplus so that funding for improvement and investment was threatened. Presumably the not-for-profit still had to fund any shortfall on the contract.
Whereas there are some advantages in recruiting employees in fringe benefit and other tax breaks the report finds that sectors like aged care have difficulty because others (eg. governments) offer better remuneration. Staffing problems are compounded by "uncertainty associated with short-term contracts'.
Occupational health and safety requirements are also imposing greater costs, and qualification requirements for volunteers are increasing their difficulties. Increased professionalism crowds out voluntary effort in community service. All this is likely to impact on the benefits, that involvement in service to the community, and in volunteering, brings to the community in terms of social capital.
In my view all of this drives the community away from its beneficent and empathic heart, causes it to know less and less about itself and its own activities - driving it instead into the arms of the market and its thinking. Providers in aged care are rapidly losing the trust of the community and that is because of the way aged care is structured.
The future of the sector essentially rests on its ability to engage the community in supporting its purposes, and to allocate resources in ways to ensure the effective fulfilment of those purposes. NFPs need the trust of their members, donors, clients and the public to undertake their diverse roles within society. This must be underpinned by sound institutional arrangements. (Page xxxiii)
In addressing the problem of staff the report stated
With respect to the NFP workforce, governments should recognise the effect of not paying the full costs of service delivery. Part funding can make it difficult for NFPs to pay competitive wages to attract and retain workers, with the cumulative effects of underinvestment in workers, technology, and planning, putting pressure on the quality and sustainability of service delivery. Full funding may be one of the most important steps to address the workforce issues in the relevant human services sectors. (Page xxxvii)
Once again we see the problem of a failure to collect the data which should be at the centre of any investigation. This is 2010, well into the age of the knowledge web, the superhighway, and lightning speed broadband. Yet we are still unable to devise standard systems for ongoing collection and collation of data.
Way back in the 1980s we were exploring object oriented programming techniques that would allow the sort of packaging, handling and passing of data to and from diverse sources and many different dedicated programs. This is essential for a knowledge web. This would have cut into the profits of the companies competing to sell large "do all" programs and it did not happen.
There is considerable scope for better measurement to improve understanding of the effectiveness of NFP activities in achieving their objectives. More challenging, but valuable is estimating the contribution these outcomes make to community wellbeing. Such measures would be useful as a guide to government, donors (philanthropists) and volunteers in the allocation of their support. (Page xxvi)
Better knowledge about the sector and its impacts on society is an important element in building confidence in the sector, as well as guiding policy and program design. Evaluation of the sector's effectiveness is essential if the sector and government are to embrace an evidence-based approach to social investment. (Page xxxiv)
The first of 5 main elements for reform
knowledge systems that support understanding of the sector by itself, government and business, as well as building an evidence base for learning about effective social intervention and public policy measures (page xxxiii)
There were many recommendations for reform but I have not tried to enter in depth. The direction is important.
The Commission's recommendations, while extensive in number and reach, are aimed at improving the foundations upon which the sector can continue to develop. - - - - - However for large, multi-jurisdictional service providers the impacts, and commensurate benefits, will be much greater. (Page xxxiv)
Measuring inputs and outputs
An interesting diagram on page xxxv seeks to conceptualise the not-for-profit activities into inputs and outputs including social and community benefits. This is so that they can be quantified and evaluated as far as possible. The sort of not-for-profit community based but centrally supported not-for-profit organization I have suggested as critical for the resolution of problems in aged care would be highly rated under this system.
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