Charity Funding Not Working - Impact Report

Eighty-four per cent of Not for Profit Chief Executives anticipate an increase in demand for their services over the next 12 months, yet are unsure of their ability to meet the demand despite large growth in funding, a new national survey has revealed.

As well, a majority of NFP CEOs want clearer funding strategies tied to performance and outcomes as well a voice and a role to play in navigating the social purpose system with Governments.

The findings are part of the PwC-Centre for Social Impact Community Index which surveyed over 300 leaders in the sector between 23 May and 7 July 2014. The survey coincided with the 2014 Federal budget and captures the initial reflections of the budget potential impact on the NFP sector.

“These results make clear that the way Government is currently funding charities isn’t working. Funding is currently awarded on an ad-hoc basis with no clear rationale,” PwC Partner Mark Reading said.

“Together with constant policy changes such as the deeply unpopular move to abolish the new charity regulator, the ACNC, it’s impossible for charities to plan for the future.”

Reading said over the last six years Government funding had increased by over 60 per cent to $41bn annually as both Federal and State Governments increasingly turn to the NFP sector to deliver social services in place of over-stretched Government departments.

“Despite this increase in funds, 40 per cent of the sector believes social outcomes have worsened. This is because funding is not allocated based on performance, which means it doesn’t always go to organisations who can actually deliver social outcomes,” he said.

“The sector wants long-term strategic investments by Governments, focused on delivering better outcomes. Above all they want certainty – in both funding and policy."

The PwC-CSI Community Index confidence score for 2014 was -2.0 indicating that confidence across the sector is negative.

Chief Executive Officer at the Centre for Social Impact, Dr Andrew Young, said the primary contributor to the negative level of confidence in the sector was the Social Purpose score of -8.2, which measures charities’ confidence in their ability to deliver services in light of the level of need.  

“CEOs expect no improvement in effectiveness in the social purpose system over the next ten years; on average they expect it to worsen,” Dr Young said.

“Simply increasing the level of funding to the NfP sector is not the answer. More than anything else CEOs want the sector to be taken seriously.

“This means fixing the way Governments currently engage with NFPs. Seventy per cent of CEOs believe a key constraint to improving outcomes is change in Government policy and direction.

“The sector is screaming out ‘we want to be heard’ and to be taken seriously by policy makers.

“CEOs want a more productive relationship with Government to improve the effectiveness of the whole social purpose system, of which NFPs are just one part.

“Whilst the focus of the Index is the NfP sector, it’s important to recognise the sector is part of the larger ‘social purpose system’ in Australia.”

The social purpose system includes all Government, Not for Profit, philanthropic and for-profit organisations, from the national to community level, that respond to social issues. It constitutes a significant part of the Australian economy.

The Report said the Confidence Index defines effectiveness as the achievement of social outcomes per dollar spent or invested in the ‘social purpose system’.

“We found that CEOs expect no improvement in effectiveness in the social purpose system over the next ten years; on average expecting it to worsen,” Dr Young said

CEOs also believe there is a role for better regulation of the NFP sector: 90 per cent want a national registry of NFP organisations, 84 per cent think there should be a reporting framework for the NFP sector; 87 per cent say state-based regulation should be nationalized including the retention of the ACNC.

The overall confidence score also varied dramatically across the ten industries covered in the Index. Health (7.2) and International (6.9) organisations had the highest confidence scores; Development and housing (-15.2) and Law and Advocacy (-19.0) had the lowest score of any of the 10 industries.

Overall, the report found that smaller organisations are much less confident than larger ones; small and extra small had an overall confidence Index score of -11.9.

Particularly very small organisations reported a worrying low people score (-20.5) compared to the sector average of -6.4, the report said.

National organisations tended to be more confident (+3.0) compared to organisations that operated in only one state (-4.5) or even multiple states (-1.0).

Intermediary organisations whose central purpose is to build capacity, relationships, promote giving, fundraising or volunteering were more positive (9.4) than other types of organisations; service providers (-3), advocacy organisations (-5) and foundations (-2).

Other key findings are:

•        Less than half of CEOs believe the system will be more effective delivering social outcomes in ten years’ time
•        Only 28 per cent of CEOs believe there are clearly defined outcomes in the social purpose system
•        Only 15 per cent believe there are effective measures of these outcomes in place
•        71 per cent don’t believe funding and other incentives currently rewards those who are most effective at achieving social outcomes

“These are not inspiring findings considering how much Australia relies – and will increasingly rely – on charities to deliver social outcomes,” Dr Young said.

“We face huge challenges with demographic shifts and continue to see entrenched social issues with little or no positive change, or where things are getting worse.”