Arguably, over the last five or so years, the Australian Not-for-profit and Charitable Sector has faced more change than it has faced over the preceding 200 or so years of its existence in this country. This change has occurred in response to a number of pressures but has been primarily driven by a significant change in the perception of the relationship between the Sector and government.
In the Australian Not-for-profit and charitable Sector, government has loomed large—especially since the advent of the Welfare State economic thinking which developed after World War II. Government and the Not-for-profit Sector have worked closely since that time to meet social challenges as they have been perceived from time to time. This relationship revolved around a nexus of funding and policy development on the government side, resourcing and informing social service delivery on the Not-for-profit and Charitable side.
Indeed, government is a very big funder of Not-for-profit activity across an incredibly wide spectrum of services. This model has been effective in distributing resources where they are needed and in bringing to bear the capacity of Charities and Not-for-profits to leverage volunteer time and donations in meeting the challenge of building our civil society.
However, over the past five years, this arrangement has been increasingly questioned due to financial challenges being faced by governments and because of changing thinking in relation to the role of Not-for-profits and Charities and how our community might be better served by establishing a markets-based funding regime.
There is little doubt that governments are facing considerable fiscal difficulty and there is an almost universal acceptance that service provision undertaken by Not-for-profits (and For-profits) need to take a more client-centric approach to their work—both to ensure the service provider is as efficient as it can be and to ensure the client gets what they want. Interestingly, commentators and policy makers often encourage this focus citing funder savings and client satisfaction as being the logical outcomes.
Two policy frameworks are often conflated to describe this policy setting. Individualised Funding (where funds are provided to the individual in order for the individual to make choices, thus enrolling the market mechanism to force change) is the first. The second is Person-centred Care intended to influence service design and delivery to meet clients’ needs.
These ideas have manifested in various government policies including Western Australia’s ‘Delivering Community Services in Partnership Policy’. Overall though, they impact Not-for-profit and Charitable organisations in three key ways: (1) they introduce increased uncertainty with respect to funding due to the impact of client choice; (2) they require organisations to redesign their operations in order to facilitate client-centric service delivery; and (3) they disrupt the relationship between government (as policy maker) and the Sector (as policy implementer). Not-for-profits and Charities must respond to these challenges if they are to survive.
To respond to these challenges, the Sector must consider three further elements. These are: (1) the financial impact of the new world; (2) the human resources impact; and (3) the governance impact arising from new ways of doing business.
The financial impact is two-fold in that Not-for-profits must both determine what capital is required in order to meet this challenge and also become more adept at costing and pricing their services. In the case of the former, capital requirements include money required for successful change management, for additional IT infrastructure such as Client Management software, and for marketing and administrative change as person-centered care and individualised funding replace more holistic contracts with government departments.
The second aspect of financial management is that of ensuring the decision makers in the organisation understand the business itself. Predominantly, this means that organisations need to become more adept at costing and pricing for planning purposes and for solvency purposes. They need to consider their capacity for meeting their financial responsibilities in the context of their demand forecast.
In human resources terms, under the person-centered care model, decisions and choices are made either by the client, by the client’s family and supporters or by guardians. Staff at the coal face need to respond to client choice within a policy framework, making decisions that are not always clear and easy. There is a great need for training and appropriate supervision in order to ensure the client achieves what they want within a decision making environment that does not compromise the Not-for-profit’s policies and mission or the requirement to meet clinical standards.
The third and final significant point is in relation to the governance and reporting processes that would likely need to be changed. Obviously traditional financial and output reporting arrangements are likely to be needed. However, additionally, the board and management are going to have to develop reporting structures that ensure outcomes reporting and decision making is able to be undertaken at all levels within the organisation. This is difficult and can be expensive.
Overall, the challenge for Not-for-profits and Charities is for them to get to know their business better in the context of the new environment, to find resources to meet the challenge and to keep the doors open while they do it—a formidable challenge for any sector in our economy.