Business climate conspires against not for profits

By most people’s reckoning, 89 kilograms of paperwork is a lot; yet that’s how much a recent tender put together by community services agency, Anglicare, weighed.

The document was weighed because it had to be sent by courier to Canberra in order for the agency to apply for a $5 million government contract to build a counselling centre.

It’s just one example of the rising compliance demands on the not-for-profit sector that make their business increasingly difficult.

Alzheimers Australia WA chief executive Frank Schaper told a recent WA Business News boardroom forum that governments’ tendering regimes were forcing organisations to drop their prices to unsustainable levels.

“If you tender, you’re always pitching too low. If you’re pitching too low, you can’t be sustainable,” he said.

“There is no investment at all in the training of community organisations. There’s no opportunity for them to become more commercially oriented.”

Good Samaritan Industries chief executive Chris Jones said his organisation had been forced to seek external advice in its funding application for 10 disability places.

“The tender took two weeks to complete and in the end we had to hire a consultant who was familiar with government tenders to actually do the tender,” he said.

Mr Jones said government hid behind the argument that it had to be accountable to taxpayers.

“If they only looked at what they’re actually wasting; they’re losing millions in other areas,” he said.

“I have seven audits that I deal with in a year through all of the different legislation; that’s just madness.”

The issue is compounded because government controls the purse strings of not for profits through two avenues – direct funding and contracts for service.

Not for profits feel they’re being squeezed on both fronts.

“One problem is [that] governments are expecting more from us but, in essence, spending less,” Nulsen Haven chief executive Gordon Trewern said.

“Agencies are having to fundraise money [for infrastructure] themselves, and some of them don’t have the capacity, so where does it put them in being competitive for the future? I don’t think we’re having an honest dialogue about the cost of business.”

One way to combat this is to become more consumer focused, according to Activ Foundation chief executive, Tony Vis.

“We have to develop a service which is fee for service and people actually have to pay their way as they go,” Mr Vis said.

With compliance requirements putting smaller organisations out of the market for big government contracts, many believe that consolidation in the sector is inevitable.

“In PMH, there are about 11 different groups that engage with the community. I could run all of their IT databases, I could probably run their PR, by expanding my staff by one, if I had to do that,” Princess Margaret Hospital Foundation CEO, Vern Reid, said.

“There’s duplication at the bottom of the triangle and it’s going to definitely force amalgamations.”

However, others say this would be to the detriment of service delivery.

“If you go to a simplistic playing field, to let the market decide, you’re discounting a lot of things, like volunteers,” Anglicare chief executive Ian Carter said. “Not for profits are a very important part of the civil society in this country.”

In addition to mounting compliance issues, WA’s not for profits are struggling with conditions created by the state’s economic boom.

From a service delivery point of view, the boom has strengthened demand.

“It’s quite clear there are the ‘haves’ and ‘have nots’ in Western Australia and the wealth gap between those who do have and those who don’t is actually growing in this state,” Mr Carter told the roundtable forum.

The sector is also experiencing shortages of staff and infrastructure, with many organisations priced out of the commercial property market.

“Finding something that’s suitable, that you can operate a service from that’s at an affordable rent, is almost impossible,” Mission Australia’s state director Angie Paskevicius said.

On the other hand, the boom is creating opportunities to leverage growth in service delivery.

Activ Foundation, which supplies workers to organisations including the Water Corporation and SlumberCare, as well as property care contracts, is pitching at more long-term commercial contracts.

“We’re taking market share and because there is a boom economy, where we’re taking market share from they’re not worried, and so that gives us an opportunity to build a market space for when the market turns,” Mr Vis said.

As the boom fuels record profits for many companies, particularly in the mining industry, there is also a belief that some of that wealth should be distributed.

“There’s a lot of talk about big budget surpluses from government, and big profits, but I’d like to see some more flow back to us, both from government and the corporates,” Salvation Army divisional secretary Gary Hart said.

However, not for profits acknowledge that the corporate sector is looking for a return on its investment.

“My view is the boom has created an expectation in the community that corporations will just give out money. Certainly at my board table there’s that expectation,” Mr Reid said.

He believes the not-for-profit sector needs to become more professional in its approach.

“What I’ve found is that my proposal gets equal consideration to a proposal from the West Coast Eagles or the WA Symphony Orchestra,” Mr Reid said.

“We have to compete and we have to engage with a potential sponsor or corporate supporter to the same level as other professional people. A lot of (not for profits) don’t know how to do business and if they do win the business, they don’t know how to sustain the relationship.”

The corporate sector is becoming increasingly important to not-for-profit groups, providing both financial and human resources.

However, while corporate volunteers are a source of labour that would most likely be otherwise unavailable to the sector, some organisations aren’t convinced of the net benefit.

Alzheimers Australia’s Frank Schaper said there was an underlying cost to taking on volunteers.

“You have to have somebody in your organisation you pay who manages that, who finds them their jobs and something to do that benefits us,” Mr Schaper said. “They come to you with no skills in the sort of work you want them to do.”

Others, like disability services provider Nulsen Haven, find it difficult to attract corporate volunteers because, according to CEO Gordon Trewern, “disability isn’t a sexy part of the industry”.

Volunteering WA chief executive Mara Basanovic said while corporate volunteers were providing a valuable resource, there needed to be a policy for stakeholders.

“There are some not-for-profit organisations that need some guidance in terms of managing it,” she said.

Board members are another resource the corporate sector can provide, although some organisations, like Nulsen Haven, struggle to attract people with the right skills.

“In the corporate world, you can go out and search for your skills. Where you have a membership-based organisation, in which you have to have a certain percentage of the board made up of that membership…those that put their hands up aren’t necessarily the right people,” Gordon Trewern said.

Others, like Anglicare, have a readymade network of parishes and schools to access.

“It’s an advantage that the church-based agencies have, because you’ve got that natural constituency to draw on,” Mr Carter said.