Mergers, partnerships and innovation are among the solutions to challenges facing the not-for-profit sector.
Activ Foundation’s July merger with Victoria’s genU marked the end of what was a tumultuous period for the Western Australian disability services provider.
The state’s biggest charity for more than a decade, Activ dropped to third place in 2022, according to Data & Insights.
The organisation’s troubles were further exposed last year when Activ announced a decision to shut seven of its worksites, leaving more than 700 people with disability at risk of losing employment.
That outcome was avoided when WA-based disability employment provider Workpower stepped in and took over those large-scale sites in June 2023.
Consequently, Activ shifted its focus to small-scale employment sites and capacity building for supported workers.
Geelong-based genU recognised Activ’s established position within the WA community and identified a merger between the two organisations as an opportunity to better support Australians living with disability.
Collectively, the merged entity employs more than 5,500 people, which it says places it among the top five disability services providers in the country.
The genU footprint already included WA operations in disability employment services, under its MatchWorks business, and a registered training organisation, genU Training.
Before the merger, its western operations represented about 17 per cent of its customers (11,146) and about 4 per cent of staff (174).
As a result of the tie-up, Michael Heath stepped down as Activ chief executive but has remained with the entity as a temporary consultant.
In a shared statement, Mr Heath said the merger created a variety of benefits for both organisations and the people they served.
“The merger is an opportunity to share learnings, expand programs, and gain efficiencies; creating a wider range of career opportunities for staff and enhanced services and better outcomes for customers,” Mr Heath said.
Activ’s revenue stood at $105.9 million in the 12 months ending June 30 2023, while genU had revenue of $400 million in the same financial year, according to its latest annual report.
Activ’s net assets were valued at $23.1 million in the 2023-24 financial year, compared to $211 million at genU.
genU chief executive Clare Amies has taken on the same role at Activ, telling Business News the two charities were closely aligned in both values and history.
Activ was established in 1951 and genU in 1952, each by a group of parents wanting more for their children living with disability.
“The merger really was the coming together of two organisations with similar histories, the same values, delivering services to some of our most vulnerable people in the country: people living with disability,” Ms Amies said.
“But the most important thing is that we’ve both been challenged by things in our industry, [and] coming together creates a real opportunity to be leaders in this space.
“Part of genU’s journey over the past five or so years has been asking what it means for us to provide a national service to people living with disability.
“[W]e want to partner with organisations that have the same commitments [and] the ability to constantly improve and advocate for what services need to look like for people.
“Activ had that in spades. It wasn’t about finding organisations that might be struggling. It’s actually about coming together with organisations that are committed to the same things we’re committed to.”
She said the 12 months post-merger would involve strategic and operational planning for the newly formed entity.
“The vision for us now is working through what becoming one organisation looks like and making sure we maintain the great qualities of both Activ and genU,” Ms Amies said.
“Our priority is for people who live with disability to have access to meaningful and sustainable employment … so they can gain the same rewards we all get every day in our lives around what it means to be valued in the workplace and contributing to something greater.
“The second big priority for genU is housing, and Activ does great work around supporting people to live independently in homes.
“It’s about making sure there’s an investment in infrastructure, that housing is accessible, and that people can age in place.
“That’s a big commitment for us. Making sure not only are we supporting people to live in their home, but also working and advocating with government and organisations around the infrastructure and build of homes that are accessible and part of the everyday fabric of all communities.”
Ms Amies said the combined scale of Activ and genU would create a stronger national voice for industry and amplify the customers’ voice.
“I think the beauty about the [National Disability Insurance Scheme] and the changes we’ve seen since the royal commission has been the whole concept around a human rights approach … and people having a say in how services are delivered,” she said.
“In the past, we’ve viewed disability services as a way to care for people. But the future of disability services is really about supporting people to live their best lives and that’s everything Activ talks about, and it’s everything that genU talks about.”
In terms of branding for the merged entity, Activ and genU will continue to operate under their individual names, while parts of the business will come under the genU banner in future.
“Activ is a very well-known brand, so it’d be crazy for us to just one day go, ‘Activ doesn’t exist and it’s genU’,” Ms Amies said.
“The most important thing for us is asking ‘How do we work through that? How do we bring Activ into the genU family of brands? Where does it make sense that we keep it as Activ and keep that connection to the legacy here in WA, but so people recognise it’s actually part of a bigger organisation that has a whole range of other services, too’?
“We don’t want to be seen as some national organisation that’s not connected. The only purpose we have is to deliver services to those living locally in communities. So if we’re too disconnected from that then you lose what our whole purpose is.”
Michael Tait says many service providers are not surviving in the current environment. Photo: Michael O’Brien
Challenges
The cost-of-living crisis is having a significant effect on charitable organisations nationwide, with increased demand for their services not matched by a corresponding upward adjustment to funding.
While the not-for-profit sector was generally viewed as efficient and productive, Ms Amies said the reality was that organisations were keenly focused on making the money last.
“[G]overnment funding doesn’t cover everything, so it means we have to innovate,” she said.
“That’s an important part of making sure we have long-term financial sustainability, that we’re investing, whether it’s in our systems or research.”
Rocky Bay chief executive Michael Tait said the way the NDIS was designed had been problematic for disability service providers.
“We access federal funding through the NDIS,” he said.
“The main and recurring challenge for our sector is the NDIS itself.
“It started with good intentions, but right now it’s not providing the best outcomes for people with disability, and in fact – in my view – it’s damaging the sector.
“Many organisations like Rocky Bay have been servicing the WA community for decades, well before the NDIS was envisaged. But it’s a difficult time to operate in our current space.
“Activ fell over [a while] ago. They were the largest to fall over, but there are many small operators pulling out on a weekly basis.”
Speaking with Business News in early September, Mr Tait said several operators had stopped offering some services just that week.
“Many will continue to pull out of other services, and many won’t survive,” he said.
“Inadequate funding is a huge problem. Also, we’ve obviously had to introduce necessary wage increases, so it’s been difficult.
“If the NDIS remains on this path, for some providers who are not as financially stable as us, it could be devastating.”
Mr Tait said organisations that managed to survive in the current climate did not have capacity to absorb the overflow of demand.
“The market simply hasn’t got capacity to pick up the gap from those that are disappearing, particularly in that more complex end,” he said.
The chief executive of MSWA (formerly The Multiple Sclerosis Society of Western Australia), Melanie Kiely, agreed that the complicated procedures associated with the NDIS placed an added burden on providers.
“The challenge that affects everyone across the whole not-for-profit sector is the cost-of-living crisis,” Ms Kiely told Business News.
“The NDIS has done this to us. They don’t increase funding as much as the cost of providing the services increases.
“You end up with this ever-increasing gap and I think that reduction, in terms of funding, is a real issue.
“[C]ouple that with the fact that organisations are trying to do fundraising, philanthropy, striking up partnerships so we can diversify the sources of income we’ve got coming in to support these people.”
MSWA runs several lotteries, including its Mega Home Lottery, with the money raised from ticket sales going to fund its work supporting people living with neurological conditions such as multiple sclerosis.
“When you run a lottery like ours, not as many people can afford $100 tickets or as many $100 tickets as they used to,” Ms Kiely said.
“It’s tough seeing people go to the ten dollar tickets instead of the $100 tickets, and we’re having to adapt.
“We’re just so eternally grateful for the ongoing support, but it’s tough.”
Mr Tait said the widening gap between costs and funding needed to be better addressed by the state government.
“In my view, the state government’s not stepping up, both in terms of commitment to financial burden, but also, and importantly, for our customers,” he said.
“We need much greater collaboration between state and federal governments.
“Less than ten per cent of Western Australians identifying as having a disability actually access the NDIS.
“That’s a large portion of people identifying with a disability who still need support but aren’t given funding for it.”
Melanie Kiely says the gap between costs and funding is increasing. Photo: Michael O’Brien
Solutions
MSWA is the fourth biggest charitable organisation in WA, recording revenue of $114 million at the end of the 2022-23 financial year.
Ms Kiely said innovation and investing in partnerships were two avenues for charities to gain financial security.
“Across the sector you’re seeing all organisations under pressure, and that’s why we’re really focused on trying to do things differently, not just within our lottery, but also with how we form strategic partnerships with other businesses,” she said.
“There are a number of strategic partners we’re in the early stages of forming relationships with … where there’s a win-win for both organisations.
“Hopefully we can come up with arrangements that can help our community and at the same time help those organisations and their staff to contribute to that community.”
Ms Kiely said charitable organisations had an obligation to be as efficient as possible to maximise outcomes for the people they served.
“We’re always trying to make sensible, wise decisions around trade-offs and those kinds of things,” she said.
“It’s very different to a corporate business, and I’ve sat on a number of listed and for-profit boards, and they don’t have the complexity we have.
“You have to be willing to question your entire model and how you do things, and you have to do it with the clients and the community.
“There’s an element of humility that needs to come into it, to actually truly listen to what our community says they want and then bring those things to be.
“I think society as a whole has been quite patronising in some ways, in our assumptions in deciding what’s best for people. But if you actually just go ask them, they’ll help you design [your services].”
MSWA has started construction of a residential facility in Shenton Park called Montario Quarter, which will provide supported accommodation for people with neurological conditions and spinal cord injuries.
Ms Kiely said the facility, delivered in partnership with state government, was expected to welcome residents in late 2025.
“There’s been lot of planning requirements, going through all the hoops around state planning,” she said.
“And because it’s a government co-funded project, it’s got all those intricacies, too.
“Also, post-COVID, building costs just mushroomed out for everybody, so it was a case of trying to work with the state government as to how we could co-manage that to be able to get progress.
“We’re just delighted it’s finally off the ground.”
Partnerships and infrastructure were also key focuses for Activ, with Ms Amies saying the survival of the not-for-profit sector was reliant on a strong three-way relationship between charities, the private sector and government.
“Activ and genU’s relationship with housing developers, social housing organisations [and] government; these are really important relationships,” she said.
“We know we can’t do it on our own. It’s absolutely the collaboration and partnership with the private sector that supports us.
“The cost of living is really hurting people … and the best way we can respond to that is when we work together.”
Ms Amies said development in the housing market and fitting out existing homes with accessibility features would lower costs in the long run.
“Committing to accessible houses is about making sure people can live their lives in the same place,” she said.
“Even if it’s me in twenty years’ time, I might need some better access in my own home. If my house is [not] already built that way, the cost to me and the cost to society … is really significant.”
Ms Amies said this also seeped into accessibility in workplaces.
“Employers play a huge role in having diversity and inclusion approaches to employing people with disability and making sure their workplace is set up to be able to support all of their employees no matter what their needs are,” she said.
“It’s not about putting any extra cost on people. It’s actually seeing that there’s a huge value to doing things upfront, having a really diverse culture in your organisation with people who bring totally different lived and living experiences, and making sure the infrastructure we build today is going to be as relevant and important to the population in ten or twenty years.
“I think the not-for-profit sector leads the way in that sometimes.”
This ties back to the innovative nature of many charities, with Ms Amies saying Activ aimed to ensure every dollar spent was contributing to better outcomes for the people it served.
“It’s absolutely in our DNA to be focused on our customers, but ensuring our financial sustainability means that we can be here for the long term,” she said.
“I think the community and not-for-profit sector are really good at partnering with [others] and understanding … what the needs of society are, what is happening when you have an economic crisis coming out of a pandemic, what we’ve learned around how we deliver services, how people want to receive services, how we recover after those times."
