Submission to Commonwealth Financial Accountability Review
February, 2013
Submission in response to ‘Sharpening the focus: a framework for improving
Commonwealth performance’
1. About ACOSS
The Australian Council of Social Service is the national voice against poverty and
inequality in Australia and the peak body for the community services and welfare sector.
Established in 1956 with a membership representing over 3000 community organisations,
ACOSS has a long standing record of policy and advocacy about the not-for-profit
sector.1
In recent years, ACOSS has previously made submissions and contributed to the
Productivity Commission Study into the Contribution of the Not-for-Project Sector, the
development of the National Compact, the establishment of the Australian Charities and
Not-for-Profit Commission, commonwealth contracting arrangements, governance
standards, equal pay supplementation arrangements, charity law and NFP tax reform.
ACOSS participates in a range of Government advisory processes including the
Australian Government NFP Sector Reform Council and the Prime Minister’s National
Panel on Economic Reform.
The Commonwealth Financial Accountability Review provides the opportunity to
address a range of reforms relating to government-funded community services, and in
the context of the work of the Department of Finance and Deregulation. This
submission is in response to the CFAR position paper, ‘Sharpening the Focus: a
framework for improving Commonwealth performance’ (the position paper). While we
do not address each and every aspect of the position paper, we have followed its
structure in so far as it relates to key issues of concern to us.
2. Introduction2
The community sector has long called for improving the processes of contracting for
funding, and the broader regulatory frameworks that govern charities and not-for-profit
organisations in Australia. The Productivity Commission’s (PC) landmark 2010 report
picked up many of these calls and has become a blue print for the sector’s reform
agenda.3 The sector’s support for this agenda remains as strong today, a point that was
reiterated clearly to the Australian Council of Social Service (ACOSS) at our member
policy forum in 2012.
The position paper outlines the following as key issues for charitable and NFP
organisations engaged in the delivery of community services:
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ensuring the independence of charities and NFPs is preserved and valued;
developing simplified, consistent and useful performance measures;
1
For a full list of our national members, see Appendix A.
ACOSS gratefully acknowledges the contribution of Hannah Gissane, Policy Intern 2012, on this paper.
3
Productivity Commission (2010) Contribution of the Not-For-Profit Sector, Productivity Commission,
http://www.pc.gov.au/__data/assets/pdf_file/0003/94548/not-for-profit-report.pdf
2
ACOSS submission to Commonwealth Financial Accountability Review
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Submission to Commonwealth Financial Accountability Review
February, 2013
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recognising that competitive tendering processes can hinder the development of
cost effective and efficient collaborative partnerships among charities and NFPs;
supporting the development of innovation through a dedicated innovation fund;
providing alternatives to the prevalence of risk management frameworks, with their
outdated focus on financial risk, for instance through strengths-based frameworks;
clarifying the minimum requirements of the ‘earned autonomy’ model; and
recognising that there are risks inherent in advocating dual and multi-party
accountability, as partnerships between governments and charitable or NFP
organisations are rarely equal or result in shared accountability.
3. Independence (Chapter 3)
The independence of charitable and NFP organisations is a vital element of their role
and ought to be valued by Governments. In supporting the independence of the
charitable and NFP sector, the PC emphasised that the role of government should be
limited and, in particular, the sector should be largely responsible for its own
development and future direction.4 The lifting of ‘gag clauses’ from government-funded
contracts by the Federal Government in 2007 was greatly welcomed by the sector; and
the current commitment to strengthen this policy through legislation is also widely
supported. Nonetheless sector independence needs to be continually guarded strongly
in the context of government funding for services.
Examples of current contracting processes that can undermine sector independence
include:
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a lack of clarity about the intellectual property rights associated with
Government-funded work;
funding Departments expectations that public statements and media releases by
a funded charity or NFP will be approved by the funder; and
demands for access to the organisation’s bank accounts in addition to audited
financial information, should a funding department wish.
Often such constraints are unwarranted. Where they do exist, they should be exerted
only and specifically in relation to a contractual agreement about a particular piece of
funded work, not about the additional or general activities of the charity or NFP.
Contracting arrangements for the community sector should foster the independence of
the organisation, rather than its control by government. For example, the intellectual
property in government funded work should be owned by the organisation unless there
is a public interest to agree otherwise. Yet ACOSS continues to identify examples in
current Commonwealth Government funding contracts that presume IP rests with the
funding body.
4
Productivity Commission, op. cit, p. 28
Submission to Commonwealth Financial Accountability Review
February, 2013
Recommendation: Government-funded contracts for community services should preserve the
independence of funded organisations with specific regard to intellectual property, independence
of media and other public statements, and of financial arrangements, except where there is a
specific public interest otherwise.
4. Accountable Performance (Chapter 4)
As we submitted to the PC study5, ACOSS and its members strongly support the need
for transparency and accountability in the delivery of community services, including but
not limited to the effective use of Government funds for the clients and communities
that access government-funded services.
Government continues to use competitive tendering as the framework for many
government-funded programs involving charitable community services and NFPs,
contending that processes such as competitive tendering improve transparency and
accountability. However, our sector’s experience is that such contracting processes can
lead to onerous and unnecessary reporting requirements, often at the expense of useful
performance measures and the potential for collaboration across the sector.
Competitive tendering often undermines collaborative work, which is vital to achieving
good social outcomes and value for money. The tendering process for Medicare Locals
is one such example where the model for funding risks fracturing the relationships upon
which the program’s effectiveness depends.
Recommendation: Competitive tendering and contracting processes should be reformed to
foster, not undermine, collaborative work in the community sector.
ACOSS and other sector organisations have long advocated for reforms to contracting
and program evaluation that focus on outcomes and impact, rather than inputs and
outputs, including through sector submissions to this Review.6 Similarly, the PC was
concerned that a focus on inputs and outputs could understate the sector’s
contributions, to which we would add the risk of undervaluing that contribution. To
remedy this, the PC study recommended that qualitative and proxy measures (such as
outcomes and impact) be applied when a dollar value cannot be assigned.7 While this
approach is being taken up in some areas, it is not yet consistent across all areas of
Government.
Where reporting requirements continue to place significant administrative burden on
charitable and NFP organisations, Government funding of services needs to compensate
for the cost of meeting these requirements. Program funding should also include
5
ACOSS (2009) Submission to the Productivity Commission, ‘Study into the Contribution of the NFP sector’, Australian Council of
Social Service, http://acoss.org.au/images/uploads/ACOSS_submission__PC_Study_into_the_Contribution_of_the_Not_for_Profit_Sector.pdf
6
See submissions from the Australian Centre for Philanthropy and Not-for-Profit Studies, the Community Council for Australia, the
Not-for-Profit Reform Council and UnitingCare Australia.
7
Productivity Commission, op. cit., p. 36.
ACOSS submission to Commonwealth Financial Accountability Review
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Submission to Commonwealth Financial Accountability Review
February, 2013
provision for evaluation.8 Many NFPs and charitable organisations who responded to
ACOSS’ Community Sector Survey 2012 were already struggling to cope with the
demand for their services.9 It is imperative that reporting requirements do not further
redirect resources from this vital service delivery.
Rather than simply regarding performance measures as a method through which
compliance is achieved, measures can also be formulated to build organisational capacity
and enhance the performance of charitable and NFP organisations who deliver programs
that are integral to the realisation of policy objectives.10
Recommendation: Government should work in collaboration with charitable and NFP
organisations to develop measures of program effectiveness that simultaneously support the
independence of the sector; value the sector’s experience and expertise; and guard against
unnecessary and overly onerous reporting processes.
The position paper makes a welcome acknowledgment that government funding
processes and the current culture of risk aversion can stifle innovation.11 We re-iterate
our recommendation to the PC that governments should dedicate a percentage of
community service program funding (possibly 1%) to an innovation fund or pool. For
example, the Department of Education, Employment and Workplace Relations has
previously established an Innovation Fund to which it allocated $40m, or approximately
0.8% of the total $4.8 billion over three years, from its Job Services Australia contracted
services for the unemployed. Another option would be to allocate a percentage of the
Future Fund for innovation. An innovation fund or pool would have clear objectives and
outcomes, but would enable considerable flexibility around how these were achieved. It
would need to factor in a percentage for failure, the price we expect to pay in science,
health and business to get leaps of innovation which may ultimately pay off many times
over.
In light of recent reviews into the access to capital by charities and NFPs including the
Productivity Commission’s ‘Study into the Contribution of the NFP sector’ (2009) and
the Senate Inquiry into Finance for Social Organisations (2011), ACOSS also
recommends low interest loans or no interest loans for capital infrastructure.
Recommendation: Government should establish an innovation fund constituting 1% of the
program funding available for community services in Australia.
8
UnitingCare Australia (2012) Submission to the Commonwealth Financial Accountability Review,
https://cfar.govspace.gov.au/files/2012/03/No.15-Uniting-Care-Australia.pdf, p. 5
9
ACOSS (2012) Community Sector Survey,
10
See for example recommendations in Community Council for Australia (2012) Submission to the Commonwealth Financial
Accountability Review, https://cfar.govspace.gov.au/files/2012/03/No.-50-Community-Council-for-Australia.pdf, p. 5
11
At page 29.
Submission to Commonwealth Financial Accountability Review
February, 2013
5. Engaging with Risk (Chapter 5) and Earned Autonomy (Chapter 6)
The position paper recommends a shift to a ‘risk smart culture’. Through our
membership of the NFP Reform Council, ACOSS has been working on the development
of a Risk Management Framework to advise good practice in Commonwealth risk
management as part of the CFAR review (see Annexure A). A key element of this advice
recognizes that risk is not necessarily increased with greater financial value; often
organisations bear greater risk when they seek to do too much with too little funding.
The Framework highlights the cost of getting contracting processes wrong as both
financial and outcome risks for government, contracted organisations and the intended
recipients of services.
Risk is often seen to be mitigated through shorter contracts, smaller funding amounts
and increased reporting requirements. Yet for charities and NFPs these are often
elements of high risk, particularly where the funding does not meet the true cost of
delivering a service or reporting requirements. Shorter funding periods can increase the
risk that policy goals remain unfulfilled, ignoring the time it takes to establish a program,
recruit staff and build trust and relationships within the community. Shorter funding
periods can also distract from service delivery, with organisations focused on
renegotiating funding and staff recruitment.12 Maintaining trust and continuity is critical
to achieving outcomes and providing the foundation for change.13 Notwithstanding the
efforts to improve the approach to risk in Government funding programs, there
continues to be considerable concern that Government contracts shift a significant
burden of risk to community services without adequate compensation, thereby
undermining the effectiveness of the services themselves. As the Risk Management
Framework submissions outline, risk should be borne by the party most able to manage
it. Government contracting should aim to ensure the effectiveness of the activities being
funded, including the organisation’s capacity to meet its responsibilities appropriately
and reasonably. While we can never achieve zero risk, Government should support
NFPs and charities to better assess and manage risks through a framework that
encourages a range of risks (not just financial) to be identified and discussed ‘up front’ at
the commencement of a program.14
Recommendation: Government-funded contracts should ensure that the risks of delivering
funded services are borne by the party best able to shoulder them; and that community services
are funded appropriately to bear these risks where that is required.
One concern with the risk-based approach is that risk becomes a self-perpetuating
framework. Charities and NFPs are increasingly interested in alternatives to risk
frameworks, such as strengths-based approaches that are used in a whole range of
activities across the community sector, from models of governance to service delivery.
The following case study illustrates this point.
12
Not-for-Profit Reform Council, op. cit., p. 9
Productivity Commission, op. cit, p. 15
14
Not-for-Profit Reform Council, op. cit., p. 9
13
ACOSS submission to Commonwealth Financial Accountability Review
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Submission to Commonwealth Financial Accountability Review
February, 2013
Crossroads is a community-based bushfire recovery program in Victoria. Crossroads
works to facilitate social participation, inclusion, economic independence and resilience
in individuals to enable them to recover from the bushfire. The program uses a
strengths-based approach which builds on what people have achieved, even if
survival is the main achievement. Staff assist clients in setting goals for their recovery
and continuously update goals as circumstances change.15
The position paper aims to ‘improve accountability and performance through managing
risk not through increasing control’.16 It sets out an ‘earned autonomy’ model, which
would run through a ‘core set of minimum requirements across all entities and varying
those requirements based on the risk profile of an entity’.17 ACOSS seeks clarification
on what these requirements would be and how they would take account of the
significant differences in organisational and program capacity.
Previously, the Commonwealth Government has advocated for a strengths-based
approach in terms of disrupting cycles that perpetuate disadvantage and social exclusion.
For example, the Australian Social Inclusion Board (the Board) recognised this approach
as an organising principle which focusses on the ‘untapped gifts, positive attributes and
underdeveloped capabilities of people’.18 As the Board rightly notes, a strengths-based
approach recognises and amplifies capabilities and potential for positive growth, rather
than focusing on limitations or ‘negatives’.19 Such a strategy is highly transferrable and
could become the framework through which Government worked with funded
organisation to identify and respond to risk.
The discussion of ‘Finance as the Commonwealth CFO’ is also interesting to consider in
the context of community services. How might such a model of government apply in the
context of government-funded charities and not-for-profit organisations? Undoubtedly,
it would require Finance engaging with this sector to the extent that it currently engages
with the business community. Such engagement would be timely in any event, given that
the NFP sector generates 5% of GDP and 8% of employment and is therefore a major
force across the landscape of Australian industries. It is also a vital engagement to shore
up the effectiveness of government funding in terms of the social outcomes such funding
seeks to meet, such as those discussed in chapter 7 of the position paper.
Recommendation: Government should engage with the charitable and NFP sector in the event
that the pursues the model of ‘earned autonomy’ and of establishing the Department of
Finance in the role of CFO.
15
Salvation Army (2011) Response to the Green Paper, ‘Towards a More Disaster Resilient and Safer Victoria’, Victorian Government
Department of Premier and Cabinet, emphasis added, http://www.dpc.vic.gov.au/index.php/featured/reforming-victorias-crisis-andemergency-management-framework/submissions-to-the-green-paper-towards-a-more-disaster-resilient-and-safer-victoria
16
Commonwealth Financial Accountability Review (2012), Position Paper, ‘Sharpening the focus: a framework for improving
Commonwealth performance’, http://www.cfar.finance.gov.au/files/2012/11/cfar-position-paper.pdf, p. 23
17
Ibid
18
Australian Social Inclusion Board (2010) Strengths-based approaches to service delivery,
http://socialinclusion.gov.au/sites/www.socialinclusion.gov.au/files/publications/pdf/Strengths-based_Approaches_June2011.pdf, p. 1
19
Ibid.
Submission to Commonwealth Financial Accountability Review
February, 2013
6. Joining Up (Chapter 7)
The PC report notes that, while governments like to talk about working in partnership
with charities and NFPs in the delivery of community services, in fact these relationships
are rarely equal and rarely involve shared accountability.20 The position paper’s
discussion of ‘Dual and Multi-Party Accountability’ raises some operational questions in
this context. Given the tendency for government funding to come with strings attached
that undermine sector independence, this approach to accountability could be
problematic for charities and NFPs. Any policy needs to recognise explicitly the sector’s
independence and the value of its expertise in the areas in which it is funded. We
welcome the Government’s commitment to make this explicit through forthcoming
legislation. ACOSS has also been preparing a guide to develop the expertise of sector
organisations in contracting principles and the skills to assert them, thereby maintaining
their independence while ensuring other positive outcomes from Government contracts.
The move towards best practice principles in Government grant-making is welcome and
recognises there is room for improvement. These guidelines refer to grants being guided
through ‘outcomes orientation’, measured by ‘changes effected in the community’ (p18);
and further, highlight the importance of ‘effective consultation, leading to a shared set of
understandings and expectations, (which) will help achieve more efficient and effective
grants administration’ and where ‘it is important to consider the needs and interests of
grant recipients’.21 Nonetheless, a cultural shift within Government is necessary to
encourage grant administrators to value and strengthen relationships with funded
organisations, rather than focusing strictly on compliance. Strong relationships are
integral to the functioning of the charitable and NFP sector from both a direct and
indirect service delivery perspective. For Government, such relationships can assist with
the early identification, disclosure and management of risk. Recruitment and training
should also be focused on skills that can assist grants administrators to work
collaboratively with organisations.22
ACOSS strongly supports the ‘report once, use often’ reporting framework adopted by
the Australian Charities and Not-for-Profit Commission and which informed further
work with Commonwealth agencies about the extent to which they require reporting
from funded community organisations. In addition, we encourage work to ensure
greater consistency in acquittal processes across the Commonwealth.
To discuss this submission further, contact ACOSS Deputy CEO Tessa.BoydCaine@acoss.org.au.
20
Productivity Commission, op. cit, p. 309.
Ibid, p.21.
22
Not-for-Profit Reform Council, op. cit., p. 10
21
ACOSS submission to Commonwealth Financial Accountability Review
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