Productivity Commission Draft Report: The contribution of the not for profit sector

The Productivity Commission is an independent statutory authority, which acts as a research and advisory body to the Australian Commonwealth Government.

The commission undertakes research into areas specified by the Australian Treasurer and is currently commissioned to investigate the contribution of the not for profit sector within Australia.

The commission’s investigations into the sector is being undertaken with the following focus:

  • Improving the measurement of the sector’s contribution to Australia, and
  • Removing obstacles that deter maximising its contributions to society.

In this regard the Commission is to:

  • assess current and alternative measures of the contribution of the not for profit sector and how these can be used to better shape government policy and programs so as to optimise the sectors contribution to society
  • identify unnecessary impediments to the efficient and effective operation of not for profit organisations and measures to enhance their operation
  • consider ways in which the delivery and outcomes from government funded services by not for profit organisations could be improved
  • examine recent changes in the relationships between government, business and community organisations and whether there is scope to enhance these relationships so as to improve outcomes delivered by the not for profit sector
  • examine the impact of the taxation system on the ability of not for profit organisations to raise funds and the extent to which the tax treatment of the sector affects competitive neutrality.

(Source: Productivity Commission – Contribution of the Not for Profit Sector)

The Commission generally follows a two-stage consultation process, with initial submissions responding to an Issues Paper and a second round of submissions in response to a Draft Report.

Syneka contributed to the submission process through the Eastern Volunteers Community Conference and Volunteering Australia which lodged a submission in regard to the Issues Paper.

The Draft Report, which was released on the 15th of October, identified a number of issues facing the not for profit sector, including five key areas required for reform:

  • Developing better knowledge systems
  • Streamlining the regulatory framework
  • Building skills in governance, promoting workforce sustainability and access to capital
  • Stimulating social innovation
  • Building relationships for collaboration and effective engagement

The Commission has recognised different State based regulations as a barrier to larger not for profits that operate within multiple States and Territories.

It is encouraging to see the Commission recognise the significance of the not for profit sector, which contributed $43 billion towards the economy, equating to 4.1% of Gross Domestic Product, in the 2006-2007 financial year. In addition, the sector employs 890,000 staff, compared to 604,000 in the year 2000, making it a significant contributor to national employment.

The Commission has also recognised the social importance of the sector, particularly in regard to service delivery, community engagement and contribution to culture, community and the environment.

The Commission has identified that taxation benefits, such as Deductible Gift Recipient (DGR), impacts significantly on donations, whereby charities with DGR status are at an advantage in receiving gifts and donations. Tax deductibility appears to be a significant contributor to encouraging donations and the Commission has identified the need to broaden the current availability of Deductible Gift Recipient (DGR) status.

The need for harmonisation between State legislation is also recommended so that not for profit organisations will be able to operate within a consistent legislative framework across Australia. This compares with other legislative areas, where State, Territory and Commonwealth Governments have sought to ensure consistency within legislation.

Standardised reporting is another item explored by the Commission, particularly to assist in the measurement of the sector’s contribution to Australia in economic, social and environmental terms.

Importantly, the Commission has recognised the importance of capacity building, with an emphasis on social innovation, governance and sustainability.

The need for good governance and planning has been identified as critical to maintaining the growth of the sector. Likewise, the use of technology in developing innovative solutions and community engagement is another area that requires further exploration.

There is also the recognition that genuine collaboration needs to improve between Government, non-profit and corporate sectors to deliver the full potential for outcomes. In particular, it was highlighted that Government funding should be provided for the defined duration or objectives of a program, rather than on a fixed year allocation. This would provide funding certainty for organisations and ensure that there is adequate time to evaluate projects and achieve self-sufficiency if required.

The Productivity Commission has invited public submissions in regard to the Draft Report which are due by the 24th of November.

The final report will be handed down to the Government on the 31st of January 2010.

While the Federal Government has the final discretion in regard to acting on the recommendations from the Productivity Commission, the findings could substantially reshape the not for profit sector within Australia.

For further information please visit www.pc.gov.au/projects/study/not-for-profit

Alex Makin

Author Alex Makin

In a career spanning over fifteen years, Alex has been instrumental in transforming, reinvigorating and growing the capacity of businesses and not-for-profit organisations. He is a visionary who understands the big picture. Alex's expertise is a Certified Practising Marketer and as Chair of the Victorian State Council of the Australian Marketing Institute. Alex is also an accomplished speaker, author and mentor and former Mayor and Councillor for the City of Maroondah.

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