Look how far we’ve come: Charities

“While the sector has doubled in size in the last 10 years, it has also become much more competitive and survival can mean charities drift from their primary purpose in order to pursue income opportunities.”

What a difference two decades make. A charity space shackled with red tape in 2000, and lacking even a legal definition of its powers and purpose, has transformed  into a vibrant sector with an effective regulator and legally-enshrined advocacy rights.     

But the past 20 years have also had plenty of trials. As the number of charities has grown, so too has the sector’s reliance on government funding. This in turn has increased the scrutiny on charities to be effective, as more organisations are forced to compete for fewer resources.   

Along the way, the sector has had to fight to make its voice heard, protect its constituents, and maintain the public’s trust. And that was all before the COVID-19 pandemic struck.   

As Pro Bono Australia celebrates its 20th birthday, we are examining how far the social sector has come since 2000. Here we take a look at charities, and the major changes that have shaped the sector so far this millennium.            

That was then                         

Back in 2000, there were around half as many charities as today. But those that did exist were much more visible. This was due not only to the sector being smaller, but also to the fact that it operated in a less fragmented media landscape. It was much easier to get your message across when audiences of hundreds of thousands tuned in daily to mainstream news services on television and radio to find out what was going on. 

On the downside, the sector was shackled with red tape. To get a charity registered could take months. The paperwork was epic. Back then, the prime regulator of charities was the Australian Taxation Office: if you wanted to qualify as a tax deductible charity, or even prove you were a charity at all, you’d have to show a letter from the ATO. So whether you were renting a community hall for charities, claiming a payroll tax deduction from the state government, or applying for funding from a philanthropic trust, you’d need time, patience and ATO documents to establish your bona fides.

As the head of the Community Council for Australia, David Crosbie, puts it, the whole situation was “woefully inadequate”.

This is now

Today there are almost 58,000 charities in Australia. That’s one for every 422 Australians. Never before have we had a higher ratio of charities to potential donors. 

These days, regulation for the sector is managed through the Australian Charities and Not-for-profits Commission (ACNC). This allows for all a charity’s basic data around who they are, their purpose and financial details to be viewed and shared easily. Despite early concerns that the ACNC would only add to the mountain of red tape, the commission’s reporting requirements proved to be quite modest and helpful in terms of building up useful and accurate data about the sector. 

The past two decades have also seen an important shift in the way charities are funded. A 2016 JBWere report found that charities were increasingly reliant on government support to stay afloat. Between 1996 and 2016 the average proportion of a charity’s income made up of government funding rose from 30 to 38 per cent. 

A key reason for this change has been a surge in government outsourcing to NFP organisations, with governments increasingly funding charities to undertake government services, particularly in areas such as disability, poverty alleviation and community housing.     

It means Australia differs from other similar countries in the way that NFPs enjoy substantial government and commercial income but relatively low levels of philanthropy. 

These days, there is a high level of scrutiny, with charities expected to report on exactly what they are doing and achieving. This includes a much stronger focus on impact measurement than in 2000.  

The turnaround saw The Smith Family lauded in 2016 for their rigorous measurement of the social impact of their Learning for Life program, which tracked school attendance, Year 12 completion and post-school engagement in education and employment. This let the charity accurately assess the program’s performance, as well as to refine its approach based on the findings.

That said, this focus on measurement brings its own challenges, based partly on doubts about the efficacy and cost of the process, and partly on fears that it serves to distract the sector from its primary goals (see Challenges, below) .  

See also our timeline showing the key events of the charity sector from 2000 to now

Challenges 

The proliferation of charities in the past two decades has created new issues, with growing pressure in recent years for organisations to consider mergers. Research in 2015 found close to a third of Australia’s charities discussed merging in the previous year.

Measurement also remains a contentious issue. 

David Thompson AM, former chair of the National Roundtable of Nonprofit Organisations, tells Pro Bono News the industry has a wide variety of different approaches to measuring impact, meaning the findings may be inconsistent and not all that accurate, as well as costly. Some sector members also fear that the focus on indicators such as the number and cost of services provided by individual NFPs  risks diverting time and attention from more significant outcomes. 

The CCA’s David Crosbie warns of a growing commodification of charity services. 

“We’re not really being asked to count how many communities we change for the better, or how many long-term changes are achieved in people’s lives, because we’re focused on delivering a commodity,” he tells Pro Bono News.

The reliance on government funding has proved a key challenge for the sector.

One concern is that as charities become more reliant on governments for support, they become less likely to speak out on political issues that could jeopardise their funding. This feeds into an ongoing battle over the issue of advocacy and the sector’s right to speak out in support of marginalised communities when that position is counter to the government’s.

Pro Bono Australia’s Civil Voices report in 2017 found that charities felt pressured to take a cautious approach to advocacy, to protect against the threat of funding cuts and/or political retribution. More than half those surveyed for the report (53 per cent) believed NGOs were pressured to amend public statements to match government policy, and 69 per cent believed dissenting organisations risked having their funding cut.

Another emerging issue for the sector is that of public trust. The sector cannot thrive if the public is distrustful of charities and trust levels in the sector have fluctuated in recent years. According to the Edelman Trust Barometer, the public’s trust in Australians charities fell in 2018, rose in 2019 and dipped again this year. 

The erosion in trust came into sharp focus early this year over the Red Cross’s handling of its bushfire donations amid public questions about its accountability and administrative costs. Whatever the realities (including that disaster relief is complex and costly) the issue highlights that the sector cannot take the public’s support for granted. 

A new research finding that Australians believe NGOs are ethical but falling short on competence, also suggests that charities face an uphill battle in proving they are as capable as the business sector. 

Achievements

It may not sound glamorous, but the establishment of the ACNC in November 2012 was a massive achievement for the sector. Finally, after years of uncertainty, charities had had an effective, efficient, representative regulatory regime. Two years later when the Abbott government tried to abolish the fledgling regulator, the sector fought back in a strong show of support, forcing the Coalition to backtrack. 

Another big win for the sector was the establishment through the Charities Act 2013 of a clear legal definition of a charity – one that included advocacy as a core activity for NFPs. Again, charities had to fight to protect their hard-won status when in 2017 the federal government’s foreign donations bill threatened to curtail the sector’s advocacy rights by broadening registration and disclosure requirements for non-party political actors including charities.

The sector led a long, and ultimately successful campaign to amend the bill arguing it would stifle advocacy and impose unnecessary red-tape on many NFP organisations.

What’s next

The Community Council for Australia, along with its members, is developing a blueprint for the future of the sector.

Crosbie says this will be used as a launching pad for a major campaign promoting the value of charities in Australia. “I think the more we can have charities valued, the less vulnerable they’ll be, and the more they’ll be fulfilling their purpose,” he says.

Thompson adds that he’d be keen to see a review of civil society in Australia, similar to the one that took place recently in the UK, which would let charities chart their own course for the future, rather than having it set for them. 

The sector will also have to deal with the fallout of the COVID-19 pandemic, which has had a devastating impact on charities. NFPs have faced funding cuts, job losses and fundraising shortages in 2020, with fears many charities will struggle to survive.  

How charities emerge from the chaos will determine the trajectory of the sector in the years to come.  

This article is part of a series looking at how far the social sector has come since 2000.

Read our introduction to the series: Look how far we’ve come.

See the full series here: 20 years of social change