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Salvos fired at charities

By Dale Renner - posted Thursday, 30 May 2013

As the Coalition gears up for government in September, and amidst the eagerness to reduce budget deficits, it was only a matter of time before the social sector was in the sights of small government apologists. Four major accusations are being used to question the funding of the social sector. These shots are wide of the mark, and deserve a critical response.

Claim 1: 'Charities are too highly government funded'

The first claim is that social organisations should get less money from government and more from donations. The challenge is: who is going to give it? Only 10% of financial donations in Australia goes to social and community services (the rest goes to sports, arts, health, churches, etc.) - that's a mere $570m or so, out of a nearly $1.3 trillion dollar annual GDP, about one twentieth of one percent. Each person in Australia buys the equivalent of 4 editions of the Big Issue, and that's it, we're done giving to social organisations for the year. (Source: FAHCSIA (2005) Giving Australia; RBA)

Those worried about the proportion of government funding for the social and community sector would be well advised to spend their efforts on raising the percentage of individual and corporate incomes donated to social organisations. The ethicist Peter Singer in his book 'The Life You Can Save' suggests about 2-5% of income for middle income families should be donated ( - yet the average family is far from this level.


In addition, funding to social organisations from governments is not via donation, but through precise contracts to deliver services. Over time, social organisations have proven they are often better (cheaper, more effective and accountable) at delivering social services than government departments delivering those services themselves.

Claim 2: 'Charities lobby government for more government'

Critics of charities have claimed that the purpose of charities' advocacy is to increase government spending. This is an ill-informed view. The social sector's main advocacy is about the natureof social policy - the laws and processes government should put in place to the benefit of vulnerable people such as improving child protection systems for the benefit of children, or reducing service duplication. Some advocacy is about arguing for a greater allocationof funds to social causes, for example to address mental health or homelessness. Often the social sector argues for lessgovernment through consolidation of state laws, e.g. through the Australian Charities and Not-for-Profits Commission - the intent is to have one regulator, reducinggovernment and cost.

Claim 3: 'Some do little or no charity work'

Small government apologists are worried that some social organisations don't deliver direct services to people in need, but do advocacy instead. First of all, a pure advocacy organisation does not receive DGR status (tax deductibility for donations), so many survive off membership income and volunteer effort, not donations. The recent Aid/Watch High Court decision recognises that advocacy is a legitimate part of social service (or 'charity') work. 'Speaking truth to power' has a long and distinguished tradition, from the anti-slavery movement, to universal suffrage, to transparency in government. Excluding social organisations from advocating for system improvements would be anti-democratic and would lead to poorer outcomes for disadvantaged people. A strong social sector that speaks its mind is a check on misuse of government power and poor resource allocation decisions.

Claim 4: 'Some charities do little good'

This final claim is easy to make because it is so hard to verify. Certainly many social organisations have a huge impact, and some less so - the challenge is to know which ones provide the best solutions to which problems. And it is in the interests of the best social organisations and funders to prove this.

In contrast to commercial measures of outcome (e.g. sales and market share as a measure of consumer preference), social outcomes are fiendishly difficult to measure. This is not to say we shouldn't try and measure them - on the contrary, measuring social outcomes is one of the most important tasks for progress in the social sector. Experiments with new funding vehicles such as social impact bonds are being watched with great interest. Innovative social financiers like Foresters and research bodies like the Centre for Social Impact, among others, are experimenting with and sharing improvements in outcome measurement.

The holy grail is to be able to measure the marginal benefits of one service solution (regardless of who provides it) compared to the next best solution. Donors and governments want to know where they can put their dollar that has the highest marginal benefit for a given social problem. Once we know that, the social services will start to emulate the clear feedback loop that exists in commercial markets. Money will flow to the highest impact programs, increasing overall impact for a given funding stream.


So, while most charities do great work, we need more effort (and dare we say, funding) on innovation and measurement to help improve productivity in the social sector.

In a world of budget deficit combat, those working for better outcomes for disadvantaged people will increasingly be called on to justify their funding and tax benefits. The social sector will need to defend itself and the value it creates with one hand, while working hard to improve its measurable social impact with the other.

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About the Author

Dale Renner is a management consultant who advises large and small organisations in the social sector on strategy and innovation, and a Board member of the Victorian Council of Social Service.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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