Chapter 1 - Introduction
In this section:
- 1.1 Background to project
- 1.2 Reference Group
- 1.3 Project objectives
- 1.4 Methodology
- 1.5 Defining the not-for-profit sector
- 1.6 Defining community business partnerships
- 1.7 The Australian context
- 1.8 Chapter summary
Background to project
The Department of Families, Housing, Community Services and Indigenous Affairs (the Department) commissioned the Centre for Corporate Public Affairs (the Centre) to undertake a major study into not-for-profit (NFP) organisations and business community partnerships in late 2007.
This follows two previous reports — Corporate Community Involvement: Establishing a Business Case (Centre for Corporate Public Affairs 2000) and Corporate Community Investment in Australia (Centre for Corporate Public Affairs 2007)— thatwerecompleted by the Centre in conjunction with the Business Council of Australia. These two reports have already been highly influential in the way government, business, and the not-for-profit sector have come to think about the issues around community investment. It would be most constructive for this current report to be considered in conjunction with the 2007 study.
The 2007 report investigated trends in corporate community investment and concluded that business activity continues to increase and deepen.
This form of business engagement with the community was described as ‘corporate community investment’ because it reflects engagement with the community as a core business activity, and the fact that it is accorded strategic importance in the business sector.
The Centre expects this report into not-for-profit and business community partnerships will further inform development of policy in this area. The report will also assist NFP organisations and businesses develop and maintain more effective community partnerships.
Reference Group
A Reference Group was established to guide the research phase of this report and act as a ‘sounding board’. Three meetings were held with the Reference Group to obtain feedback and guidance on the scope of inquiry, research methodology, trends and recommendations. While the Reference Group provided helpful advice, the findings, conclusions and recommendations are the responsibility of the Centre for Corporate Public Affairs.
The Reference Group comprised:
- Geoff Allen, Chairman, Centre for Corporate Public Affairs
- Mark Anderson, Chief Executive Officer, Fairbridge Western Australia Inc
- Elaine Henry OAM, Chief Executive Officer, The Smith Family
- Mandy Hillson, Senior Manager, Business Engagement in the Community, Prime Minister’s Community Business Partnership, Department of Families, Housing, Community Services and Indigenous Affairs (on Reference Group until May 2008)
- Chris Mangin, Chief Executive and Artistic Director, Opera Queensland
- Kym McConnell, Senior Manager, Community and Business Engagement, Community Support Programs Branch, Department of Families, Housing, Community Services and Indigenous Affairs (on Reference Group from May 2008)
- Fergus Ryan, Director of Commonwealth Bank of Australia, Australian Foundation Investment Company, and other companies
- John Simpson, Group General Manager, Corporate Affairs, National Australia Bank.
Project objectives
This research project builds on the findings of the 2007 report into corporate community investment, and explores the not-for-profit sector’s experience of, and interaction with, the business sector.
The study seeks to understand how to better facilitate business engagement with not-for-profit organisations, and optimise the contribution of business to the work of the NFP sector. While the report focuses primarily on large business engagement with NFP organisations, the importance of small and medium businesses is also canvassed.
The study:
- examines differences in expectations and comprehension of corporate community investment in the NFP and business sectors
- highlights perceived positive and negative forces on partnership activity
- identifies existing barriers to successful partnerships
- focuses on current trends and future developments.
The study also seeks to understand how to:
- strengthen partnerships and relationships between the NFP and business sectors
- leverage the modus operandi of the NFP sector to enhance interactions with large businesses.
Methodology
The study incorporates research from four sources — literature review, online survey of NFPs, national qualitative research workshops of NFP organisations, and individual consultations with senior NFP executives.
Literature review
The Centre conducted a review of Australian and international research into the not-for-profit sector and business community partnerships. The literature review provides the theoretical foundation for this report, from which definitional issues are clarified. It identifies international trends in business community partnerships and best practice. Sections of the literature reviewed in this report have been made available separately to the Department of Families, Housing, Community Services and Indigenous Affairs.
Online survey
The Centre developed and managed an online survey of Australian not-for-profit organisations to capture the views of a broad range of organisations, particularly those unable to attend the workshops (due to timing, workload, or geographic constraints).
The online survey was open between 26 February and 9 May 2008. To ensure confidentiality and optimise frankness of responses, Values Bank Research, an independent market research firm, was commissioned by the Centre for Corporate Public Affairs to host the online survey. Hard copy surveys were also despatched on request.
The survey was distributed to more than 900 not-for-profit organisations. The online survey web-link was also disseminated through the newsletters of Our Community and Pro Bono Australia, and information about the survey circulated by Fundraising Australia. One hundred and fifty three NFP organisations completed the online survey.
Nearly half of 153 not-for-profit organisations that participated in the Centre’s survey employ less than 10 full-time (or full time paid equivalent) staff. A further 31 per cent employ between 10 to 99 full-time staff. About 24 per cent of respondents employ more than 100 full-time staff.
Fig 1.1: Employment Demographics
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2008.
The survey population included organisations identified in the Centre’s Corporate Community Investment in Australia report, not-for-profit organisations that have received Department of Families, Housing, Community Services and Indigenous Affairs funding, and Australian NFP organisations listed on websites, directories and other databases.
Not-for-profit organisations that participated in this research range from those with a local community focus, to national and international NFP organisations operating in Australia.
Following discussions with our government sponsor, the Centre’s survey excluded religious organisations (per se), private schools, organisations exclusively or predominantly focused on advocacy, sector peak councils and major sporting bodies not focused principally on community recreation.
Workshops with not-for-profit organisations
The Centre for Corporate Public Affairs convened research workshops in Sydney, Melbourne, Canberra and Perth. The workshops were structured to prompt discussion between not-for-profit organisations of differing size, operating across various sectors, and were facilitated to interrogate issues identified in the literature review.
The discussions and insights from the research workshops are reported and cited in this study.
Individual consultations
The Centre for Corporate Public Affairs consulted also individually with a number of not-for-profit organisations, including relevant peak bodies. These consultations provided further insights into the NFP sector, and allowed us to interrogate findings from the online survey and group workshops in depth.
Further individual consultations were conducted with smaller not-for-profit organisations that were unable to attend a research workshop.
Defining the not-for-profit sector
Existing literature internationally and in Australia uses a plethora of different terms to refer to the not-for-profit sector.
Commonly used references include ‘non-profit’, ‘civil society’, and ‘the third sector’, and are described as ‘community’, ‘voluntary’, ‘independent’, or ‘non-governmental’.
The use of these terms is not consistent, and terms are often used interchangeably, referring to different groupings of organisations.
For clarity, this report uses the term ‘NFP organisation’ to refer to not-for-profit organisations.
The term ‘organisation’ is chosen over ‘institution’ because it is more relevant to the Australian domestic context.
In this report, the terms ‘NFP organisation’ and ‘not-for-profit organisation’ are used interchangeably with the phrase ‘NFP community organisation’. The focus should be on the term ‘not-for-profit’. Box 1.1 examines an internationally accepted definition of a not-for-profit organisation.
DEFINITION OF A NOT-FOR-PROFIT ORGANISATION
Anheier and Salamon have developed an internationally accepted definition of a not-for-profit organisation. This definition has been adopted by the United Nations Handbook on Non-profit Institutions in the System of National Accounts, developed by the United Nations Statistics Division, and the John Hopkins Center for Civil Society Studies.
According to this definition, a NFP organisation:
- has an organised structure
- is institutionally separate from government
- reinvests all profit into the core mission of the organisation
- is self-governing
- has voluntary membership only.
Source: Anheier & Salamon 1998, p. 216; United Nations 2003, pp. 4-5 & 15-20.
Defining community business partnerships
Internationally, the term ‘partnership’ refers frequently to NFP-business relationships with the highest level of involvement and integration of resources, though some organisations use the term to describe any kind of NFP-business relationship.
The former Australian Prime Minister’s Community Business Partnership defined a community business partnership as:
A situation ‘where one or more businesses and one or more community organisations, having common goals, agree to work together to share and leverage the strengths, resources, talents and knowledge of each other in ways that benefit both business and the community’.
Social Compass 2005, p. 2
Chapter 2 of this report covers the trend in recent years for business and NFP organisations from historical relationships that were often of a financial nature to move towards more dynamic and sophisticated relationships. We focus on the interactions between business and NFPs that are defined as partnerships. However, we recognise that this describes a wide range of relationships on a continuum from funding relationships to full integration.
This report focuses on the experiences of not-for-profit relationships in working with business. We note that in some cases business and NFPs are also partners with government.
The Australian context
This section examines activities undertaken, sources of income, and employment generated by, the not-for-profit organisations that participated in this study.
It is not within the scope of this report to undertake a comprehensive study of the scale and characteristics of the not-for-profit sector in Australia. Numerous government, academic, and consultancy studies have documented these recently. Box 1.2, however, provides a brief overview of the size and other characteristics of Australia’s NFP sector. It incorporates recently released ABS data.
SIZE OF THE AUSTRALIAN NOT-FOR-PROFIT SECTOR
The Australian Bureau of Statistics released new data on the not-for-profit sector in August 2008. This represents a significant, but not exhaustive, contribution to the collected data on the Australian NFP sector.
There were 40 976 not-for-profit organisations operating in Australia in the 2006-2007 financial year. Culture and recreation organisations accounted for 20 per cent of this total.
The sector employed 884 476 individuals, mainly in social services (which accounted for 27.2 per cent of total employees) and education and research organisations (24.4 per cent). Full-time employees accounted for 40.8 per cent, while part-time and casual employees 33.5 per cent and 25.7 per cent. Significantly, there were 2 434 815 volunteers during the 2006-2007 financial year.
During the 2006-07 financial year, the not-for-profit sector received $74.5 billion in income. Industry value added by these organisations was $35.1 billion, and capital expenditure was $8.5 billion for the same period.
The main source of income for these organisations was funding from federal, state and local government, which accounted for 34.1 per cent, or $25.4 billion, of total income. This funding was primarily received by education and research and social services. It should be noted that 68.1 per cent, or $17.3 billion, of total government funding was volume based, meaning it was granted on a per student or a per client basis.
The Giving Australia report (2005) indicated that total business giving to the NFP sector amounted to $3.2 billion in 2004. Community and welfare services attracted the largest share of business giving, receiving 30.5 per cent of total giving. The health sector (including medical research) and sporting and recreational groups receive 18.5 per cent and 17.7 per cent respectively.
Source: DFCS 2005; Australian Bureau of Statistics 2008.
Figure 1.2 illustrates the range of activities undertaken by the not-for-profit organisations that completed the Centre’s online survey. Most respondent NFP organisations work in areas relating to children, education and training, and youth. Interestingly, only 6 per cent focus primarily on environment and conservation — though this is an area that many NFPs in workshop research for this report believe community interest has shifted to markedly.
Fig 1.2: Major not-for-profit activities
Survey question: Please select the major classification that best characterises your organisation’s activities (more than one may apply).
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2008. Survey respondents were asked to nominate areas of principle activity. More than one category may apply.
The survey indicates also that many not-for-profit organisations receive most of their cash income from government sources (see Figure 1.3). Individual giving is also a large component of the NFP funding mix, while the business sector accounts for a much smaller proportion of their funding.
Government provides, on average, almost half of total cash income for respondent not-for-profit organisations. Interestingly, a third of survey respondents receive between 80 and 100 per cent of their cash income from government.
Based on feedback at workshops, it appears that a substantial proportion of this government support is to assist not-for-profit organisations in delivery of government programs and services.
Other sections in this report highlight, however, that significant volunteer hours and contributions in kind flow to the NFP sector from corporations and the wider community.
Fig 1.3: Sources of cash income (Average percentage of total cash income)
Survey question: Please provide your best estimate of cash income derived from the following sources.
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2008. Some categories overlap so responses do not sum to 100 per cent.
Figure 1.4 suggests limited government contribution to business community involvement initiatives with participant NFP organisations. Of the 38 per cent of NFP organisations creating a community involvement activity or structure as a vehicle for corporate involvement, only 11 per cent received government funding for such an initiative.
Fig 1.4: Government support for corporate community involvement initiatives
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2008.
Not-for-profit organisations use significant resources to seek further support (in cash or in kind). Figure 1.5 illustrates results from the Centre’s survey regarding the resources NFP organisations use to support specific initiatives, as a percentage of the total annual budget.
Fig 1.5: Seeking further support
Survey question: Of your annual budget, what proportion of resources is used to secure support for the following:
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2008. Some categories overlap so responses do not sum to 100 per cent.
Chapter summary
- The terminology ‘not-for-profit organisation’ or ‘NFP organisation’ is used interchangeably
- Internationally, the term ‘partnership’ refers frequently to NFP-business relationships with the highest level of involvement and integration of resources, though some organisations use the term to describe any kind of NFP-business relationship
- One hundred and fifty-three NFP organisations participated in a quantitative survey for this report. Almost half employ less than 9 FTE staff. Almost one-quarter employed more than 100 FTE staff. The Centre also conducted research workshops with NFP organisations in Perth, Melbourne, Canberra and Sydney and conducted interviews with not-for-profit organisation senior executives
- Most respondent NFPs work in areas relating to children, education and training and youth
- Government provides, on average, about half of NFP funding for the respondents. Corporations provide 9.4 per cent of funding. NFPs spend 15.6 per cent of their annual budget resources to seek support in cash or kind, and 6.2 per cent of annual budget is spent on programs to engage large companies