International Cities Town Centres & Communities Society

ICTC2011 Grand Chancellor Hotel, Hobart, Australia

25 – 28 October, 2011

Is it Above Board? The Diminished Community

Voice in Community Based Welfare Organisations

Dr Suzanne Mutton, University of South Australia Tel: +61 8 87252470; Fax: +61 8 87218951

suzanne.mutton@unisa.edu.au

ABSTRACT In Australia as in other western democracies non-government welfare agencies are faced with significant new responsibilities that impact on their accountability to their government funders. Single stand alone non-government charitable welfare organisations that were established in the 1970s as a result of the Whitlam government’s push to establish community control of community issues are now particularly vulnerable because of the economic rationalist policies of successive governments. This paper will argue that small non-government welfare organisations in rural and regional Australia are being taken over by their city based counterparts and are consequently losing their ability to have a voice in the public policy debate and the types of community services provided. KEYWORDS: welfare organisations; rural; boards of management; competitive tendering; public policy

1. INTRODUCTION There has been a rapid change in the environment for non-government welfare sector organisations in recent years. As a result of government policies, boards of management in the non-government welfare sector in Australia have experienced significantly enlarged responsibilities that have been instigated by successive governments at state and federal levels. In a bid by governments to ensure accountability from non-government welfare organisations they have introduced sophisticated funding and reporting requirements that has created higher expectations of governance provided by boards of management where organisations are required to deliver specific, measurable and reportable outcomes for clients. To compound these expectations, the legislative framework for the non-government sector has expanded in an increasingly litigious environment. ‘Non-government organisations that were once taken for granted as part of the fabric of Australian society now operate within an extremely turbulent, unstable and contested environment’ (McDonald & Marsten, 2002:3).

Higher competition for government funds has created new demands on boards of management (Fishel, 2003). This has coincided with the emergence of competitive tendering for programs and required a demand for a type of service planning that addresses complex client needs and demonstrates a depth of knowledge of the issues facing service users as well as the legislative requirements commensurate with changes in employment standards. These requirements have been particularly difficult for many small, single issue organisations in rural Australia as many of them

that were established in the 1970’s struggle to find boards of management with the necessary skills to provide the new types of governance required. These demands were not present when community organisations and their boards began to proliferate in Australia in the 1970’s. Under the principles of community development ‘power was invested in the consumer by encouraging and supporting them to take collective responsibility for addressing their issues and needs (Kenny, 1999:130). Voluntary agencies have grown apace, both in number and size, as a result of increased reliance by successive governments, on contractual arrangements with non-government agencies, to deliver social welfare services. Such contractual arrangements have become an accepted part of the delivery of social welfare services in Australia (Nevile, 1999). However, in recent years, governments have supported the centralisation of the governance of non-government welfare agencies to create efficiencies, cut costs and provide an element of social control.

2. NON-GOVERNMENT WELFARE ORGANISATIONS Governance of rural welfare organisations is provided by volunteer boards of management whose members comprise interested citizens from local communities. These people, collectively known as boards of management or management committees, give their time to provide governance and support to the non-government welfare sector. They are also the people that have the primary responsibility for the accountability and performance of their organisations (Productivity Commission, 2010). Recent government managerialist policies have created significant issues for the on-going viability of small single issue non-government organisations, particularly in rural areas of Australia. This has been ably demonstrated by the disappearance of many small organisations in recent years as they have been taken over by their larger, often faith-based, city counterparts. The takeover of these local organisations by larger city based organisations has meant that small communities no longer have a voice in the public policy debate, no longer have any input into the types of services that are most relevant to the specific needs of their communities, no longer have local boards of management and no longer have access to the government funders to provide knowledge of particular service needs. There is little evidence and debate in current literature about how the shift from dispersed to more centralised community service models will impact regional communities. This presentation seeks to contribute to the discourse with a view to highlighting a potential policy vacuum that may emerge should alternative channels of information to government policy makers not be re-established with rural community groups.

3. RURAL COMMUNITIES AND THEIR NGO’S When comparing a wide range of social indicators such as health, housing, income, education and employment, rural communities face significant disadvantage when compared to urban ones (Cheers, 1998). Consequently the provision of welfare services to rural communities is particularly important to that population’s well being and provides the welfare services for rural residents that, if not available, would further marginalise them. However, rural communities suffer because of the limited choice of welfare services in many rural regions. The lack of choice of services can impact on the non-government welfare sector when they are constrained to a model of service delivery that limits their flexibility in providing services to clients. To meet

the diverse needs of a rural community, organisations need to have a more generalist approach than their city counterparts to their service delivery (Cheers, 1998; Lynn, 1990). Such an approach should include concepts of ‘interconnectedness, mutuality and reciprocity, interrelatedness, and inter-dependence’ (Lynn, 1990:17) to overcome the lack of specialised services in rural areas. Generalist services are also the most ‘culturally compatible with rural life’ (Lynn, 1990:18). The competitive tendering policy of recent governments does not support this generalist provision of services and has had the effect of marginalising and disenfranchising small rural non-government welfare organisations to the extent that many small organisations are finding it increasingly difficult to operate in an environment characterised by complex legal, operational and financial accountability requirements (Nevile, 2003). This paper will highlight how theories of Economic Rationalism and Public Choice along with Competitive Tendering and other managerialist policies have created a situation where the small single issue rural organisations cannot compete with their large city based counterparts and have therefore lost control of their organisations and the social issues that affect them as the tender guidelines are too specific to meet the generalist requirements of the rural organisations.

4. NEW GOVERNMENT POLICIES 4.1 Economic Rationalism Economic rationalist policies instigated by successive Australian, and other governments in the Western World, have impacted on the non-government welfare sector. The policies have brought the dynamics of the free market place into the way governments fund non-government organisations. They have forced a cut back of the welfare sector and the responsibilities of governments so that the sector is now dominated by market forces. The promotion of independence has ridiculed the welfare state and has questioned the existence of society (Pusey, 1991). Successive Governments in Anglo-American cultures have privatised public assets such as electricity, water and telecommunications, deregulated finance and lowered taxes. They have also made significant cut backs in public services (Rees and Rodley, 1995). As a result the economy is run like a market, and human effort is treated as a commodity. The economic rationalist approach to policy has been established as a management theory by governments. Although economic rationalism can be traced back to Taylorism, (Pollitt, 1993) the current economic rationalist policies are attributed to a reaction to the economic policies of John Maynard Keynes and the Keynesian economic revolution supported by the London School of Economics that prevailed in most democratic countries. Economic rationalist policies were embraced by government leaders of the western world such as Margaret Thatcher and Ronald Reagan as well as their Australian counterparts, Malcolm Fraser, Bob Hawke, Paul Keating (Rees and Rodley, 1995), and John Howard. Economic rationalism has now been firmly established as a management theory that focuses on process rather than content in the delivery of welfare services (Marceau, 1995). Conventional wisdom, according to economic rationalist theory, is that the ‘dictates of the market are both inevitable and desirable’ (Stilwell, 1993:265) where finalthe free market is seen to be superior to government intervention. According to

Stilwell (1993) this economic belief has dominated the debate about economic issues. Although economic rationalism has been criticised for its lack of ethics, its questionable theoretical foundations and the difficulties it creates for workers in the government sector, and the non-government agencies that are required to provide more services with less staff, dissent is discouraged. Those people who do criticise risk being ‘labelled as anti-progressive, unrealistic, insufficiently corporate, uncooperative or all of these’ (Rees and Rodley, 1995:286). 4.2 Competitive Tendering As part of the economic rationalist policies, governments in Australia, since the 1990’s have increasingly used competitive tendering to fund welfare services in Australia (Nevile, 2000). Competitive tendering is the process where the relevant state or federal government department prescribes the type, location and intervention for the delivery of a specific welfare service for a fixed period, and offers a contract for service provision specified in this way. A contract is offered to the non-government welfare sector where the tenderers compete with one another to deliver the service. A contract is awarded by the government to the successful tenderer, and the funding allocated to the agency that then provides the service for the contracted period (Taylor, 1999). Competitive tendering for non-government welfare organisations can be traced to The Council of Australian Governments (COAG) adoption of the Hilmer Report (1993) that was presented at the Independent Inquiry into Competition Policy in Australia (1993) as well as the Industry Commission’s Investigation into Charitable Organisations in Australia (1995) and the Industry Commission’s investigation into Charitable Organisations in Australia ( McDonald 2002:100). There have been many critics of competitive tendering in recent years (Ernst, Glanville and Murfitt, 1997; Harris, 1999; Hodge, 1996; Valentine, 1999; Webster, 1995). Their criticisms are directed at the incongruence of the ideology of competitive tendering based around a market driven, economic rationalist economy and an ideology that promotes self interest for welfare service provision. This is in direct contrast to the ideals of a welfare state where the social welfare of the community is paramount and the community has civil, political and social rights (McDonald, 2002). ‘A feature of competitive models is self interest, which is a principle that does not sit comfortably with providing services for the public good’ (Braithwaite, 1997:38). Competitive tendering is a particular problem for rural areas because of its urbo-centric assumptions related to service delivery in metropolitan areas rather than rural communities (McDonald, 2002). In rural areas multiple service providers often do not exist and the funding models assume a far greater number of service users that are living in a rural or remote region resulting in the service being withdrawn, or not delivered at all, when government specified targets cannot be met (Nevile, 1999). The delivery of welfare services in rural regions needs to be flexible, according to Lynn (1993) and Taylor (1999), who concur that rural welfare practice also needs to be collaborative, a practice that competitive tendering does not allow for. Some other critics of the process of competitive tendering to deliver welfare programs in Australia have claimed that the church based agencies have an unfair

advantage, with their large infrastructure and assets. The concept of competitive tendering for welfare programs may give the church based groups an unfair advantage against other non-government welfare agencies, because of their larger infrastructure and assets. Other criticisms of the churches’ involvement in the provision of welfare services that are funded by the government include arguments against the church receiving government funds include the church’s consequent inability to speak publicly about social issues and therefore the loss of their prophetic voice. One may also question whether the particular Christian values espoused by religious service providers limits service provision in any way, should faith be challenged. Governments need to demonstrate that they are concerned about social issues by funding programs that meet the needs of the community (Moore, 2001). This has not been the case in Australia where the government prescribes the types of services to be provided. This has a significant effect on rural services and also on the larger services, although they are somewhat buffered by their ability to be flexible and to meet the government’s needs. However the United States experience, according to the Salvation Army in Boston U.S. (Loconte, 1997:32) is that in order to receive government funds to deliver welfare programs, the recipients of government contracts have found that their mission becomes broader and less clear. The temptation is to try to make programs fit what the government is prepared to give money for, not what the organisation’s perception of community need may be. This can be problematic when changing governments alter their priorities, and even scrap programs, by no longer funding them. Along with the provision of funds, come government regulations for the delivery of welfare programs. A USA survey (Gregg, 2000) suggests, ‘the demands of such regulations facilitate the expansion of massive bureaucracies. Large numbers of accountants, lawyers and managers are employed by church agencies to ensure that the provisions of such regulations are met’ (Gregg, 2000:3). One church charity director in the United States has stated that ‘what government agencies don’t understand is that the more they regulate us, the more we have to spend what little money we get on business people and secretaries’ (Loconte, 1997:29). This concurs with the findings of Whelan (1999) in a UK study who warns that most government contracts do not make allowances for all core costs and welfare agencies often find themselves having to draw from their own funds to meet hidden overheads. These overheads can escalate rapidly when agencies administer large scale projects that require extra resources, such as offices, equipment and staff. Agencies sometimes find themselves in a worse position financially than if they had not taken on the contract to deliver the government’s services. In addition to the cost implications, small community based providers are unable meet the complex skill levels required for governance expectations and consequently miss out on funding opportunities. McDonald (2002), writing of the Australian experience, warns that competitive tendering increases administration costs because, whether the tender is successful or not, there is considerable time and effort expended by staff members in preparing the tenders and then, if successful, meeting the onerous reporting requirements of the government funders. This further damages the potential for small rural non-government organisations to tender for new contracts and impact their ability to continue service provision.

Another negative aspect of competitive tendering is the lack of cooperation and collaboration between agencies that previously shared resources and information, but now, jealously guard their own interests, programs and intellectual property. Guarding intellectual property is a way of ensuring that their competitors do not gain undue advantage in applying for the next round of government funds to deliver services (Taylor, 2003). This has led to agencies creating a model of service delivery that is separated and uncoordinated, instead of one that is integrated and that complements existing local welfare infrastructure. Competitive tendering has weakened the collective power of the non-government welfare sector as organisations tend to concentrate on their own individual aims and objectives (Lawrence, 1996). In the past rural communities have relied on the collectiveness of all agencies to deliver services, recognising that one agency cannot be all things to all people. Nevile (1999) suggests that there are three major negative consequences of competitive tendering. Firstly she argues that reduced collaboration between agencies has led to the loss of ‘specialised physical, as well as intellectual capital’ which in turn has the result of ‘reducing the quality of welfare services’ (Nevile, 1999:3). She also claims that competitive tendering has reduced the choices for many clients of non-government welfare organisations and has removed access to welfare services entirely for some clients. This is due to the decline of some smaller agencies, particularly in rural areas and the exclusion of some clients because they do not fit the tightened eligibility criteria. Nevile (1999:4) states that ‘the disappearance of rural and regional organisations is of particular concern’. Along with Gregg (2000) and Whelan (1999), Nevile (1999) also argues that competitive tendering has increased the costs to service providers. The Australian Federal Government’s Department of Human Services, (http://www.humanservices.gov.au) as the major funder of the majority of non-government welfare programs in Australia, suggests that much successful innovation arises from the community’s ability to operate outside the limits set by government programs and funding. The Department claims that successful innovation of non-government welfare services can influence government policy. However, according to Lawrence (1996), because of their individual aims and objectives, boards of small community organisations do not influence government policy in areas of common interest, and do not have the power and influence of most of the larger charitable, faith based organisations. Governments, not small non-government welfare agencies, set the agenda for the delivery of services. Ife and Tesoriero (2006) warn of the (then) Australian Government’s propensity to reduce its commitment to spending on welfare services. The non-government welfare organisations can become part of its cost cutting agenda by reducing or withdrawing funds from specific sections of the welfare community to reduce the government’s overall budget on welfare services. Because this is done at a local level it escapes the public gaze. The notion of competitive tendering fits the government’s agenda of ‘Public Choice Theory’ (Staples 2008), where, by necessity, each organisation is acting in its own self interest. Competitive tendering is aimed at ensuring that organisations deliver

welfare services for a cost that fits the government’s budget. It has the effect of eliminating some of the criticisms of lack of accountability, where organisations and special interest groups, are asking for too much of the public purse. 4.3 Public Choice Theory Attacks on the accountability of the non-government sector in recent times have been attributed to the logic of neo-liberal Public Choice Theory’ (Staples, 2008). Public Choice Theory (Arrow, 1951; Black, 1958; Buchanan and Tullock, 1962; Downs, 1957; Niskanen, 1971; Olson, 1965; Riker, 1962), is an economic model of rational behaviour that assumes people are guided mostly by self interest. ‘Although most people base some of their actions on their concern for others, the dominant motive in people’s actions in the marketplace – whether they are employers, employees or consumers – is concern for themselves’ (Shaw 2005). Developed over 50 years ago, Public Choice Theory has only been part of the non-government organisation debate in recent decades in Australia, New Zealand, Britain, and North America (Marsh 2002). The premise is that groups representing the welfare industry, sometimes referred to as the ‘compassion industry’, should be excluded from the public policy debate because they tend to act in their own self interest, rather than for the relief of social disadvantage and poverty (Bennet and Di Lorenzo, 1985:6). Because such groups are unelected they are considered to be unrepresentative of the groups they aim to advance and ‘deliberately exaggerate poverty rates out of self interest’ (Nahan, 1999:2). Rather than representing the interests of the welfare recipients, non-governments organisations are representing the interests of those that work with the welfare recipients – the welfare industry (May, 2001). Staples (2008), viewing a very wide cohort of non-government welfare and other organisations, suggests that current discourses on the accountability of non-government organisations are based on this theory. The premise underpinning the logic is that excessive expectations of the special interest groups, or advocacy groups, are fuelled by self interest (Brittan, 1975). Such groups are perceived by governments to have no budgetary constraint on their demands and therefore governments are expected to deliver their requests without regard for costs: Such excessive demands as outlined by Brittan have attributed to the lack of accountability claims of the government on the non-government sector that, they claim, make demands that cannot be responded to because of economic constraints. Recently governments have claimed that the non-government sector is not accountable (Hewson, 1991; Howard, 1986; McGuiness, 1991; Stone, 1991) and by doing so, reduced the public debate on social issues. Public Choice theorists advocate that actions such as ‘policy advocacy, participation and consultation should be avoided, as they are little more than a ruse designed to disguise the purely self interested motives of the well organised minorities’ (Sawer and Jupp, 1996:84). They claim that power and greater political influence of non-government organisation members is their true motivation. According to Staples (2008) Governments state that only elected representatives of the people are accountable, supporting Olsen’s (1965) claim that special interest groups aim to gain opportunities for themselves at the expense of others. However, as Brennan

(1998:134) points out, ‘those feathering their own nests are among the worst-paid members of the workforce’. Critics of Public Choice theory (Marsh, 2002; Sawer, 2002) explain that governments are shifting the public discourse on social issues by referring to social advocacy groups, or non-government welfare organisations, as special interest groups or elites, claiming such groups are asking for a bigger cut of the welfare dollar at the expense of ordinary Australians. Public Choice Theory has been used as a justification for defunding major advocacy groups in the non-government sector. The Howard Liberal Government ignored the recommendations of the Industry Commission Report (1995) that outlined ways to improve the accountability of the non-government sector. In 2001 the Charities Definition Enquiry proposed that a separate independent commission have responsibility for the overall regularity regime of charities in Australia. Despite having support from the non-government sector for the recommendations of the Industry Commission Report, and the recommendations of the Charities Definition Enquiry, the Liberal Government of the day ignored both reports, even though they were directed at improving the ‘accountability’ of the non-government sector. 4.4 Corporatisation and Change in the Welfare Industry

Although the Howard Liberal Government ignored the recommendations of the Industry Commission’s Report on Charitable Organisations in Australia, by not implementing any of the recommendations (Staples, 2008), the report was a major catalyst in underpinning the government’s reform to the way the welfare sector was funded and in its adoption of economic rationalist policies. Accordingly, ‘the general movement away from a unified public service towards the development of quasi-markets based on the involvement of non-profit organisations can be viewed as the most radical change to state-society relations since the advent of the modern welfare state’ (Considine, 2003:63). Many of the problems associated with the non-government welfare sector relate to the new managerialist strategies that have been pushed onto the sector agencies as a condition of receipt of funding by their government funders. Funders believe that the problems with the welfare state are based on the inefficiencies of the public sector and that they can be solved by adopting the methods of the private sector. Governments in Australia and the United States of America have been encouraged to emulate the private sector in terms of their management practices, structure, marketing, employment policies and entrepreneurialism (Ife and Tesoriero, 2006). However, the role of public administration is to enhance and support citizenship whereas the role of private management is to respond to and manipulate individual and isolated consumers (Savoie ,1995). The process of change in Australia and other Western countries in the non-government welfare sector, identifies a new language modelled on corporate managerialist strategies that includes words such as performance management, market development, competitive tendering, output based purchasing, business unit and client focused services. This language has been pressed onto the non-government welfare sector by government bureaucrats in their process of implementing competitive tendering procedures to the welfare sector. This new language of corporatism has been developed in tandem with the increased

requirements by governments for accountability and reporting, in turn, for the receipt of government funds to provide services. Liberal democratic societies have embraced capitalist market formation with the use of words such as individualism and bureaucracy along with the acceptance of materialistic market values.(Elshtein 1995) This corporatisation, and use of such language, further alienates the agencies and their boards of management from the client base they aim to support. It should be recognised that non-government welfare sector organisations are now operating with the same aims, objectives and goals that the for-profit businesses and corporations use (Lyons, 2001). The implications of corporatisation for voluntary boards are considerable. Unless board members have a clear understanding of the language of the corporate sector, and the processes required by their government funders, they will have difficulty in understanding their requirements. This required knowledge deters would be board members from joining voluntary boards because of the level of expertise now required to function fully as a board member. This has been evidenced, in recent years, by the number of small non-government welfare agencies that have been taken over by the larger, better resourced, non-government organisations. Each successive government has instigated changes that have impacted on the non-government welfare sector. Recent external forces for change in organisations have included information technology, where the networking of computers has become a rapid driver of environmental change. Such changes have made the immediate transfer of information easy and inexpensive and have enhanced the global and local competition for the delivery of services and products for clients. New technologies have also opened up new employment relationships (McShane, 2007). The amalgamation of some government departments into very large bureaucracies has created an environment where non-government agencies have little contact with their actual government funders. This has occurred to the extent that many organisations now have difficulty in keeping up with the personnel in the bureaucracies because of the constant change in roles that the government departments themselves are experiencing (Hodgson, 2003). Much of the communication between the bureaucracies and the non-government organisations is conducted electronically, rather than by telephone that previously provided more intimate inter-personal communication. The introduction of new programs and strict new funding guidelines, stricter criteria for eligibility for clients, competitive tendering and the relocation of some institutional services to community based programs has brought about change to the non-government sector. Many of these changes have been forced onto the sector. Little is known about the impact that these changes have had on the non-profit welfare organisations.(Considine, 2003) However, what is known is that the non-government welfare sector has had to undergo vast changes to comply with government requirements.

5. CONCLUSION By limiting the number of agencies that provide welfare services to only those large, often faith based agencies, the rural sector has been squeezed out of the public

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