Tuesday, 17 September 2013

16. Grant Thornton Australia and New Zealand Not for Profit sector survey 2013/2014

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Accounting firm Grant Thornton recently released the results of its bi-annual survey of not for profit (NFP) organisations in Australia and New Zealand: Doing good and doing it well? Grant Thornton Australia and New Zealand Not for Proft sector survey 2013/2014.  The report does not refer to the number of entities in the Australasian not for profit sector, but common estimates are 600,000 in Australia (of which 57,000 are registered charities) and 90,000 in New Zealand (of which 26,000 are registered charities).  The results are based on 72 Australian survey responses and 344 New Zealand survey responses.


It’s always good to get an insight into the NFP sector, particularly when that insight compares New Zealand and Australia, so the Grant Thornton report is worthwhile reading.   Bear in mind that their findings are based on a small sample size of only 416 organisations out of about 690,000 organisations in the Australasian NFP sector.

I have to admit I’m still not convinced about the final conclusion that there are “few significant differences between New Zealand and Australia”.

From the points highlighted in this blog, it looks to me like Australia’s NFP sector is way ahead of New Zealand in the use of social media, concerns about compliance and government regulations, the level of board member awareness of their obligations, NFP support for a national regulator, and NFP reliance on government funding. 

So rather than the Australasian NFP sector being homogenous, there are still enough differences for us to take lessons from our neighbour across the ditch.


Here are eight observations in the survey that caught my eye.

1.  By and large, and once size and turnover are taken into account, there are few significant differences between New Zealand and Australia (p.4).

On the face of it, this observation isn’t unexpected because New Zealand and Australia have so many similarities.  However I wonder what a detailed analysis, rather than a small survey, of the two sectors would uncover.   For example, are there significant differences in the NFP structures and vehicles used?  Do significantly more NFPs qualify for donation tax credits / deductible gift recipient status in one country than another?  Which country has the most effective tax policy for NFPs?  Does the proportion and profile of NFP volunteers significantly differ between the two countries?  The survey left me questioning whether there actually are significant differences in the two NFP sectors but the areas of difference just aren’t canvassed in the survey.

2. The use of social media is one area in which Australian organisations seem to be generally more sophisticated than their New Zealand counterparts (p.5).  The survey reveals that 79% of New Zealand respondent’s organisations have a website, whereas the corresponding figure is 99% in Australia (p.23).

They could well be right.  Shame on New Zealand NFPs for being stuck in the twentieth century.

3.  Funding and fundraising were identified as the major issues by around three quarters (76%) of New Zealand respondents and around two thirds (68%) of Australian respondents (p.6).

No surprises here. I doubt this will ever change - funding is always going to be a dominant issue for the sector.

4.   Australian NFPs are particularly concerned about government and compliance with government regulations, including new governance standards by the Australian Charities and Not-for-profits Commission (ACNC) and the introduction of the National Disability Insurance Scheme.  By contrast, government and compliance were not such significant issues in New Zealand (p.6).

Australia’s multiple layers of government, particularly at the State/Territory and Commonwealth levels, make it no surprise NFPs would be more concerned with compliance that side of the Tasman.  That is why they are so focused on initiatives to reduce red tape and administrative burdens on the sector.  Perhaps the Australian concerns are heightened because their legislation tends to have more administrative and other penalties for non compliance, so the consequences of not complying with government regulations can be harsh on NFPs.  Australian law also tends to be more prescriptive – for example they have regulated governance standards for registered charities whereas New Zealand has not.  Arguably, however, that gives the sector more certainty about what is expected, so it raises the sector standards and consequently the level of public trust and confidence in NFPs.

5. Directors and Trustees of NFPs are expected to meet increasingly high standards of performance and accountability.  Less than half (43%) of New Zealand respondents said that all board members understand this, compared with 65% of Australians (p.10).

The paper notes that “there is still a need for board member education within the sector”.  If 57% of New Zealand boards have at least one member who does not understand their responsibilities, then you can’t argue with that conclusion.

6. New Zealand has recently introduced a number of changes to financial reporting.  77% of respondents said they were aware of the changes and the compliance requirements are largely seen as reasonable.  However one in five were unsure about their impact (p.14). 

This was a surprisingly positive result in respect of the upcoming New Zealand changes, especially given the very high level of special purpose, unaudited and poor quality financial accounts provided to the charities regulator at present.  Perhaps the NZ authorities should be congratulated for ensuring there is public awareness of the changes.  On the other hand, perhaps the level of positivity would significantly reduce if the sample was just taken for small charities. 

7. In Australia the ACNC commenced in December 2012, the charity governance standards came into force from 1 July 2013 and the Statutory Definition of Charity Act comes into force on 1 January 2014.  Australian respondents support the direction of the reforms with a clear majority (83%) believing the sector needs a national regulator (p.16).

This is great news for the ACNC.  Hopefully Grant Thornton’s findings have some sway with the new Liberal Government, which is on record as saying it will abolish the ACNC, replacing it with a centre for excellence focused on innovation, education and best practice.  The findings might also be useful ammunition for the ACNC supporters who don’t see any advantage in having an emasculated regulator.

 8. In 2013, government grants and contracts were the most significant funding source for 53% of New Zealand respondents, whereas they are the most prominent source of funding for 79% of Australian respondents (p.30).  Those organisations in the social services sector are most likely to rely on government grants and contracts and generally deliver services for which government agencies are the default funder.

The paper concludes that NZ NFPs are trying to become less reliant on government funding.  Maybe so.  Although perhaps government funding in Australia is just more obvious, with its vast array of Commonwealth Grant Guidelines and acquittal forms, whereas in NZ NFPs are less likely to recognise funding from the likes of lotteries and councils as government funding.  In any case, the difference between 79% reliance on government funding and 53% does appear to be quite significant.

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