Last time I wrote about the implication that the COVID pandemic was going to have on funders. It’s a little too early to look at what is actually happening here: June will have the first full data for some funders, and sure as eggs I will do so.
But, in some words that have been attributed to Niccolo Machiavelli, lets never waste the opportunity offered by a good crisis.
In my last blog I wrote this. The impact of the COVID pandemic is going to have a profound effect upon how third sector organisations deliver their services. It exposes a funding ecosystem in New Zealand where around 2/3 of the grant money coming to communities comes from gambling activities. It exposes chronic underfunding of core service delivery by government, and a rise of professional staff (and their resultant cost) within third sector organisations tasked with getting that diminishing pool of grants and private philanthropy.
What are the answers? If I knew that I wouldn’t be writing this. But I do know that if we want to make some systemic changes, the opportunity is now, so let’s get those ecosystem conversations going.
So with some dog walking time, a few conversations, and some reading, I do have a bit of a solution which will put the control of community funding back into the hands of those who receive the benefits: the community.
The issues are complex.
We have supply issues. Money coming from gambling makes up over two thirds of grant funding for community groups. Around $358m goes into the New Zealand TSO ecosystem from gaming trusts. Lotteries too put $261m into the community last year.
We have demand issues. Most groups want more money. But sometimes there seems little community benefit in how that money is spent. We have a lot of middle class capture within the sector, little benchmarking, and little innovation due in part to lack of access to capital.
We have cost to serve issues. Some of my earlier work suggests that the cost of this process to NZ Inc is around $260m per annum, and that a grant costs around $4k to get into the community.
Any conversation around third sector organisations always ends up with money. This is driven in part by the fact that many people participating in these discussions are paid members of community organisations whose mortgages depend on this, which is perfectly reasonable. Those groups who are purely voluntary, be they structured or unstructured community groups, just keep on doing what they do and don’t realise they have a place in the conversation. Funders too drive the conversation, but see solutions which put them at the heart of a solution, rather than as an enabler.
The Problem Gambling foundation have proposed to the Minister that Class 4 gaming is phased out. That has huge implications for the sector. Now the simplest response will be to stick with the status quo. It will be interesting to see how the Government reacts to this proposal, and of course community groups will come out in favour of the status quo due to their inability to actually say what they really think as they need the money produced by this sector.
A key issue is WHO gets to decide where the money goes. Gaming trusts by and large are middle aged men allocating “their” money to various groups, with some eyebrow raising resource consequences. Check out some of my blogs for a dive into that stuff. Community trusts and various local and central government funds have a legion of staff making assessments, with either elected politicians or friends of those elected politicians determining what communities need. Surely the people who know what their communities need are people within those communities?
So let’s get radical.
Let’s get rid of pokies. We set up a voucher scheme for every citizen of New Zealand.
Third sector organisations can be part of a national voucher scheme: sports groups, arts groups, community groups, education groups, youth groups, health groups, environmental groups. Every citizen of New Zealand could be entitled to a state funded $100 voucher which can be applied through a portal. 5,000,000 * 100 = $500m. The portal takes each person through a few questions around what each person values. Sport? What sports do they play? Do they play for a club? Arts? Like the theatre? Dance? Baby and me classes? Cancer support? The first step helps people consider how they engage with groups in the community. The portal then gives people options around groups, benchmarking them against each other in terms of costs, efficacy and other elements. Perhaps the voucher does not need to be a flat amount. Perhaps in an effort to drive equity poorer communities get a bit more. Perhaps $100 is too low? Too high? Don’t know. Let’s discuss.
Secondly, money is applied from this system to operating costs. It can be spread over as many or as few groups as each citizen chooses. Perhaps we have an age range: from Year 7 and up people create their profile and allocate their money. This could be wrapped around a citizenship module to help students understand their power in a modern democracy. (Or not).
And no, if an individual choses not to spend it they do not get it. Rather, perhaps it gets allocated out according to the profile of the community the person lives in.
Third sector organisations who have chosen to be on the portal have put in what additional value can the voucher income can provide them that their current revenue does not. This could be around ensuring equity to enable children to play sport, ensuring support for health issues, or to keep community groups resourced. They simply fill in a form with their annual accounts and leave it open. No multiple requests: just the accounts, the plan for the money, and evidence to support why a dollar spent with this community group is a good investment. So there is an instant admin saving for those applying for money.
“The vulgar crowd always is taken by appearances, and the world consists chiefly of the vulgar.” Another Machiavelli quote. Because here is where we need to be careful in execution. This voucher scheme is not a popularity contest. There should be no incentive for charities to spend precious money on branding exercises to appeal to people. Rather, we use a bunch of tools to demonstrate community value and drive a bit more critical thinking (a skill, in these unprecedented times, that I am sure we agree needs practice). The number of people playing within the sports club. The group’s cost base compared to others. The outcomes that the group actually achieves with its money.
This portal, and the analysis on each organisation is centrally funded but managed outside government. People are paid a piece rate for analysis, and perhaps go through some form of certification. Analysis is peer reviewed, and public. Obviously there is a cost here: say 50,000 of the 114,000 TSOs are seeking money. If reviewers are paid $200 a review, and peer reviewers $100, that’s $15m. We have an IT system in here to which would cost a bit to set up and run, and a few staff to manage it. New cost? Not so. The cost to serve I mentioned before suggests it costs at least $260m per annum for the status quo. These costs are hidden in the accounts of funders and TSOs seeking grants.
Councils and others such as private foundations and other funders can use the portal too saving costs as well: costs often hidden well within Council budgets. However, I’d like to see a stop in both Council and Lotteries funding for community groups opex: this opex should be able to be covered with the above system, and Council can then focus on community capex opportunities. After all, taxpayer / ratepayer: we are all the same people providing the money for these grants.
When I have floated this concept in the past, some people in TSOs have said, “well, what say we get no money?”. I suspect that’s the point. If the community sees no value in what you are doing, then why are you still doing it? Innovation in this sector is rare due in part to access to funding. JB Were released a report in 2017 called “The New Zealand Cause Report”. This is super interesting, and I would recommend anyone with an interest in the sector to have a gander. The writer looks at Innovation, and summarises “While there have been some large changes in growth rates between different charity sectors over time, there hasn’t been much change in the names of the large organisations dominating the sector suggesting the ability for new and smaller organisations to innovate and grow is limited. Almost 80% of the 40 largest New Zealand charities have existed for over 20 years. This is in contrast to the for-profit sector where dramatic change in ranking order is common, availability of risk capital is higher and the financial rewards for success are greater.” And in the summary the point is rammed home with this comment: “The Facebooks of the charity sector are rare”.
This model as proposed enables some healthy competition for funding. This concept could well be an anathema to many groups, but I suspect funding in a more transparent manner is a better framework for competition than the current murky ecosystem.
Organisations that perform services with government contracts on behalf of the community should be 100% government funded. Some work done by Social Services Providers Association puts the dollar tag here at $630m. To be honest this feels a little on the light side, but it could result in a bunch of cost savings as focus goes on delivering best practice around the social service provision rather than the marketing and other activities that are needed to fill the current funding shortfall.
Organisations that have contracts with the Government around service delivery would register on the portal. People are referred to that portal based on their specific needs. For example, say I have a child with special needs. I have the cost of providing Health, Education and Social Services allocated to me to use as I choose, and those costs are based on audited best practice, Government rates to support my needs. I choose a service provider whose programme best suits my needs, and they receive my voucher income for the contracted years. This should see an increase in Government income to Third Sector organisations, as the contract rate is based on what it would cost the Government to provide best practice support, and bundle service delivery around the person rather than the Government department providing that aspect of care.
Similarly, these organisations undergo review on the portal. We have seen examples of largesse within the contract system, and there seems little appetite within Government for stronger management here. So its up to us, the taxpayers I think to ensure that the groups do what they say they will do, and do it well.
Curiously I wrote most of this before I watched a Zoom with members of different political parties discussing the charitable sector. It was hosted by Hui E Community Aotearoa (I have shared a link on my Delfi Facebook page if you want to watch the 90 minute webinar). The wind was taken out of my sails a bit by Geoff Simmons from TOP advocating just this: a voucher system for funding (funded ex alcohol taxes). This idea was then pooh poohed by Jan Logie who felt it could turn into a popularity contest (which I think I have addressed above). TOP I believe are not precious in their policies, and they seemed the only ones in that chat who had a real alternative to the funding status quo.
The definition of stupidity is often defined as doing the same thing and expecting a different result. I’m keen to get a community sector discussion going about how we can drive a outcome to solve some of the supply issues, the demand issues, and that pesky cost to serve, As our mate Machiavelli is purported to have said, “I'm not interested in preserving the status quo; I want to overthrow it.”
I write about this stuff as believe that as need to understand where funding comes from, where it goes, and how it gets there. As a citizenry we allow both those supplying money and those asking for money to operate, and as a community we need to ensure we have oversight over the organisations they choose to fund. Love to talk with you if you think this is at all interesting, and if you want to dive into the data a bit more than happy to do so. Check out my website http://www.delfi.co.nz/
But, in some words that have been attributed to Niccolo Machiavelli, lets never waste the opportunity offered by a good crisis.
In my last blog I wrote this. The impact of the COVID pandemic is going to have a profound effect upon how third sector organisations deliver their services. It exposes a funding ecosystem in New Zealand where around 2/3 of the grant money coming to communities comes from gambling activities. It exposes chronic underfunding of core service delivery by government, and a rise of professional staff (and their resultant cost) within third sector organisations tasked with getting that diminishing pool of grants and private philanthropy.
What are the answers? If I knew that I wouldn’t be writing this. But I do know that if we want to make some systemic changes, the opportunity is now, so let’s get those ecosystem conversations going.
So with some dog walking time, a few conversations, and some reading, I do have a bit of a solution which will put the control of community funding back into the hands of those who receive the benefits: the community.
The issues are complex.
We have supply issues. Money coming from gambling makes up over two thirds of grant funding for community groups. Around $358m goes into the New Zealand TSO ecosystem from gaming trusts. Lotteries too put $261m into the community last year.
We have demand issues. Most groups want more money. But sometimes there seems little community benefit in how that money is spent. We have a lot of middle class capture within the sector, little benchmarking, and little innovation due in part to lack of access to capital.
We have cost to serve issues. Some of my earlier work suggests that the cost of this process to NZ Inc is around $260m per annum, and that a grant costs around $4k to get into the community.
Any conversation around third sector organisations always ends up with money. This is driven in part by the fact that many people participating in these discussions are paid members of community organisations whose mortgages depend on this, which is perfectly reasonable. Those groups who are purely voluntary, be they structured or unstructured community groups, just keep on doing what they do and don’t realise they have a place in the conversation. Funders too drive the conversation, but see solutions which put them at the heart of a solution, rather than as an enabler.
The Problem Gambling foundation have proposed to the Minister that Class 4 gaming is phased out. That has huge implications for the sector. Now the simplest response will be to stick with the status quo. It will be interesting to see how the Government reacts to this proposal, and of course community groups will come out in favour of the status quo due to their inability to actually say what they really think as they need the money produced by this sector.
A key issue is WHO gets to decide where the money goes. Gaming trusts by and large are middle aged men allocating “their” money to various groups, with some eyebrow raising resource consequences. Check out some of my blogs for a dive into that stuff. Community trusts and various local and central government funds have a legion of staff making assessments, with either elected politicians or friends of those elected politicians determining what communities need. Surely the people who know what their communities need are people within those communities?
So let’s get radical.
Let’s get rid of pokies. We set up a voucher scheme for every citizen of New Zealand.
Third sector organisations can be part of a national voucher scheme: sports groups, arts groups, community groups, education groups, youth groups, health groups, environmental groups. Every citizen of New Zealand could be entitled to a state funded $100 voucher which can be applied through a portal. 5,000,000 * 100 = $500m. The portal takes each person through a few questions around what each person values. Sport? What sports do they play? Do they play for a club? Arts? Like the theatre? Dance? Baby and me classes? Cancer support? The first step helps people consider how they engage with groups in the community. The portal then gives people options around groups, benchmarking them against each other in terms of costs, efficacy and other elements. Perhaps the voucher does not need to be a flat amount. Perhaps in an effort to drive equity poorer communities get a bit more. Perhaps $100 is too low? Too high? Don’t know. Let’s discuss.
Secondly, money is applied from this system to operating costs. It can be spread over as many or as few groups as each citizen chooses. Perhaps we have an age range: from Year 7 and up people create their profile and allocate their money. This could be wrapped around a citizenship module to help students understand their power in a modern democracy. (Or not).
And no, if an individual choses not to spend it they do not get it. Rather, perhaps it gets allocated out according to the profile of the community the person lives in.
Third sector organisations who have chosen to be on the portal have put in what additional value can the voucher income can provide them that their current revenue does not. This could be around ensuring equity to enable children to play sport, ensuring support for health issues, or to keep community groups resourced. They simply fill in a form with their annual accounts and leave it open. No multiple requests: just the accounts, the plan for the money, and evidence to support why a dollar spent with this community group is a good investment. So there is an instant admin saving for those applying for money.
“The vulgar crowd always is taken by appearances, and the world consists chiefly of the vulgar.” Another Machiavelli quote. Because here is where we need to be careful in execution. This voucher scheme is not a popularity contest. There should be no incentive for charities to spend precious money on branding exercises to appeal to people. Rather, we use a bunch of tools to demonstrate community value and drive a bit more critical thinking (a skill, in these unprecedented times, that I am sure we agree needs practice). The number of people playing within the sports club. The group’s cost base compared to others. The outcomes that the group actually achieves with its money.
This portal, and the analysis on each organisation is centrally funded but managed outside government. People are paid a piece rate for analysis, and perhaps go through some form of certification. Analysis is peer reviewed, and public. Obviously there is a cost here: say 50,000 of the 114,000 TSOs are seeking money. If reviewers are paid $200 a review, and peer reviewers $100, that’s $15m. We have an IT system in here to which would cost a bit to set up and run, and a few staff to manage it. New cost? Not so. The cost to serve I mentioned before suggests it costs at least $260m per annum for the status quo. These costs are hidden in the accounts of funders and TSOs seeking grants.
Councils and others such as private foundations and other funders can use the portal too saving costs as well: costs often hidden well within Council budgets. However, I’d like to see a stop in both Council and Lotteries funding for community groups opex: this opex should be able to be covered with the above system, and Council can then focus on community capex opportunities. After all, taxpayer / ratepayer: we are all the same people providing the money for these grants.
When I have floated this concept in the past, some people in TSOs have said, “well, what say we get no money?”. I suspect that’s the point. If the community sees no value in what you are doing, then why are you still doing it? Innovation in this sector is rare due in part to access to funding. JB Were released a report in 2017 called “The New Zealand Cause Report”. This is super interesting, and I would recommend anyone with an interest in the sector to have a gander. The writer looks at Innovation, and summarises “While there have been some large changes in growth rates between different charity sectors over time, there hasn’t been much change in the names of the large organisations dominating the sector suggesting the ability for new and smaller organisations to innovate and grow is limited. Almost 80% of the 40 largest New Zealand charities have existed for over 20 years. This is in contrast to the for-profit sector where dramatic change in ranking order is common, availability of risk capital is higher and the financial rewards for success are greater.” And in the summary the point is rammed home with this comment: “The Facebooks of the charity sector are rare”.
This model as proposed enables some healthy competition for funding. This concept could well be an anathema to many groups, but I suspect funding in a more transparent manner is a better framework for competition than the current murky ecosystem.
Organisations that perform services with government contracts on behalf of the community should be 100% government funded. Some work done by Social Services Providers Association puts the dollar tag here at $630m. To be honest this feels a little on the light side, but it could result in a bunch of cost savings as focus goes on delivering best practice around the social service provision rather than the marketing and other activities that are needed to fill the current funding shortfall.
Organisations that have contracts with the Government around service delivery would register on the portal. People are referred to that portal based on their specific needs. For example, say I have a child with special needs. I have the cost of providing Health, Education and Social Services allocated to me to use as I choose, and those costs are based on audited best practice, Government rates to support my needs. I choose a service provider whose programme best suits my needs, and they receive my voucher income for the contracted years. This should see an increase in Government income to Third Sector organisations, as the contract rate is based on what it would cost the Government to provide best practice support, and bundle service delivery around the person rather than the Government department providing that aspect of care.
Similarly, these organisations undergo review on the portal. We have seen examples of largesse within the contract system, and there seems little appetite within Government for stronger management here. So its up to us, the taxpayers I think to ensure that the groups do what they say they will do, and do it well.
Curiously I wrote most of this before I watched a Zoom with members of different political parties discussing the charitable sector. It was hosted by Hui E Community Aotearoa (I have shared a link on my Delfi Facebook page if you want to watch the 90 minute webinar). The wind was taken out of my sails a bit by Geoff Simmons from TOP advocating just this: a voucher system for funding (funded ex alcohol taxes). This idea was then pooh poohed by Jan Logie who felt it could turn into a popularity contest (which I think I have addressed above). TOP I believe are not precious in their policies, and they seemed the only ones in that chat who had a real alternative to the funding status quo.
The definition of stupidity is often defined as doing the same thing and expecting a different result. I’m keen to get a community sector discussion going about how we can drive a outcome to solve some of the supply issues, the demand issues, and that pesky cost to serve, As our mate Machiavelli is purported to have said, “I'm not interested in preserving the status quo; I want to overthrow it.”
I write about this stuff as believe that as need to understand where funding comes from, where it goes, and how it gets there. As a citizenry we allow both those supplying money and those asking for money to operate, and as a community we need to ensure we have oversight over the organisations they choose to fund. Love to talk with you if you think this is at all interesting, and if you want to dive into the data a bit more than happy to do so. Check out my website http://www.delfi.co.nz/
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