A study commissioned by the Australian Charities and Not-for-profits Commission (ACNC) suggests a spike in not-for-profit mergers would demonstrate "vibrancy" in the sector.
The same study suggests a vibrant sector would be characterised by revenue growth and by a wide spread of organisation sizes and types, which would demonstrate the sector was able to adapt to changing needs.
The study was conducted by Tulipwood Economics, which was asked by ACNC Commissioner Gary Johns to come up with metrics to accompany one of the Commission's trickier-to-define objects: "To support and sustain a robust, vibrant, independent and innovative not-for-profit sector".
The result is a somewhat bureaucratically titled study: Measures in Support of the Not-for-profit Sector: Indicators of Object 1(b) ACNC Act.
Tulipwood surveyed the literature about NFP sector performance in Australia and overseas before producing the 24-page report, which is expected to be the subject of formal consultations.
The report proposes measures relating to the characteristics "robust", "vibrant", "independent" and "innovative".
Tulipwood says a robust industry should be responsive to environmental, social and economic "shocks" and be able to adapt accordingly. Measures of robustness would include registrations, revocations and the longevity of organisations.
Measures of vibrancy could include the number of mergers in the sector, because "mergers may indicate that NFPs are joining forces to make the most of their respective 'competitive advantage'."
An independent sector was painted as one that was not heavily reliant on funding from government or another single source, and had a level of "regulatory independence".
An innovative sector would be capable of developing new products and services and using technologies that improved services to clients and the community.
Four to six measures are proposed for each of the four characteristics. Some are already available to the ACNC, and some would require new questions in the annual activity statement submitted to the regulator by charities.
For instance, Tulipwood recommended the ACNC seek new data on innovation measures by setting metrics on collaboration, new technology use and staff training.
The ACNC says it will consult on the proposed new measures before adopting any of them.
While the measures might mean increased scrutiny, Mr Johns said in a recent column that "the focus is on measuring these concepts as they relate to the sector, not individual charities".
It is understood the ACNC has now engaged PwC to examine how it might implement the recommendations.
Responding to the report, the Community Council of Australia's David Crosbie criticised the ACNC's use of outside economists, saying the consultants had applied a "narrow economic lens" instead of using not-for-profit specialists to do the assessment.
"Even the best economic proxy measures can only ever partly explain what is at the heart of our work," Mr Crosbie wrote.
"And if we are going for proxy measures, surely we can do better than assumption-ridden superficial measures developed by unknown economists from outside of the sector?"