Report highlights the human cost of funding failures

In new research to be presented today at the Catholic Social Services Australia national conference in Sydney, the director of the University of Western Australia’s Centre for Public Value, Professor David Gilchrist, paints a grim picture of many organisations’ ability to sustain their operations amid government cost-cutting and rising demand for their services.

“The sector is less able to deliver services at the quality and quantity that must be delivered. This results in a reduction of the service mix that is required to meet services needs in the community,” Professor Gilchrist told the Community Advocate ahead of the conference.

“Organisations are becoming less and less able to provide services in a financially sustainable way.”

Gilchrist said there was a "fundamental disconnect" between governments’ understanding of service delivery and what happened "at the coal face".

The result was "poor funding decisions, poor indexation decisions, bad governance policy, and a lack of understanding of sector resource needs in delivering frontline services".

He said the research paper Real Costs, Real Impacts: A Path to Social Services Sustainability showed this funding gap was having a negative impact on organisations’ financial sustainability in three ways:

Short term: reducing the capacity of organisations to pay their bills on time

Medium term: hampering their capacity to pay for accumulated costs such as leave entitlements

Longer term: curtailing organisations’ ability to evolve to meet changes in technology, government policy and the way services must be delivered to meet the needs of society.

“We're really concerned that the service requirements are not being met and we're seeing that service delivery is reducing quite exponentially as those service costs increase and make it very difficult to actually deliver service outcomes,” said Gilchrist.

He said there was "no transparency" about the gap between community needs and what was funded, arguing that "governments remain unaccountable for their poor policymaking".

A new approach

Gilchrist, who has been researching human services delivery costs for decades, said his latest study was the first to look at the problem through the lens of the financial sustainability experience of social service organisations.

“This project is different because rather than looking at population level data where we are examining the cost of service delivery for a group of organisations or from a government's perspective, we've taken seven case studies and looked in much greater depth and detail at the cost of human services delivery for each of them.

“This has not really been done before and it allows us to step away from looking at these organisations as if they're homogeneous and really focus on each individual case,” said Gilchrist.

“We're looking at those cases to see whether or not costs levels are sustainable, what is driving the cost increases, and also how those costs may be mitigated."

Those improvements could comprise reforms to funding and indexation policies and better data for increased transparency, which would ultimately help service clients, taxpayers, and governments.

Gilchrist said his research showed that costs related to changes in the way business is conducted are increasing in unexpected ways.

“So, for instance, organisations have traditionally applied for grants to pay capital costs for the purchase of IT,” he said.

“Whereas now, IT software is mainly subscribed to and that has a very significant impact on the financial sustainability of these organisations, because that subscription value is not included in the cost of service delivery from a government funder’s perspective.”

Government ignorance is costing all taxpayers

Gilchrist said much of the sector’s service delivery fiscal pain could be traced back to governments.

“I think governments feel that they understand how costing works and how the cost of services works, but they actually don’t,” he said.

He said governments were not trying hard enough to "close the knowledge gap".

“What we're seeing is that those people who are making decisions about what kinds of services need to be provided, and what the quantity and quality of those services need to be, is simply not understood by government.

“They don't understand what it costs, and they don't understand what the impact is for them in relation to not achieving the comprehensive costs of service delivery.”

Gilchrist said he could understand the motivation behind government efforts to reduce the cost of service delivery, but this often proved to be counterproductive in the longer term.

“It seems logical from a government perspective to reduce costs, but ... not providing proper human services means that government has to pay more for things such as healthcare that are much more expensive, so primary healthcare services like hospitals have to meet the cost of service delivery anyway.”

“The cost to governments is actually far greater."

Better funding and indexation would actually save money, he said.

Poor government communication is worsening the issue

Gilchrist said exacerbating the problem was the lack of communication between government departments about the best way to deliver services.

He had also identified inefficiencies agencies delivering services at a federal level when state-based agencies could do so more effectively, or vice versa.

“In other words, they’re not working with each other to make sure the services are delivered in the best way possible from the overall taxpayer’s point of view.”

Gilchrist called for a more transparent approach to service delivery, in which the focus was shifted to giving organisations enough money to meet community need, rather than making them work with what spendthrift governments think they need to get the job done.

Conference leaders hail UWA research

CSSA executive director Dr Jerry Nockles said Gilchrist’s work put the focus on the key cost pressures threatening the sector’s ability to deliver sustainable support to vulnerable Australians.

“For a long time, government funding and indexation models have fallen short of key economic and environmental factors – perhaps unintentionally, but with significant consequences for sustainable social services upon which Australia’s most vulnerable people rely.

“A properly resourced social services sector is a critical element in building an equitable Australia.”

The chair of CSSA and CEO of Marist180, Peter Monaghan, said social services organisations across the nation were grappling with the growing challenge of providing more support with fewer resources.

“This is a critical moment to address the systemic issues undermining the sector’s sustainability,” he said.

“Our collaboration with the UWA represents an important step towards understanding how we can future-proof the social services sector.”

Real Costs, Real Impacts: A Path to Social Services Sustainability was commissioned by Catholic Social Services Australia.

More information

https://cssa.org.au/resources/...

More about the Catholic Social Services Australia conference