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The 44th Angus Mitchell Oration will be delivered at the luncheon on 12th February 2014 by Professor Peter Shergold AC titled "Two Cheers For The Community Sector".

Synopsis of the luncheon:

Last Wednesday the 2014 Angus Mitchell Oration was delivered by Peter Shergold AC in the presence of three previous orators, one having delivered the Oration twice.

150 members and guests witnessed a most outstanding oration with Peter encompassing a number of community issues close to the heart of Rotarians.  As a retired Head of the Prime Minister and Cabinet, a position held for more than 6 years he reflected on the amount of wonderful work performed by NFP and NGO organisations in Australia. The most current figures presented were nothing less than amazing with $18 Billion worth of works done by Community groups in the previous 12 months not including 5 million hours of voluntary labour.

He gave three cheers for the on-going committed community organisations but only two cheers for the failure of government agencies to make the lot of the volunteers and their agencies easier to deliver their outcomes.  Acknowledging most of the public servants tried their hardest and did their best the hurdles and barriers presented along the way were quite often insurmountable causing delays, frustrations and hardship.  The depth of concern and the issues raised in this Oration were such that all Australians, public servants, educationists, unionists, employers, employees, philanthropic organisations, charity and NFP groups together with the members of the 10,000 registered charities should be furnished with a copy of the address.

To be present to hear first-hand the words of such an outstanding Oration was indeed a privilege for all. Peter Shergold AC, as the nation’s most senior public servant for many years, served us well and is still doing so to this day.  To be a Rotarian, to serve the community is equally a privilege.  Taking note of the Orator we must ensure the organisation we respect so much is not weighed down by ‘red tape’ or should that be ‘blue and gold tape’.

A transcript of the Oration:

I am delighted and honoured to present this year’s Angus Mitchell oration. It was first delivered in 1971.  Frankly, as I look at the long and distinguished list of those have gone before me I am intimidated: previous speakers include Sir Zelman Cowen, Sir Gustav Nossell, Major-General Michael Jeffery, Professor David Pennington, Justice John Phillips, the Reverend Tim Costello, Sir Ninian Stephen, Justice Michael Kirby, and General Peter Cosgrove. I feel the pressure of the illustrious company I keep (particularly as three of them - Bishop Peter Hollingworth, David Wittner and Sir James Gobbo, - are sitting at my table!).

I am grateful that the Rotary Club of Melbourne – Australia’s first and largest Rotary club - has extended this invitation. I stand in admiration of the scale and reach of the organisation of which the Club is a part. When Angus Mitchell was International President of Rotary in 1948-49, there were already some 300,000 Rotarians in 6,000 clubs worldwide. Today there are over 1.2 million members in more than 34,000 clubs. In the words of the website, they are ‘neighbours, friends, and community leaders who come together to create positive, lasting change in our communities and around the world’.

I am rather embarrassed, then, to admit that I am not one of them. I have never, unlike a number of earlier orators, been the proud recipient of a Paul Harris fellowship. Nor have I benefitted from a scholarship or exchange program. Indeed I do not remember attending a club meeting. Only once has Rotary directly touched my life and it was at a very local level. It was nevertheless significant.

At 17 years of age, a decidedly mediocre and rather troublesome student in the classroom, I was given an opportunity to show off in the only intellectual sphere for which I had exhibited a natural aptitude – talking! In Hampshire, England the local Rotary club sponsored an interschool debating competition on ‘the future of Petersfield’. I can’t remember what I said but I won. I still have a photo of me in 1963, teenage pimples and brylcreemed quiff, proudly holding my certificate of achievement. Aside from being placed second in drawing (age 6 years) it was the only honour I received in 12 years of unsuccessful scholastic endeavour. So let me, 50 years on, use this opportunity to say thank you very much.

When asked if I would be willing to take the podium on this prestigious occasion, I had no hesitation in agreeing. Angus Mitchell was an extraordinarily dynamic and far-sighted Rotarian and, as recognised by his Knighthood in 1956, an outstanding Australian. The history of your club (Owen Parnaby, Australia’s First Rotary Club, 2002) makes it clear that he was a person who fully comprehended the value of citizens forming an association on a voluntary basis in order to do things together. He recognised that by such actions they could create a more civil and civic society.

Angus Mitchell exemplified community action. He was a public-spirited man throughout his life. In the 1930s depression he initiated the Port Melbourne settlement for unemployed youth. Later he took significant leadership roles with the YMCA, the Boy Scouts’ Association and the Victorian Society for Crippled Children. His major international contribution to the community was, of course, through Rotary. In that role he showed both wisdom and courage arguing, in the immediate post-Second World War years, that Japan and Germany should be readmitted to Rotary International. It was not a universally popular position to hold in the late 1940s but, as history has shown, his instinct for reconciliation was correct.

David Wittner, in preparing to present this Oration 20 years ago, perused Mitchell’s papers in the State Library of Victoria, including the personal letters exchanged between Mitchell and the Chicago attorney who founded Rotary in 1905, Paul Harris. The philosophy that pervades that correspondence is as relevant today as it was three generations ago. Central to it was Mitchell’s belief in the role of friendship both as a driving force for voluntary endeavour and as a natural consequence of such collaboration – in Rotary language, it was possible to use ‘acquaintance as an opportunity for service’. A modest and self-effacing individual, he felt deeply that such activity had a spiritual dimension. He also believed in plain speaking and adhered to the need to keep the mission and principles of Rotary simple and easily understood. He advocated local initiative but extolled the importance of clubs working together on large projects. Camaraderie and collaboration were the foundations of his community activism.

Even more important, to my mind, was his vision of projects – local or global – that could be led and undertaken by business leaders, without relying on the intervention of the state. As Melbourne Rotary Club has long understood, the provision of help for the Melbourne homeless, supporting refugee children, providing clean water to a village in the Philippines or helping rebuild infrastructure in East Timor need not wait for action from governments. People, working together in community-based organisations like Rotary, can take the initiative. By the application of their skills and experience, and by dint of the gift of their time and money, citizens can create public value. My concern is whether that ethos, central to the mission of so many non-government organisations, and epitomised by Rotary, may be under threat.

Let me begin, however, by giving three rousing cheers for the social contribution made by community-based organisations. As I said in the valedictory lecture which marked my departure from the Australian Public Service in 2008, “whilst I love the making of public policy, and believe that the APS contributes mightily to that effort in extraordinarily beneficial ways, I am increasingly persuaded that it is far too important to be left to governments and public services. Over the years I have come to the view that it is the voluntary efforts of hundreds of thousands of individuals, and the support and advocacy of not-for-profit (NFP) organisations that gives Australian democracy its vibrancy… The ‘third sector’ builds the social capital that makes us a nation.”

Since leaving the public service, and whilst building a portfolio career as a director of private and government boards, I have tried to play my own small part in contributing to that goal: as chair of the Australian Rural Leadership Foundation, deputy chair of the Sydney Writers’ Festival and patron of the non-partisan Left-Right Think-Tank. I have also been a member of the General Sir John Monash Foundation - which honours a man, I have discovered, who made a major contribution to the early history of this Club. Like many business leaders, pro bono activities give purpose to my life, whether as Chancellor of the University of Western Sydney or as a member of the PM’s Indigenous Advisory Council. I don’t see this engagement as a way of ‘giving back’: rather it presents an opportunity to create with others the sort of society in which I want to live. In that sense it’s intensely selfish.

The broad dimensions of Australia’s community enterprises are well-known. There are around 600,000 NFPs. Of these, 50,000 are classified as ‘economically significant’ and 56,000 have their charitable status registered and endorsed by the ATO. Around 20,000 are ‘social enterprises’, which means that they supplement philanthropic support by trading in pursuit of a surplus with which to pursue their mission. Whilst Australia’s NFP sector includes some very large players - such as clubs, hospitals, schools, unions and credit unions - most community-based organisations are very small.   Many exist only to meet the shared interests of their members.  Most survive entirely on voluntary effort.  They nevertheless play a significant role.  They build networks of social capital and create bonds of civic engagement.  Their members, bound together by mutual enthusiasms, enjoy richer lives and a stronger sense of well-being.

Many ‘community sector’ organisations also have a broader mission to provide public benefit.    Some are incorporated associations whilst others are companies limited by guarantee.  Some focus exclusively on the delivery of services to those in need; others also advocate on behalf of those whom they serve.  Some enjoy various forms of charitable status; others do not.  Many find their purpose in the quest for social justice; others are driven by environmental or cultural aspirations.

In short, the community sector is extravagantly heterogeneous. It speaks with a cacophony of voices and embraces a diversity of goals. Underpinning this vibrant diversity, however, are two common characteristics.

First, the ambitions of community organisations are nearly always greater than the resources available to meet them.  In times of economic volatility and government austerity the daily challenge becomes even tougher:  demands for services often increase but funding becomes harder to find. A few institutions are richly endowed but most struggle to make ends meet year to year. It is the precarious nature of survival, I think, which drives not-for-profits (NFPs) to be creative, manage scarce resources carefully but also be willing to take calculated risks.

Second, by world standards, Australians are relatively poor givers (especially amongst high net worth individuals); good joiners (more than 85% of adults Australians are a member of at least one NFP); but even better helpers.  It’s estimated that around a third of adult Australians volunteer each year.  Indeed, the OECD’s Better Life Index places Australia near the top of the international list when it comes to people believing that they can help others or, at a time of crisis, be assisted by others.  More than two-thirds of Australian respondents indicate that they have helped a stranger in the previous month, compared to less than half of those surveyed in the 34 OECD countries as a whole.

The message is simple.  Australia’s economic performance has been impressive.    But it’s on the basis of our well-organised community sector that we can truly claim to be a world beater.  That’s in part why Australia nearly always ranks higher against other nations in terms of the quality of our life than in our material standard of living. We are distinguished not by the size of our pay packets but by our willingness to lend a hand.

Three cheers, then, for community organisations. But, as the title of my address indicates, I raise only “two cheers for the community sector”. What do I mean? And why is my praise qualified?

I start from the proposition that the community sector goes far beyond the role of community-based organisations. It is, in economic terms, an ‘industry’. According to the Australian Bureau of Statistics there are now almost 10,000 organisations and businesses working in community service activities. In response to rising demand the number of people employed in the community sector has increased by 50% over a decade, from 340,000 workers in 2000-01 to 513,000 in 2010-11. NFPs are major employers. They are increasingly important to the effective delivery of public assistance, care and support services to young children, the aged and frail, those with a disability and those who are poor, unemployed, homeless or troubled. In the area of childcare 66% of providers are private sector businesses operating for profit but in the delivery of social assistance around 60% of providers are NFPs and in residential care that figure rises to 76%.

It is this cross-sectoral industry – heavily regulated and extensively funded by government but jointly delivered by the public, private and ‘third’ sectors – that is the focus of my remarks. It lies at the heart of the report on service sector reform in Victoria which I delivered to Minister Mary Wooldridge in November last year (Service Sector Reform: A Roadmap for Community and Human Services Reform). In it I sought to suggest ways in which to improve outcomes for disadvantaged and vulnerable people by delivering government services in more effective, efficient and empathic ways. Central to that goal, in my view, is to extend greater opportunity and encouragement to community-based organisations so that they can do things in the way that they wish to do.

This is becoming increasingly difficult. I do not wish to suggest that proud traditions have been expunged. Many associations still subscribe to a long-held philanthropic impulse. Others can trace their intellectual antecedents to the friendly societies, mutuals and cooperatives that were such a prominent part of life in nineteenth-century Victoria. The community organisations of today had their roots nurtured in the complementary principles of charity and self-help.

But the world has changed. As a consequence of government policy the social safety-net is far stronger than in an earlier era: those individuals who fall will more likely be caught although, weighed down by learned helplessness, they may also find it harder to climb out. Government welfare payments, as some impressive Aboriginal leaders are now recognising, can act as a slow poison, undermining incentive and ambition. It’s no longer just the penurious and destitute who are the recipients of state assistance: the middle class, through a range of family benefits, now expect government support.

As Australia has emerged as a modern welfare state, so the role of community organisations has been transformed. Government programs now provide much of the financial support and many of the community services that NFPs previously delivered.  The community sector has been made over. When Angus Mitchell was alive community-based organisations would often, through the application of their philanthropic endeavour, undertake activities that had a beneficial social impact. In recognition of this fact, governments on occasion offered a level of financial support to the organisations. Grants were in effect a form of public subsidy. They were designed to supplement community-driven activities that were recognised to have public value, whether it was helping migrants to settle, planting trees on a riverbank, providing meals to the homeless or running a community arts festival.

In the last generation that financial relationship has been changed fundamentally. Community organisations today enter into service agreements to deliver government programs. Usually they only do so if they believe the purpose is in accord with their mission. But let us be clear: the programs are not designed and ‘owned’ by the NFPs themselves.

The good news (first cheer) is that the amount of government money now paid to community organisations is greater than in the past, and as a result their economic importance is growing. A Productivity Commission research report, issued in January 2010 (Contribution of the Not-for-Profit Sector) found that the contribution of the NFP sector represented 4% of GDP, or just under $43b. That figure is conservative for it does not include the efforts of nearly 5 million volunteers who contribute an additional $14.6b in unpaid work. Direct government funding of NFPs to deliver citizen entitlements is widespread and rising. Expenditure totalled $25.5b in 2010.

As a consequence (second cheer) the influence of NFPs on governments has significantly increased. Many government programs which are now contracted out for delivery to ‘outsourced’ third-party providers, can no longer be implemented without the engagement of community-based organisations. Governments need NFPs if they are to meet voter expectations. They rely upon them.

The bad news (pregnant silence) is that public funding comes with strings attached. Government contracts often give rise to complex purchasing and reporting arrangements, typically set out in bureaucratic legalese. Organisations, which have a proud history of community-based engagement and advocacy, now find themselves treated by public service agencies as little more than ‘service providers’. Many NFPs have become significantly dependent on government payments. The Australian Community Sector Survey, conducted in early 2013 by ACOSS, paints for me a worrying picture. Of 532 community organisations that responded to the questionnaire, 58% indicated that the most significant issue they faced was the underfunding of services by government. The immediate concern, of course, is the financial sustainability of these organisations in the face of rising demand. The more profound underlying problem is that some of these NFPs have come to define their success in terms of their ability to access government funding. Their independence has been compromised by reliance on government.

This is the invisible canker that eats at the core of Australia’s community sector. It is symptomatic of an unequal power relationship between public servants (who purchase programs on behalf of governments) and service providers (who deliver them to clients). Ask virtually any NFP board member or executive and they will tell you, with varying strengths of feeling, that contractual agreements come with a considerable compliance  burden and, not infrequently, a high level of micromanagement of how they operate. Their social purpose – the very essence of their emotional appeal to donors and volunteers – can slowly be undermined: in the quest to win government contracts their mission can drift. Worse still, keen to meet their community aspirations, NFPs can agree to provide government programs at a price below the real cost of delivery. Instead of governments subsidising community activity, community organisations end up subsidising governments.

It does not have to be so. There is no reason why commercial businesses, private investors, government funders and community organisations cannot build a ‘public economy’ based on collaboration. NFP enterprises need to be liberated so that, as in the past, their entrepreneurial flair and creative approaches can be given licence. If governments showed themselves more willing to pay for results (rather than for process) they could let community organisations decide how they want to achieve the agreed outcomes. They could do it their way.

That would produce a far more innovative community sector: a diversity of providers, a flexible array of support programs and genuine choice for citizens in need. Of course there needs to be accountability for the expenditure of public funds, but base it on performance rather than compliance. Let’s move away from the imposed requirements born of asymmetric power and have public service agencies and community organisations agree the metrics against which outcome evaluation can take place.

In a more equal world NFPs, with their extensive front-line experience, would be given the opportunity to co-design the programs that they are contracted to deliver. Better still, governments might actively encourage community organisations to develop and take their own approaches and, if deemed successful, be willing to support them. Unsolicited bids, already a feature of public-private partnerships for building public infrastructure, could be extended to the delivery of human services.

Governments could, as today in NSW, provide opportunities for ‘impact investing’. The development in that jurisdiction of Social Benefit Bonds represents a radical new approach with exciting potential. In effect the government agrees to fund community organisations over the medium term to address social problems through early intervention – in the three pilot schemes underway, it will pay outcome fees if the need for government to place children in out-of-home care is reduced or the incidence of prisoner recidivism lowered. Then, on the basis of performance-based funding, the community organisations are enabled to raise capital from socially responsible investors. This allows them to scale-up their activities and, if successful, pay a reasonable return to equity holders. The NFPs take on more risk but they enjoy greater freedom.

Angus Mitchell had a strong belief in the capacity of Rotary Clubs, individually or collectively, to address public challenges. He envisaged that business leaders had expertise that could empower their sense of public responsibility. Together they could make a better world. But to paraphrase L.P. Hartley, the past is a foreign country: they did things differently there. It is dangerously anachronistic to transfer the application of ideas formed in a particular historical context to a modern environment. I enter into such chronological inconsistency simply to illustrate how different was the world in which Mitchell was so influential to the one we inhabit today.

Even in the 1940s Mitchell would probably not have rejected a level of financial assistance from the state but I think he would have been wary of becoming too dependent on public coffers. Leaping forward to the present, I imagine he would have approved of the bold Polio Plus project, which involves a massive financial contribution from Rotary as well as a huge amount of volunteer-hours donated by Rotarians; he would likely have welcomed Rotary’s financial partnership with the Bill and Melinda Gates Foundation; and he may have been delighted that, inspired in part by Rotary’s leadership, the World Health Organisation had launched its own Global Polio Eradication Initiative.

What I think he would not have supported would have been an arrangement by which Rotary was simply contracted by a government body, even the United Nations, to deliver programs on its behalf. Yet that, through hundreds of different Commonwealth, State and Territory service agreements, is the position in which many Australian NFPs now find themselves. A large number of today’s community-based organisations would have been familiar to Angus Mitchell, but their relationship to the state would have bemused him. They have become, to varying degrees, agents of government. This is unfortunate.

Please understand. I am not advocating a return to the days in which those in need found themselves reliant on charity. Governments have a valuable role to play in making Australian society fairer and promoting equal opportunity. Those in genuine need require more help not less. The problem is that as the ambit of public welfare has widened, so has the self-reliance of recipients been undermined. As the state has extended its array of government transfer payments and support programs, it has delivered them in ways which often serve to reinforce the sense of social exclusion that they are intended to alleviate: people treated as dependents become dependent; beneficiaries categorised as ‘cases’ to be managed learn to let others make decisions on their behalf. At the same time, as publicly funded services are increasingly contracted out to NFPs for delivery, so those organisations face the risk of becoming little more than government providers. Their capacity for innovation is restricted in the name of public accountability. Compliance rather than performance becomes the yardstick of evaluation.

There is a better alternative. Governments could focus welfare expenditure on those in most need and allow those citizens who require support –the poor, the old, the frail, the mentally ill, those with a disability and those in need of a job – to take greater control of the public funds at their disposal. This is not blue-sky thinking: ‘self-managed budgets’ and ‘consumer-directed care’ are already being trialled. At the same time governments and their public services could facilitate cross-sectoral relationships that are transformational rather than transactional in nature. They could empower NFPs by allowing them to deliver public services without unnecessary interference and, better still, enable them to contribute to the design of the government programs they deliver. Again it's already starting to happen, captured in the language of ‘payment by outcomes’.

A new world beckons. There is, on the horizon, a revitalised community sector in which the enthusiasm and energy of volunteers, philanthropists and social investors can once again be given full rein. It’s a world in which governments, public services, businesses and NFPs can work together in partnership. Democratic governance can take the form of a network of participants. That’s a beguiling prospect for which I would willingly raise three cheers.

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