X0021 Charities & Not-For-Profit Organisations in Australia Industry Report

8/22/2019 X0021 Charities & Not-For-Profit Organisations in Australia Industry Report

1/34

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

4 Industry at a Glance

5 Industry Performance

5 Executive Summary

5 Key External Drivers

6 Current Performance

9 Industry Outlook

12 Industry Life Cycle

14 Products & Markets

14 Supply Chain

14 Products & Services

15 Demand Determinants

16 Major Markets

17 International Trade

18 Business Locations

20 Competitive Landscape

20 Market Share Concentration

20 Key Success Factors

20 Cost Structure Benchmarks

22 Basis of Competition

22 Barriers to Entry

23 Industry Globalisation

24 Major Companies

27 Operating Conditions

27 Capital Intensity

28 Technology & Systems

28 Revenue Volatility

29 Regulation & Policy

31 Industry Assistance

32 Key Statistics

32 Industry Data

32 Annual Change

32 Key Ratios

33 Jargon & Glossary

IBISWorld Industry Report X0021Charities & Not-for-ProfitOrganisations in AustraliaMarch 2012 Craig Shulman

Bigger and better:Organisations in theindustry are expanding their service offerings

www.ibisworld.com.au | (03)9655 3881 | [email protected]


2/34

WWW.IBISWORLD.COM.AU Charities & Not-for-Profit Organisations in AustraliaMarch 2012 2

This industry consists of organisationsthat exist for reasons other thannancial gain. This broad industryclassication includes charities and

not-for-prot organisations engagedin activities such as healthcare,operating hospitals, education, sports,cultural and religious organisations.

The primary activities of this industry are

Fundraising

Advocacy

Operating health, educational and cultural programs

Industry Definition

Main Activities

Similar Industries

The major products and services in this industry are

Business and professional associations and unions

Culture and recreation

Education and research

Environment, development, housing, employment, law, philanthropic

Hospitals and health

Religion

Social services

About this Industry

N Education

Establishments in this division provide education services from preschool through to postgraduate courses,with private and public options.

O8729 Welfare Services and Fundraising in Australia

Organisations in this industry provide welfare services to the disadvantaged and fundraising activities aimedat supplementing government funding for these activities.

P9319 Sport Organisations and Other Sports Services in Australia

Establishments in this industry include sporting clubs facilitating or participating in sporting activities, orprovide services to sporting activities. Sports coaching services are also included.

Q9610 Religious Organisations and Services in Australia

Organisations in this industry are operated for religious worship or for the promotion of religious activities,including churches, temples and monasteries.

Q9621 Industry Associations in Australia

Companies in this industry promote the business and professional interests of their members by conductingresearch and providing education services.

O8600 Health Services in Australia

Establishments in this subdivision supply health services to the public either directly or via proxies.

For additional information on this industry

www.ausaid.gov.au

AusAID

Additional Resources


3/34


About this Industry

IBISWorld writes over 500 Australianindustry reports, which are updatedup to four times a year. To see allreports, go towww.ibisworld.com.au

www.fia.org.auFundraising Institute Australia

www.nfpn.com.auNot-For-Profit Network

www.philanthropy.org.auPhilanthropy Australia

www.probonoaustralia.com.auPro Bono Australia

www.thirdsectormagazine.com.auThird Sector

Additional Resourcescontinued


4/34


Market Share

There are no

major players inthis industry

Key External DriversNationalunemployment rate

Population aged55 or older

State funding for primaryand secondary education

Federal funding for thearts and related activities

State funding forhealth services

Natural disasters

Key StatisticsSnapshot

Industry at a GlanceCharities & Not-for-Profit Organisations in 2011-12

Revenue

$105.0bnEnterprises

44,800Exports

$6.1bnBusinesses

44,800

Annual Growth 12-17

4.0%Annual Growth 07-12

3.5%

Industry Structure Life Cycle Stage GrowthRevenue Volatility Medium

Capital Intensity Low

Industry Assistance High

Concentration Level Low

Regulation Level Medium

Technology Change Medium

Barriers to Entry High

Industry Globalisation Low

Competition Level Medium

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32

People(million)

7.0

4.0

4.5

5.0

5.5

6.0

6.5

1602 04 06 08 10 12 14Year

Population aged 55 or older

SOURCE: WWW.IBISWORLD.COM.AU

%change

15

5

0

5

10

1804 06 08 10 12 14 16Year

Revenue Employment

Revenue vs. employment growth

Establishments

30.9%NSW

2.5%TAS

22.3%VIC

2%NT 1.7%

ACT

21.9%QLD

11.1%WA

7.6%SA


p. 24

p. 5



5/34


Key External Drivers National unemployment rateHouseholds where adults areunemployed are more likely to usewelfare and charity services, particularly

where unemployment has been over thelong term. Long-term unemployment isthe most closely correlated social variableto demand for welfare, as it alsocorrelates closely to levels ofhomelessness and mental illness.

Population aged 55 or olderFrail older people are more likely torequire assistance in the home, deliveredmeals and health care.

State funding for primary andsecondary educationNot-for-prot entities providingeducation services are partially

reliant on public funding in order toll their classrooms. An increase ingovernment funding would allowexpansion of services.

Federal funding for the artsand related activitiesFederal funding is a major source ofresources for not-for-protorganisations engaged in the arts.Increased government expenditure in

ExecutiveSummary

Charities and not-for-prot organisationsmay not sound like big business inAustralia, however the industry employsover one million workers on a paid basis,and revenue is expected to increase by3.4% in 2011-12 to reach $105 billion.Over the past ve years, industry revenuehas increased by an average of 3.5% peryear, and only fell briey during 2008-09when private and business donors cutback amid uncertain economic conditions.

The size of the industry is largely due

to the huge array of products andservices that Australian charities andnot-for-prot organisations deliver.These range from operating hospitals,arts organisations, schools andchurches, all the way down to

grassroots fundraising and communitycauses. Government grants andfunding are a crucial form of incomefor the industry, with not-for-protorganisations routinely partnering withgovernment departments to provideservices to the community.

The future for the industry remainsbright, with long-term government grantsand service provision contracts keepingrevenue volatility down. Industry revenueis expected to increase by an average of

4.0% per year in the next ve years, toreach $128 billion in 2016-17. Theessential services provided by the industrywill continue to be delivered by charitiesand not-for-prot organisations, many ofwhich are highly experienced and efcient.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage

Million

50000

10000

20000

30000

40000

1501 03 05 07 09 11 13Year

State funding for primary and secondaryeducation


People(million)

7.0

4.0

4.5

5.0

5.5

6.0

6.5

1602 04 06 08 10 12 14Year

Population aged 55 or older


6/34


Industry Performance

Effect of the financialcrisis

In late 2007, problems in the UnitedStates nancial sector created a rippleeffect that sank most of the worldswealthy nations into recession by 2009.While Australia managed to narrowly

avoid the same fate thanks to earlygovernment stimulus spending and thestrength of the resources industries, theunemployment rate rose, and consumerand business condence fell. This createda very challenging fundraisingenvironment for charities and non-government organisations (NGOs), withsome private donors and businessesseeing philanthropic activities as a luxuryspend during the good times. In additionto greater strain on charitiesdomestically, major natural disasters inHaiti, Pakistan and China occurredduring this time, which NGOs respondedto with funding and resources.

While many humanitarian charities sawrevenue levels rise signicantly due tothese disasters, others were still affected.The ATO reported that there was a 10.8%drop in individual claims for deductible

gifts in 2008-09 to $2.0 billion. This wasmostly due to donations made bywealthier people being signicantlyreduced. During this time drops ininvestment income and corporatefunding also furthered a decline inrevenue levels according to The Centrefor Corporate Public Affairs.However, the times of difculty also drewgreater empathy from more people, withthe number of claims made increasing by3.7% to 37.8% of Australian taxpayers,particularly due to the VictorianBushres during 2008-09.

The provision of community-levelessential services such as education,

CurrentPerformance

The Charities and Not-for-Prot

Organisations industry can be seen as theglue that holds Australian communitiestogether. Routinely performing valuablework in areas of little appeal to prot-making enterprises, charities and not-for-prot organisations tend to complementthe work of the public sector towardscreating a dignied and compassionatesociety. The size of the industry is trulylarge, with revenue expected to be in theorder of $105 billion in 2011-12, anincrease of 3.4% over the previous year.Despite enduring a challenging few

years due to the global nancial crisis,industry revenue has increased by anaverage of 3.5% per annum during theve years through 2011-12.

While the industry does not make

prot by denition, it is quite commonfor charities and not-for-protorganisations to have more funds in theiraccounts at the end of a year than at thebeginning. Recent economic turbulencehas underlined the need for organisationsin the industry to possess sufcientfunding reserves to be able to adequatelyrespond to needs during times ofhardship in the community, often in anenvironment of falling levels of incomingfunds. What constitutes an adequate levelof reserves varies greatly, depending on

the line of work that a charity or not-for-prot organisation is engaged in, its coststructure, size, and how variable itsincome streams are.

Key External Driverscontinued

this area enables these organisations toprovide more extensive services.

State funding for health servicesState governments are a signicantsource of funding for community-levelhealth services, which are often providedby not-for-prot organisations.

Natural disastersNatural disasters can have a major short-term effect on the demand for charity andnot-for-prot services. Depending on thetype and location of a natural disaster,public appeals can be launched by welfareor aid organisations to obtain additionalfunds with which to respond.


7/34



Effect of the financialcrisiscontinued

healthcare and hospitals was relativelyunaffected by the global nancial crisis,with demand not faltering. While nancialhardship reduced the capacity of somepeople to purchase these services,extensive government funding of essentialsegments such as these ensured that theseservices remained accessible to the vastmajority of Australians. Not-for-protorganisations offering services in relativelymore discretionary elds, such as arts andsport, were more vulnerable to a fall in

patronage, but services such as kids sportremained in strong demand even asAustralias economy wobbled during2008-09. Demonstrating this, theAustralia Business Arts Foundation foundthat a decrease in corporate support fortheir activities occurred in 2010.

This nancial strain has forced greaterstructural and strategic change bodingwell for the long term, but has still leftthe industry worse off nancially.In particular, mid-size rms have beenstruggling in a new environment where

greater frugality after the nancial crisiscombined with changing regulations and

greater demands for accountability andtransparency are placing greater strainon their resources. Enterprise growthstagnated temporarily, and has only

during 2011-12 started to move in apositive direction. In a commercialenvironment, this would normallylead to a greater occurrence ofmergers and acquisitions, howeverdue to the niche, ideological nature ofrms in the industry, thesecircumstances have seen some rmsbeing forced to shut down entirely.

The resumption of stronger economicconditions in Australia during 2010-11has served to bring greater stability andcondence to donors, government

budgets and the Charities and Not-for-Prot Organisations industry.

New avenues toattracting donordollars

Technology changes and industrycompetition has had signicant effectson the industry through changingperceptions of how charities and Not-For-Prots should work. For instance,while it started as a PR and marketingexercise, the competition amongst rms

in the industry has forced them todisplay greater accountability andtransparency in order to attractpotential donations from individuals,business and the government. Failing todisplay these characteristics is nowlikely to shed the rm in a negative lightand arouse suspicion. Thus, annualreports for these organisations are nowcommonplace. At this stage charities arestill struggling to communicate thismessage, with the Charities AidFoundation Australia nding that 75% ofdonors do not believe that charities

communicate well about how theirdonations are used. However, this trendhas the danger of removing theemotional appeal of these organisationswhich they all ultimately depend on toattract money in the rst place.

Technological changes have also

fostered revision of fundraising methodsby organisations in the industry.Financially, the industry further expectsnew nancial instruments such as debtand equity to be utilised towardsrevenue raising. Mobile applications arenow easily accessible and are able toprovide awareness towards variouscauses and further the aims of variousindustry organisations; particularlyhealth-focused NFPs. Donations viaapplications and texting, alreadyoccurring in the United States, is beinglooked into in Australia currently.

Demand for servicesincreased during the globalnancial crisis, even asrevenue from donations fell


8/34



International context Regularly, comparisons in the media aremade between Australia and otherdeveloped countries in terms ofgovernment aid budgets, governmentcommunity funding or the level ofprivate charitable giving. Suchcomparisons can be misleading, becausethey typically look only at one part of thepicture. Many of Europes nations arehigher taxed than Australia, and as aresult have larger government budgetsto dedicate to domestic welfare

provision and foreign aid. As a result,NGOs often play smaller roles.Other wealthy nations such as Japanand the United States are lower taxed,and more of the aid and welfarefunctions fall to communities and NGOsto undertake. Australia falls betweenthese two styles, with a robust NGOsegment accompanying a governmentthat is moderately active in domesticsocial welfare and is ramping up itsforeign aid spend to reach a target of0.5% of national income. As of 2009,

Organisation for Economic Cooperation

and Development (OECD) data forinternational aid donated bygovernments revealed that Sweden andNorway spent over 1.0% of their nationalincome, while Australias correspondinggure was 0.3%. Japan and the UnitedStates were at 0.2% each.

To place this in context, a 2010report by the Charities Aid Foundation(CAF) found that Australia and NewZealand were the most giving nations inthe world, measured by the average

prevalence of giving money, giving timeand helping a stranger. The CAF reportfound that 38% of Australians volunteertheir time, almost double the gure forDenmark, whose government aidprogram is three times larger thanAustralias as a share of nationalincome. As this suggests, private givingto causes is relatively common and welldeveloped in Australia. This culturalnorm of personal giving needs to bekept in mind when assessing the extentto which the Australian Government is

involved in the same sphere.

Staffed by all walks oflife

A 2010 study by the Australian Instituteof Company Directors (Directors SocialImpact Study) found that over 60% of the1,200 directors surveyed serve on anot-for-prot board, which suggests adeeply entrenched corporate culture ofdonating high-level business andstrategic expertise to the Charities and

Not-for-Prot Organisations industry.The availability of skilled andexperienced oversight to the industry isimportant for setting out and achievingthe mission statements of charities andnot-for-prot organisations. Data fromthe ABS supports this point, withvolunteer rates occurring at higher levelsamongst those of higher socio-economicstatus, as well as those who hold

managerial or professional positions.At the other end of the scale, people

from less lofty backgrounds carry out thevast majority of the work of charities andnot-for-prot organisations. In additionto the workforce formally employed bythe industry, 5.2 million peoplevolunteered a total of 620 million hours

of labour for non-prot organisations ofall types in 2006. This number increasedby 16.4% to 6.1 million in 2010. Thepresence of this huge pool of free labourvastly increases the amount of outputthat an organisation can produce with agiven amount of funding. The industryemploys an estimated 1.06 million paidworkers, with wages averaging just under$47,000 per employee.


9/34



IndustryOutlook

Due in part to many of the industryslargest players having long-term serviceprovision contracts with various levels ofgovernment, the future is looking brightfor the industry. It is uncommon forgovernments to re-centralise outsourcedfunctions back under their direct control,so public-benet services that are currentlybeing provided by organisations in theindustry are likely to remain non-government. Over the ve years through2016-17, industry revenue is forecast to

increase by 4.0% per year to reach $128billion by the end of the period.Growth in the industry will be

underpinned by demographic andeconomic fundamentals such as theageing of the population and the recoveryof the economy. Australias economy hasnegotiated the global nancial crisiswithout falling into technical recession.The forecast smoother growth conditionsover the next ve years are expected tomake it easier for charities and not-for-prot organisations to budget their

nancial and human resources in orderto operate efciently and effectively.

As the organisations cave to pressureto become more efcient, utilise morebusiness practises and ultimately becomemore business savvy, more organisationswill end each year with greater amountsof reserve funds, and thus become moreprotable. However, since the industrystill relies heavily on government grants,organisations will be unable to move

outside of the industry and becomeself-reliant over the next ve years.

The role ofgovernment

With government funding representingover a third of the industrys source ofincome, the policy behaviour ofgovernments is of distinct relevance tocharities and not-for-prot organisations.While shifts in the state politicallandscape around Australia already

started to occur in 2010-11, the recentnarrow victory by the Federal GillardGovernment is likely to bring a degree ofstability to federal funding arrangements.Though the minority FederalGovernment may not easily passcontentious legislation, the types ofservices typically provided by charitiesand not-for-prot organisations are notin the foreground of this. A notableexception is the proposed hospitalreforms, which involve centralisingresponsibility for hospitals from stategovernments to Canberra. The effect onnot-for-prot operators of hospitals,some of which are the industrys largest

companies, will depend on whether thecentralisation of responsibility forhospitals is accompanied by alterationsto funding levels.

The 2011-12 Budget has nonethelessbrought signicant reforms to theindustry, with an intention to streamline,

simplify and enhance the regulationsurrounding the industry. Specically,these reforms include a tax on unrelatedcommercial activity (already in placesince July 2011), the establishment of anational not-for-prot regulator for July2012, and the establishment of a formaldenition of the word charity inAustralian law by July 2013.

In November 2010, Foreign MinisterKevin Rudd announced the rst fullreview of Australias aid program inve years, to be undertaken by anindependent panel in 2011. The focusof the review was aid effectiveness,specically in the area of poverty

%c

hange

15

5

0

5

10

1804 06 08 10 12 14 16Year

Industry revenue



10/34



The role ofgovernmentcontinued

alleviation. The ndings of the revieware expected to inform thegovernments policies in the area.The review can be seen as timely, inthe sense that Australias aid budget isexpected to double between 2010 and2015, reaching $8.6 billion. Treasuryhas advised the government thatscaling up existing activities is unlikely

to deliver value for money. As of 2010,about 7.0% of the governments aidprogram was delivered via NGOs onthe ground. If this percentageincreases during the next ve years,Australian NGOs will have incentive toexpand their capacity, in terms of bothknowledge and resources, toimplement these projects.

Looking for biggerfishThe recognition that businesses are ableto donate larger amounts thanindividuals is being picked upthroughout the industry, with strongercompetition emerging in the industry forbusiness-sourced dollars. Previous tothe global nancial crisis crash in 2006and 2007, private donations to theindustry were particularly high, nearlydoubling from previous amounts in2005 thanks partly to businessdonations. While donations from

business leaders and businessesthemselves dropped signicantly duringthe crisis, these levels have started torecover in line with business condence.

Notably, the most successful lobbyistsfor business donations will be largerorganisations in the industry.Their economies of scale and ability topresent their organisation as accountableand transparent will appeal to a businessaudience, while smaller organisationswill struggle to present such an image.

Expanding lines ofwork

Being the enormously diverse industrythat it is, the Charities and Not-for-ProtOrganisations industry contains areas thatare undergoing signicant growth. Thisgrowth can be generated by an organicexpansion of demand for a product orservice, or by the increasing involvementof the industry in a service that waspreviously the domain of government.An example of the latter can be found in

public housing, with the AustralianBureau of Statistics (ABS) forecasting thatnot-for-prot organisations will own ormanage about 35% of Australias publichousing stock by 2014.

Another area of need that is expected tocontinue its growth trajectory is theprovision of services relating to health.The ageing of the Australian population iscreating organic demand for services such

as palliative care, nursing homes, mealson wheels and transport. With the FederalGovernment having to spend aconsiderable portion of the next ve yearsgetting its budget back into surplus, it isexpected that charities and not-for-protorganisations will be given theopportunity to tender for a range ofservice-provision contracts, in addition toproviding volunteer support to the elderly.

Education is another eld for potentialgrowth, with greater numbers ofAustralian families seeking to send theirchildren to kindergartens and schoolsoutside of the public education system.No longer the domain of inner city elites,demand for independent schooling isdeveloping on urban fringes, creatingopportunities for not-for-prot educationservices to be delivered in new areas.

A culture of giving The notion of volunteerism in Australiais strong by international standards andthis is expected to remain the case for

the foreseeable future. ABS data from2010 suggested that there were 6.1million volunteers in Australia, providing


11/34



A culture of givingcontinued

free labour to charities and not-for-protorganisations. This number is expectedto grow in the next few years, alreadygrowing 16.4% from 2006. While theseorganisations may not be run in aprot-maximising manner, the capacityto call upon volunteer labour representsa meaningful competitive advantagewhen pitted against prospectivecorporate competitors for governmentcontracts or service provision.

The nature of Australian culture

represents a challenge for charities andnot-for-prot organisations in terms offuture fundraising capacity. A 2011 studyundertaken by the Australian Centre forPhilanthropy and Nonprot Studiessuggests that the tall poppy syndromethat has prevailed in Australia for manydecades means that charitable giving isoften undertaken privately by donors and

is not a topic of conversation or outwardpride. One effect of this is that peer groupbehaviour, one of the main motivators foran individuals action, may not inducecharitable giving to the extent that it doesin other nations. Organisations in theindustry are thus faced with the task ofincreasing the prominence ofphilanthropy and charitable giving inAustralian culture. By encouragingdonors to display evidence of their giving,and discuss it with others, it is expected

that new donors will commence giving,unlocking additional funds for theindustry. A recently popular example ofthis is the charity initiative Movember,which as a tongue-in-cheek actionencourages men to grow moustaches andconsequently allows people todemonstrate their welfare concernsthrough their involvement.


12/34


Industry PerformanceIndustry revenue and value added haveoutpaced national GDP growth

Fiscal restraint by governments in the wake of the

nancial crisis has created new opportunities

Emphasis on government policy concerningnon-institutionalised care will directpublic funding to the industry

Life Cycle Stage


30

25

20

15

10

5

0

5

10

10 100 20

5 155 25 30

%

Growthofprofit/GDP

% Growth of establishments

DeclineCrash or Grow?

Potential Hidden GemsFuture Industries

Quality GrowthHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

Time WastersHobby Industries

MaturityCompanyconsolidation;level of economicimportance stable

Shake-out

Shake-out

Quantity GrowthMany new companies;minor growth in economicimportance; substantialtechnology change

Key Features of a Growth Industry

Revenue grows faster than the economy

Many new companies enter the market

Rapid technology & process change

Growing customer acceptance of product

Rapid introduction of products & brands

Education

Health Services

Welfare Services and Fundraising

Sport Organisations and Other Sports Services

Religious Organisations and Services

Charities & Not-for-Profit Organisations


13/34



Industry Life Cycle With government budgets tight in thewake of the global nancial crisis, charitiesand not-for-prot organisations areperforming important roles in Australiansociety. Population growth and ageing areproving to be strong organic growthdrivers. The Federal Governmentsdecision to not heavily cut funding in mostof the industrys segments has allowedorganisations to keep meeting communityneeds. With the national economyreturning to a growth pattern in 2010-11,

private donors are increasing theircontribution to industry revenue.The broader Australian trend, which

has prevailed over the past 15 years, istowards the involvement of private sectorand not-for-prot organisations in theprovision of services that weretraditionally the domain of government.This includes functions as varied as roadbuilding and utilities, but in activitiesrelating to this industry, an increasingpercentage of Australias school studentsare outside of the public school system,more Australians are using private healthinsurance to be treated at private

hospitals, and the Federal Government isin the process of increasing its foreign aidbudget to 0.5% of national income.

This industryis Growing


14/34


Products & Services In a technical sense, charities and not-for-prot organisations in Australia arguablyconstitute an operational method morethan an industry. The types of productsand services offered by organisations inthe industry vary immensely, ranging

from a sausage sizzle to a PhD. AustralianBureau of Statistics (ABS) data has beenused to classify the types of products andservices offered by not-for-protorganisations into different segments.

Not-for-prot culture and recreationorganisations include hospitality clubs,sporting organisations, performing artsorganisations, libraries and museums.This segment employs over 10% of theindustrys workforce and earns abouthalf of its revenue from the provision of

services. For every employee working inthe industry, there are approximatelyve additional volunteers, with labourcosts constituting about one-third of thesegments cost structure.

Education and research is aparticularly labour-intensive segment ofthe industry, employing almost 20% ofthe industrys workforce with a ratio ofapproximately one volunteer per paidworker. Over half of this segmentsincome is derived from local, state andfederal funding, with income fromservices accounting for an additionalthird. Increasing amounts of youngAustralians in non-government schools

have fuelled growth. About two-thirds ofthe segments expenses relate to wages.

In 2007, there were about 100 not-for-prot hospitals in Australia, employing5.0% of the industrys workers.In addition, there were about 800

not-for-prot health organisations,employing 15% of the industrys workers.This segments funding is heavily relianton government, which provides abouttwo-thirds of revenue. Due to the moredemanding skill sets often required towork in this segment, there are relativelyfew volunteers per paid worker.

The social services segment of theindustry includes youth and family welfareservices, child care, services for thedisabled and elderly (excluding high-care

residential services), refugee and homelessassistance, emergency accommodationand shelters. The segment employs aboutone-quarter of the industrys workers,predominantly in casual or part-timeroles. In addition, there is a ratio ofapproximately one volunteer per paidworker. This segment receives about halfof its income from government, andlabour costs account for 60% of expenses.

Other key industry segments includereligion, business and professionalassociations and unions, andorganisations that provideenvironment, development, housing,employment, law and philanthropic

KEY BUYING INDUSTRIESM Government Administration and Defence

Charities and not-for-profit organisations may supply products and services to various levels ofgovernment, depending on their line of work.

Z9901 Consumers in AustraliaPrivate consumers purchase services provided by not-for-profit and charitable organisations,such as education, healthcare and cultural activities. In many instances, these services areprovided to needy individuals free of charge.

KEY SELLING INDUSTRIES

M Government Administration and DefenceGovernment grants and funding are a significant source of resources for charities and

not-for-profit organisations.Z Consumers

Private donors give their money or volunteer time to charities and not-for-profit organisations.

Products & MarketsSupply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations

Supply Chain


15/34


Products & Markets

DemandDeterminants

The industry provides services that areoften complementary to local, state andfederal government. As a result, prevailinggovernment policy and funding levels inany given year represent a big factor indetermining industry demand.

In addition to the scale of thegovernments direct involvement in theindustry, industry participants in healthcare and hospitals count population size,ageing, natural disasters and epidemicsas important determinants of demand.

Education organisations, on the otherhand, are more directly inuenced bythe birth rate, year 12 retention ratesand unemployment. Charities andnot-for-prot organisations undertakingwelfare work are likely to have theirdemand levels inuenced by theunemployment rate, divorce rates andbroader economic growth. As servicesprovided by charities and not-for-protorganisations are sometimes basicversions of more-expensive servicesprovided by the private sector, broadersocietal trends have a bearing on thelevel of demand for the basics.

Unemployment crucialThe level of direct government incomeand other assistance provided to low-income or disadvantaged households(e.g. unemployment, aged pension,family, parental, child care, disability anddisability carer benet payments and taxexpenditures) can reduce the need amongsome people for this industrys services.

Households with low incomes aremore likely to use most welfare andcommunity health services, while

households with higher levels ofincome are more likely to donate cash,goods and labour to welfareorganisations. However, donationsfrom wealthier households tend to bedistributed among a variety of causes,including international ones, meaningthat any increase in income and wealthdisparity in Australia is likely toincrease demand for industry servicesand place greater strain on the abilityto deliver those services.

The incidence of single parents,family breakdown, domestic violenceand residential property eviction affects

Products & Servicescontinued

services. Due to the unusually broadarray of industry activities, theremaining components of the industrysproducts and services do not lendthemselves well to further

segmentation. Examples of otheractivities and services undertaken bythe industry include cooperativeschemes, manufacturing, wholesaling,retailing and operating cemeteries.

Products and services segmentation (2011-12)

Total $105.0bn

26%Other

4.2%Environment, development, housing,

employment, law, philanthropic

21%Education and research

2.6%Business and professionalassociations and unions

1.7%Religion

17.3%Culture and recreation

15.4%Social services

11.8%Hospitals and health



16/34


Products & Markets

Major Markets The markets for charities and not-for-protorganisations are all dened by intereststhat are seen as commercially unviable andlack interest from government bodies butnonetheless is seen by a signicant amountof people as an important product orservice. As a result, the industry is denedmore by its business model rather than itstarget market, and thus the market iswide-ranging in nature.

The industry, however, is most oftenassociated with assisting thosedowntrodden in the community.

Initiatives towards these interests makeup 63.8% of all industry revenue spent.Breaking down this sector further,people suffering from physicaldisadvantages draws 20.6% of totalindustry revenue. These people includethose who require assistance with adisability or mental health, and servicesfor aged and elderly. People unsatisedwith living standard situations draw18.4% of industry revenue, allocatingmoney towards homelessness,economic development initiativesoutside of Australia (foreign aid), andjob training programs. Programsfocused towards individuals dealing

with trauma make up 13.5% of industryrevenue. Themes in this area includedomestic violence and sexual assaultassistance, and addiction.Financially disadvantaged individualsdraw 13.3% of industry revenue,providing many services includingscholarships, subsidised legal services,and nancial support services.

Outside of these causes, most otherprograms and organisations in theindustry target niche interests that arenot achievable in a commercial

DemandDeterminantscontinued

demand for counselling services, publichousing and other crisis assistanceservices. In addition, the extent to whichcarers of disabled people use formalrespite accommodation services, whichis affected by the cost of these services(affected by the level of governmentfunding) is of critical importance, andpeople aged over 75 years are morelikely to be disabled relative toyounger people. In-house carers oftenwork on a part time or voluntary basis

and rely on other industry services,such as meals on wheels.

Voluntary work and government aidThe availability and willingness of friendsand family to assist those who suffermisfortune is of critical importance to theindustry. Many disabled or mentally illpatients primary carers are spouses,

parents or children, and the level ofgovernment support for informal carershas a marked impact on the ability ofthese people to feasibly perform such a

function, and consequently on the level ofdemand for external health, welfare,housing and social assistance. The cost ofattaining care for friends or family iscritical in establishing the level of demandfor industry services. However, cost isclosely linked to the level of governmentassistance, which often increases if thedemand for services goes up.

Households with lowincomes are more likelyto use most welfare andcommunity health services

Social trends in Australia relating toCharities & NPOs, 2010-11Activity Percentage of Population

Used health services 80

Religion affiliation 65

Cultural venue use 41

Welfare service use 29

Sports club member 26

School attendance 15.5

TAFE attendance 8

trade union member 8

Attending university 4

SOURCE: IBISWORLD


17/34


Products & Markets

International Trade With the majority of organisations in theindustry focused on community-levelwork, international interaction in theprocess of their fundraising or delivery ofservices is generally conned to thelargest organisations, and those involvedin international aid and developmentactivities. Major aid destinations fromAustralia tend to be towards either Pacicor East Asian countries, or multilateralorganisations. While Australias largesteducational institutions are mainly publicowned, some not-for-prot institutionscater to international students, thoughservice exports do not comprise a major

part of overall industry revenue. Due toAustralia being a wealthy country withstrong domestic institutions, the countrydoes not import any meaningful amountof aid or not-for-prot services.

What is important to note is that theAustralian government has chosen toincrease its foreign aid commitments to0.5% of GNI by 2015-16. Since during2005 there has been a dramatic increasein AusAIDs grants to the industry, thiswill be expected to grant a strong revenueboost to the industry over the next severalyears, raising the stature ofinternationally focused charities.

Major Marketscontinued

framework since the goals of theprograms and organisations areconcerned about achieving non-commercial goals. This broad categorymakes up 31.8% of industry revenue.General niche interests make up 15.3%of industry revenue, with examples ofsuch interests include arts andcultural programs, sports clubs, aswell as zoos and aquariums. Otherniche interests relate to ideologicalcauses (10.6%), including political,

religious and social goals. Also,communal infrastructure programsattract 5.9% of industry revenue,including social clubs, professionalassociations and trade unions.

Finally, programs and organisations

focused towards scientic progress makeup 4.4% of industry revenue.

In terms of usage, sectors in theindustry that see the most activity arehealth services and religiousorganisations, used by 80% and 65% ofthe population in the past year,respectively. Health services, inconjunction with an ageing population,are expected to be utilised on a moreregular basis, while religious services areexpected to follow a historical decline in

terms of afliation. Notably, communityservices are used by 29% of thepopulation due to its broad nature. Also,the level of investment towards educationservices, similar to health services, onlycovers a total of 35.5% of the population.

Major market segmentation (2011-12)

Total $105.0bn

20.6%Physically disadvantaged

10.6%Ideological causes

16.4%Economic development

5.9%Communal infrastructure

4.4%Scientific progress

15.3%General niche interests

13.5%Trauma

13.3%Financially disadvantaged


Level & Trend

Exports in theindustry are Lowand Increasing


18/34


Products & Markets


TAS2.5

WA11.1

QLD21.9

VIC22.3

NSW30.9

NT2.0

SA7.6

ACT1.7

Establishments (%)

Cold Zone (


19/34


Products & Markets

Business Locations As an employer of one million Australianworkers in a wide range of elds, thegeographic distribution of revenue for theindustry closely mirrors other nationalmeasures, such as government revenueand population distribution.

New South Wales is the nationslargest state in terms of population andeconomic output, and there aresignicant numbers of large not-for-prot organisations headquartered inSydney. Hospital, health, cultural and

educational not-for-prot organisationsall have a major presence in New SouthWales proportional to population.Victoria can be summarised in much thesame way, with its high populationdensity and full breadth of servicesattracting large-scale involvement, oftenon large government contracts.

States with low population densitiesand remote areas attract charities andnot-for-prot organisations for somewhatdifferent reasons. Low or scatteredpopulations make service delivery less

efcient and often not commercially viableat the standards that people may be usedto in large capital cities. The industrysorganisations are more likely to be

involved because of this reality, deliveringservices to communities of lesser interestto big business. The inefciencies ofundertaking these tasks are generallysubsidised by the government in the formof grants. Recently, rurally focused rmshave noted an unintentional move

towards providing assistance withinformation and communicationstechnology due to the technological dividebetween metro and non-metro areas.

Percentage

40

0

10

20

30

W

A

ACT

NS

W

N

T

QLD S

A

TAS

V

IC

Establishments

Population

Distribution of establishments vs. population



20/34


Cost Structure

Benchmarks

The cost structure of a not-for-prot

company looks different to a prot-geared company. Charities and not-for-prot companies do not distribute anyof their operating surpluses tomembers, and their reason forexistence is not to maximise margins.That is not to say that a not-for-protcompany cannot be in a situation whereits level of income exceeds its level ofexpenses over a given period. It is quitecommon for organisations in theindustry to deliberately underspendtheir incomes. The reason for this isthat prudently run organisations ofmost types seek to maintain a nancialbuffer against unforeseen events.

During times of economic or political

upheaval, the industry may nd that itslevel of income unexpectedly dips atprecisely the same time that its servicesare most crucial to the smooth functioningof society. By being able to call on nancialreserves, these organisations will be betterpositioned to achieve their organisationalobjectives. While there is considerablevariation in operating margins betweenorganisations and segments in theindustry, IBISWorld estimates thatabout 2.2% of annual income is currentlybeing allocated to reserves.

The largest expense for the industry isthat of wages. Comprising almost half ofthe industry cost structure, paid workers

Key Success Factors Ability to attract localsupport/patronageA large number of organisationsin this industry are community-based, and rely heavily on thecommunitys support.

Ability to effectively manage riskRevenue streams for many charitiescan be volatile, and depend oneconomic conditions or one-off events.Many larger charities and not-for-prot organisations set aside cashreserves or other investments to reduceshort-term funding risks.

Optimum capacity utilisationCharities and not-for-prot organisationsoften operate on tight budgets and usevolunteer labour. Using both nancialand human resources efciently is veryimportant in such a situation.

Ability to raise revenue fromadditional sourcesIn addition to traditional forms offundraising and revenue from servicedelivery, many organisations deriveconsiderable funding fromgovernment grants, deceased estates,and corporate giving programs.

Market ShareConcentration

There are over 600,000 not-for-protorganisations currently operating inAustralia, including about 40,000economically signicant ones.Accordingly, industry concentration levelsare very low, with the four largest playersin the industry accounting for well under10% of industry revenue between them.Many organisations are communityfocussed and operate only in their localareas. Another important factor is thelarge range of products and services

offered by organisations in the industry.Because organisations in theindustry generally exist for non-

commercial reasons, commercial logicwhen analysing merger andacquisition potential is of little use.Many charities and not-for-protorganisations possess self-sufcientorganisational cultures, which do notalways translate well to consolidation.While many charities have boardmembers with high levels of businessacumen, it is generally not deployedtowards assessing industryconcentration. Recent economic

difculties in Australia associated withthe global nancial crisis had minimaleffect on industry consolidation.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalisation

Level

Concentration inthis industry is Low

IBISWorld identifies250 Key SuccessFactors for abusiness. The mostimportant for thisindustry are:


21/34


Competitive Landscape

Cost StructureBenchmarkscontinued

in the industry undertake tasks rangingfrom driving vehicles to performing heartsurgery. Wages as a percentage ofindustry revenue have risen in recentyears, with increasingly qualied workersoccupying non-volunteer positions atcharities and not-for-prot organisations.

While organisations in the industry aremajor recipients of grants, many of themthemselves allocate grants and otherpayments. This can relate tosubcontractors and smaller industry

participants who undertake work forlarger ones. Depending on anorganisations line of work in theindustry, purchase expenses can includemedical supplies, educational materials,food, or equipment hire and purchase toconduct cultural or sporting events.

Depreciation and amortisationexpenses account for just under 5.0% ofindustry income. During 2006-07,organisations in the industry undertookan estimated $8.7 billion in new capitalexpenditure including land, withsurpluses from current operations beingthe main source of funding. It iscommon for smaller charities andnot-for-prot organisations to beprovided with free or nominallyexpensive equipment and facilities by

benefactors or public bodies, reducingdepreciation and rental costs belownormal commercial levels for equivalentoperations. Other expenses incurred byorganisations in the industry includestandard administrative costs, trainingand recruitment expenses.

Sector vs. Industry Costs

Profit

Wages

Purchases

Depreciation

Utilities

Rent

Other

Average costs of

all industries in

sector (2011-12)

Industry costs

(2011-12)

0

20

40

60

P

ercentage

ofrevenue

80

1006.40

26.6

3.8 2.23.5

41.2

16.2

24.6

4.03.34.3

16.8

47.0



22/34



Barriers to Entry Entering the industry may seem easy

enough, particularly on a small scaletha does not require a signicant incomestream. Start-up costs can be negligiblefor community-based service providers,and there is the theoretical capacity totap into a pool of volunteer labour tominimise expenses. However, it is notquite so simple for charities and not-for-prot organisations that seek tooperate on a larger scale.

The high proportion of non-protrms already gaining signicant taxconcessions makes accessing fundingfrom federal, state or localgovernments increasingly difcult,particularly as governments are

increasingly inclined to offer fundingto larger, privatised services that offera broad range of services to numerousgeographic regions. In addition, forthose who do gain government

Basis of Competition In recent years, there has been a growingtrend towards organisations outsourcingsome or all fundraising activities toconsultants. Increasingly, donors andpotential donors are requiringinformation on the costs of charitiesprograms and are directing donations tothose charities that are efcient and candirect a high proportion of the fundsthat they raise directly to the peoplerequiring welfare assistance.This increasing level of awareness among

donors of charity and aid effectiveness iscompelling organisations to try to outdoeach other on this measure.

With organisations in the industrymotivated by service to recipients ratherthan returns to investors, the manner ofcompetition differs from an industrydriven by commercial forces. That is notto say that these organisations do notstrive for excellence and prominencehowever, with abundant examples ofcompetitive behaviour evident in varioussegments of the industry.

With government funding such animportant part of the industrys income,the competition for lucrative long-termtenders can be erce among charities andnot-for-prot organisations. Failure toobtain or retain important governmentincome sources has the potential to forceorganisations to sharply cut back their

staff and output, or merge with otherorganisations. There is also competitionin raising funds (e.g. donations andrafes) and in obtaining volunteerlabour, both of which are used tosupplement any funding initiatives.In addition, present in many parts of theindustry is competition mainly based onthe cost and quality of service, and onmarketing the benets of services offeredto the community generally.

In competing for donations and

government funding, organisations alsocompete with other welfare and charitableservices (as well as with the arts andsporting organisations). There is a niteamount of private charitable donationsthat are made each year, and all not-for-prot organisations compete with oneanother for those donations.Community services organisations tend tofocus fundraising initiatives on localefforts, rather than broader drives such asthose undertaken by groups like WorldVision. Government budgets each year are

nite in size, with the different segments ofthe industry all seeking to be allocated asmuch funding as possible. This oftenmeans that lobby groups for hospitalspending will be seeking money that maycome at the expense of the arts, educationor other lines of business also catered to bycharities and not-for-prot organisations.

Level & Trend

Competition inthis industry isMediumand thetrend is Steady

Level & Trend

Barriers to Entryin this industry areHighand Steady

Barriersto entry checklist LevelCompetition Medium

Concentration Low

Life cycle stage Growth

Capital intensity Low

Technology change Medium

Regulation and policy Medium

Industry assistance High



23/34



IndustryGlobalisation

The vast majority of the organisations inthe industry are small scale and operate inlocal communities. Most of the sectors thatnot-for-prot organisations work in, suchas sport and recreation, the arts, andcommunity health care require little to no

coordination across national borders.The most notable exception to this relatesto numerous charities and not-for-protorganisations involved in international aid

and development. Organisations such asWorld Vision, the Red Cross, and Care, areglobal organisations dedicated to usingskills and resources from developedcountries such as Australia to benetpeople living in poverty and conict

overseas. In addition to poverty alleviation,these organisations are commonly at theforefront of natural disaster responseprograms around the world.

Barriers to Entrycontinued

funding, maintaining governmentcontracts and tax concessions can beexpensive, placing greater pressure onindustry entrants attempting to gainequal status without the necessaryfunds to access these concessions.

Contracts offered by state and federalgovernments for community services aremost commonly medium-to-long term(i.e. ve years or greater), meaning thatnew entrants must have a speciccontract in mind when entering the

industry, or will be forced to competewithout public funding, assistance orclients for a prolonged period. Theindustry experiences a high level of

regulation and often stringentrequirements must be met to gain allnecessary licences and accreditations tooperate in the industry, furtherincreasing the costs for new entrants.

The reputation of establishedorganisations in the industry is a very realbarrier to entry. Many iconic charities andnot-for-prot organisations have been inAustralias national consciousness fordecades and potential donors are familiarwith their line of work, credibility and

previous campaigns. As a result, a newentrant to the industry may nd it difcultto raise funds in a similar industry nicheto an established organisation.

Level & Trend

Globalisation in this

industry is Lowandthe trend is Steady


24/34


Other Companies The sheer volume of charities and not-for-prot organisations operating in Australiais such that even large not-for-prothospital operators such St John of GodHealth Care account for barely 1.0% oftotal industry revenue. It is estimated thatthere are approximately 50,000economically signicant not-for-protorganisations operating in Australia today.

St John of God Health CareEstimated market share: 1.0%

St John of God Health Care is a nationalnot-for-prot Catholic healthcareprovider, with facilities and services inWestern Australia, Victoria, New SouthWales and New Zealand. The organizationemploys about 8,900 people nationallyand operates 14 hospitals (predominantlylocated in regional areas), with 2,086 bedsand St John of God Pathology.

In the four years through 2008-09, StJohn of God Health Care spent $221.3million on redevelopments. In 2008-09,St John of God Health Care generated

total revenue of $804.7 million (up 6.0%on 2007-08), with hospitals accountingfor $678.8 million (up 5.5% on 2006-07),pathology accounting for $102.7 million,and other services for $23.2 million.Hospital revenue grew from $411.2million in 2004-05 to $678.8 million in2008-09, representing averageannualised growth of 10.5%. There were88,565 inpatient separations in 2008-09(up 2.2% on 2007-08) and 95,836day-case separations (up 7.4%). Capital

expenditure amounted to $92.4 millionin 2008-09, up 25.8% on 2007-08.

St John of God Health Care acquiredPathCare Consulting Pathologists in

November 2004, a hospital in Bendigo,VIC, in February 2005 and a psychiatrichospital in Dandenong, VIC, in March2005. A merger between St John of GodHealth Care and the Hospitaller Order ofSt John, effective 1 July 2007, addedpsychiatric beds, disability supportservices and a youth service to the group,and extended the operational reach toNew South Wales and New Zealand.

Mater Health Services

Estimated market share: 1.0%Mater Health Services, established by theSisters of Mercy in 1906, operates anetwork featuring seven hospitals inBrisbane (three public and four co-located)and employs about 4,850 staff. Mater wasincorporated in 2002 as MaterMisericordiae Health Services BrisbaneLtd. The company generated sales revenueof $839.4 million in 2009-10 (up from$423.9 million in 2005-06) and produceda net surplus of approximately $28.6million (up from $3.0 million in 2005-06).

Australian Red Cross SocietyEstimated market share: 0.9%Australian Red Cross Society is anAssociation associated with theinternational Red Cross Red CrescentMovement that operates in 187countries, making the worlds largesthumanitarian organisation. In Australia,the movements aim is to improve livesand reduce vulnerability in Australiansociety. In practical terms, this entails

distribution of funds and resourcestowards assisting disadvantaged anddisaster areas in Australia and aroundthe world, including Aboriginal and

Major CompaniesThere are no major players in this industry | Other

St John of God Health Care Inc financial performance

YearRevenue

($ million) (% change)NPAT

($ million) (% change)

2007-08 759.1 N/C 38.2 N/C

2008-09 804.3 6.0 29.6 -22.5

2009-10 895.1 11.3 39.8 34.5

2010-11 942.8 5.3 26.9 -32.4

SOURCE: IBISWORLD


25/34


Major Companies

Other Companiescontinued

Torres Strait Islander people andfostering community inclusion.The most signicant and obviouspresence the society has within Australiais their Blood Donor Service, which iswhere the organisation generates themajority of its income from.

The Societys Blood Donor Service hasbeen increasingly marketed towardsregular blood donors and general societyand as a result has seen increaseddividends for the organisation. Over the

three years to 2011, revenue from theirblood services segment has increased byaround $140 million.

Their humanitarian services have alsobeneted, with the success of fundraisingefforts ever increasing, particularly dueto several signicant disasters around theworld and in Australia in recent years,including the Victorian Bushres in2008-09, the Queensland Floods in2010-11, the Japanese Tsunami in2010-11 and the Haiti Earthquake in2009-10, among others. The signicant

amount of outreach for the VictorianBushres in particular saw revenue levelsskyrocket in 2008-09, like otherAustralian humanitarian organisations,raising their revenue levels above $1billion that year and increasing theirmarket share temporarily to 1.3% from0.7% the year previous. Since thenmarket share has remained somewhatsteady at its current level.

Salvation Army Australia

Estimated market share: 0.7%The Salvation Army, which splits itsoperations into its southern andeastern territories, is a major providerof emergency services, employmentservices, meals, aged care andrehabilitation services to people whohave problems with alcohol, drugs andgambling. Other activities include theprovision of evangelical programs.The combined assets of the Australianterritories are worth over $1.2 billion,split between social-welfare activitiesand church activities.

In 2008, the Salvation Armys easternand southern territories assisted 1.5

million people. Each week theseorganisations provided, among otherthings, rehabilitation support for 1,200people; 4,000 counselling calls;employment services to 7,000 people;180,000 meals; and 20,000 food vouchers.

During a downturn, such as oneexperienced during 2008 and 2009,charitable giving tends to slip markedly.However, the high level of governmentfunding for large groups such as theSalvation Army ensures that it is

insulated from the worst of this.Moreover, there is a far lesser prevalenceof Australian charities and endowmentsinvesting on the stock market, preventingthe kind of nancial collapse experiencedby charities in the United States.

In 2008-09, government fundingaccounted for 48.6% of total operatingincome; legacies and donations 27.5%;social service client contributions 10.6%;dividends and interest 5.8%; and otherincome 7.5%. Expenses from operating

activities were broken down into socialprograms (19.9% of expenses fromordinary activities); evangelical and otherprograms (24.9%); aged care (17.1%);employment and youth training (28.1%);recycling operations (8.2%) and the RedShield Appeal (1.8%).

Epworth HealthCareEstimated market share: 0.5%Epworth HealthCare, a not-for-protorganisation, is the largest privatehospital operator in Melbourne, throughthree campuses. Epworth generatedrevenue of about $461 million in 2009-10and had over 2,700 employees.

Salvation Army Australia EasternDivision financial performance

YearRevenue


2006-07 292.1 N/C

2007-08 293.0 0.3

2008-09 341.7 16.6

2009-10 306.9 -10.2

2010-11 328.4 7.0

SOURCE: ANNUAL REPORT


26/34


Major Companies

Other Companiescontinued

The organisation has improved itsnancial performance in recent years andhas completed plans for major buildingworks. In October 2006, HealthSouthCorporation of the United States closed atransaction to sell Cedar CountyRehabilitation Hospital in Melbourne andrelated assets to Epworth Foundation andING Management Ltd. The Cedar Courtassets include a 74-bed rehabilitationhospital and outpatient centre, astandalone rehabilitation facility at Oasis

Leisure Centre and an occupationalmedicine rehabilitation therapy business.

World Vision AustraliaEstimated market share: 0.4%Founded in the United States in 1950,World Vision is a major Christianfundraising and charitableorganisation, with a particular focus onyouth poverty, especially in Africa.Working on six continents, WorldVision is one of the largest Christianrelief and development organisations

in the world, with a budget of over $1.5billion per year. The groups totalrevenue, including grants, productsales and foreign donations, was about$2.6 billion in 2008.

World Vision International operates asa federation of interdependent nationalofces, each overseen by their own boardsor advisory councils. Each ofce and itsmembers have created a common missionstatement. Through an ongoing system ofpeer review, each national partner is held

accountable for and abides by commonpolicies and standards.The groups Australian operations

reached revenue of about $346.7 millionin 2008-09, which was a drop of $7.0million on the previous years gure indicating that donations overChristmas were severely curtailed bycollapsing consumer sentiment in thewake of the crash of global nancialmarkets in September.

The largest share of the groupsrevenue, unlike many other charities in

Australia who rely on governmentfunding, comes from the activity thatthey pioneered: child sponsorship.This method involves individuals orgroups paying a predetermined amountper week or month to World Vision,which is then assigned to a specic childsschool or village, with whom the donor isencouraged to interact. This program ofdeveloping an awareness of the effect ofdonations has proven successful as adriver of continued donations.

Salvation Army Australia SouthernDivision financial performance

YearRevenue


2007-08 285.9 N/C

2008-09 295.3 3.3

2009-10 285.4 -3.4

2010-11 334.6 17.2

SOURCE: ANNUAL REPORT


27/34


Capital Intensity With so much of the industrys activitiesfocused on the provision of services,wage costs account for a large amountof the industrys revenue. Many of theseservices are delivered in the community,rather than in institutions (i.e. reducingthe level of capital needed to deliverservices). The presence of hundreds ofthousands of volunteers in the industryreduces wage costs from what they mayhave otherwise been, but there remainalmost a million paid positions in

various administrative, managerial andoperational roles. While there are a highnumber of volunteers in the industry, itis often necessary to pay a salary inorder to get either the specic expertiseor time commitment required by anorganisation. Thus, the capital-to-

labour ratio is 10.9:1, thus signifyingthat for every $1.00 spent on capital,$10.90 is spent on labour.

Operating ConditionsCapital Intensity | Technology & Systems | Industry Volatility

Regulation & Policy | Industry Assistance

Tools of the trade: Growth strategies for success


LabourIntensive

CapitalIntensive

Change in Share of the Economy

New Age EconomyRecreation, Personal Services,Health and Education.Firmsbenefit from personal wealth sostable macroeconomic conditionsare imperative. Brand awarenessand niche labour skills are key toproduct differentiation.

Traditional Service Economy

Wholesale and Retail.Relianton labour rather than capitalto sell goods. Functions cannotbe outsourced therefore firmsmust use new technologyor improve staff training toincrease revenue growth.

Old Economy

Agriculture and Manufacturing.Traded goods can be producedusing cheap labour abroad.To expand firms must mergeor acquire others to exploiteconomies of scale, or specialisein niche, high-value products.

Investment EconomyInformation, Communications,Mining, Finance and RealEstate. To increase revenuefirms need superior debtmanagement, a stablemacroeconomic environmentand a sound investment plan.

EducationHealth Services

WelfareServices andFundraising

Sport Organisations and Other Sports ServicesReligious Organisations and Services

Charities & Not-for-Profit Organisations

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labour unit

Charities &Not-for-ProfitOrganisations

Special Reportsfor Australia

Economy

Level

The level of capitalintensity is Low


28/34


Operating Conditions

Revenue Volatility As an industry that derives a signicantshare of its funding from private donationsand philanthropy, revenue can suffer

during periods of economic strife.Another main source of funding isgovernment grants, which can uctuatedepending on government policy, theelectoral cycle, and competition from othercharities and not-for-prot organisations.

Government grants are a steadier

medium-term source of funding fororganisations in this industry, but thecapacity to access these grants varies.

During the economic downturn in 2008and 2009, government-funding levelsremained solid, while private donationlevels dipped over a 12-month period.By 2010-11 however, private donationconditions had become stronger as donorsfelt surer about their own circumstances.

Technology& Systems

The level of technology usage byorganisations in the industry variesconsiderably, primarily due to scale,funding levels and the type of servicethat the charity or not-for-protorganisation provides. A large part ofthe activity in the industry focuses oninterpersonal interaction and providinghands-on care. Users (or customers) ofindustry services such as aged care,welfare and education often have lowincomes and a low level of exposure to

technology (e.g. low computer andinternet use), and often require personalassistance with information provisionand dissemination. Organisationsoperating on a large scale need to haveadequate accounting and managementinformation systems in place to allow ananalysis of the client base, and theincome from and costs of providing eachservice to specic types of clients.

Nonetheless, technologyrequirements are heightening quicklyfor the industry as it continues to

acknowledge the high value technologycan add to their processes, despite anoften high labour intensity.However, strong resource restrictionsdo not allow technology change to occurquickly for most players in the industry.

Increasingly, charities are using theinternet to raise awareness and funds.Online campaigns can be effectivemethods of reaching large, geographicallyscattered audiences, and the capacity toexecute online donation transactions canlower costs for the charity.Recent innovations have includedFacebooks Causes application, whichembeds a charity into social networkingfeeds, and the popularisation ofmicrolending by websites such as Kiva.

org. One of the more notable successstories on the domestic front is theMovember campaign, which allowsparticipants in a charity event topersonalise an online prole andcampaign for online donations.

Despite technological advancements,many donations given to the industryare in the form of cheques. About 30% ofnot-for-prot rms receive more than50% of their donations via cheque.Consumers who tend to use cheques are,according to the Australian Payments

Clearing Association, the elderly, rurallyisolated and unwaged. Since olderpeople tend to give to not-for-protrms more, this reects the difculty ofnot-for-prots towards reaching outbeyond this audience.

Level

The level ofTechnology Changeis Medium

Level

The level ofVolatility is Medium


29/34



Regulation & Policy With operators in the industry involvedin activities ranging from junior soccer totsunami relief, the regulation and policyframework for particular charities andnot-for-prot organisations dependsheavily on their line of work. However,

the federal government is seeking toreform the currently state-based not-for-prot regulation legislation, as speciedin the 2011-12 budget.

New Federal Legislation to be introducedIn the 2011-12 budget, the GillardGovernment declared its intention overthe next several years to overhaul andnationalise third sector regulation, byestablishing the Australian Charities andNot-for-Prots Commission (ACNC) as a

national industry regulator for operationin July 2012, and redening the wordcharity from July 2013 which has notbeen modied from Englands 1664denition in Australian law. The aim ofsuch reforms is to create greaterconsistency between state regulations, andcreate greater industry transparency aswell as simplify the system byimplementing a report-once, use-oftenstrategy to reporting. These measures areexpected to bring greater efciencies tothe industry for larger players, withBradeld Nyland Group nding thatcurrent reporting requirements accountfor about $100 million worth of lost hours

with the current system. Smaller players,however, are likely to take on greaterreporting burdens, straining theirresources even more so.

More immediate concerns to theindustry, however, is that since July 2011

the industry has been taxed for unrelatedcommercial activities in order for thegovernment to help guarantee thatnot-for-prot organisations maintaintheir altruistic intentions. This move isexpected to also prevent individuals andcompanies from sheltering themselvesfrom tax evasion.

Community services regulationEach state and territory government hasresponsibility for all aspects of child

adoption as well as corrective serviceswithin its jurisdiction, in addition tohaving their own legislation relating tochild adoption and corrective services(including parole). The CommonwealthGovernment is principally responsible forfamily affairs through the Family Law Actand the Marriage Act.

The HACC Act authorises theCommonwealth Government to paynancial assistance to state and territorygovernments under agreements with theCommonwealth Government for theprovision of home and communityservices. The objective of the agreement isthe provision of moneys by the

Revenue Volatilitycontinued


Volatility vs Growth

Revenuevolatility*(%)

1000

100

10

1

0.1

Five year annualised revenue growth (%)

30 10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

Charities & Not-for-ProfitOrganisations

A higher level of revenuevolatility implies greaterindustry risk. Volatility cannegatively affect long-termstrategic decisions, such asthe time frame for capitalinvestment.

When a firm makes poorinvestment decisions itmay face underutilisedcapacity if demandsuddenly falls, or capacityconstraints if it rises

quickly.

Level & Trend

The level ofRegulation isMediumand thetrend is Increasing


30/34



Regulation & Policycontinued

commonwealth, state and territorygovernments to assist governments andcommunity organisations in developing arange of integrated home and communitycare for the frail aged and younger peoplewith disabilities and their carers. Theagreement also facilitates the maintenanceof those people in their own homes, andavoids their premature or inappropriateadmission to long-term residential care,thereby improving their quality of life.

The Supported Accommodation

Assistance Act 1994 provided a basis forthe Commonwealth Government andstate and territory governments to fundsupport accommodation and otherassistance services. The program (SAAP)aims to provide transitional supportedaccommodation and related services tohelp people who are homeless, in crisis orat imminent risk of being homeless toachieve the highest possible degree ofself-reliance and independence.The commonwealth, state and territorygovernments fund the SAAP program.

The Commonwealth Governmentprovides about 60% of SAAP funding.

The Commonwealth State/TerritoryDisability Agreement (CSTDA) is afunding agreement between governmentsthat provides a framework for a system ofadministering services for people with adisability. Under the agreement, stateand territory governments are responsiblefor providing, inter alia, non-residentialcare (as well as accommodation supportand respite services).

Commonwealth, state and territorygovernments have additional community,individual and family support programsthat provide funds to welfareorganisations that deliver the service.

Most state and territory governmentshave legislation controlling fundraising.The legislation seeks to protect the publicagainst fraud, misappropriation of funds,misleading conduct; and ensure that thepublic have access to information andthat organisations use acceptablefundraising practices.

Fundraising and financial regulationThe industrys knowledge of theirlegal environment, according to law

rm Makinson & dApice, needs muchimprovement, with many players inthe industry stating they are unableto deal with bequests and propertylegal issues sufciently.

The states and territories havetrustee legislation that imposesobligations governing how trustees,including charities, invest their funds.Children adoptions are principallyarranged by state and territorygovernment welfare departments,although adoptions are also arranged

by non-government organisations insome states. Once an adoption order isgranted, the adopted child becomes thechild of the adopted parents as if he orshe had been born to them.

Parole services arise out of ordersimposed by courts, which prescribeconditions and place offenders undercontrolling supervision for less than 50%of the time. These services are funded andprovided by state and territorygovernments. The Fundraising Institute

Australia has issued a code of professionalconduct. It provides guidelines tomembers requiring disclosure to donorsand specifying correct procedures fortelephone solicitation.


31/34



Industry Assistance While charities and not-for-protorganisations commonly exist for assistingothers, the organisations themselves arealso assisted in various ways.Arguably, the most signicant manner isvia taxation concessions that apply toregistered not-for-prot organisations.As of June 2009, 52,149 not-for-protorganisations were registered as taxconcession charities, and about 40% ofthose endorsed as deductible giftrecipients. Organisations endorsed as

deductible gift recipients enable donors tooffset their donations against their annualtax liabilities, creating an incentive todonate. Australian taxpayers claimed $1.8billion for deductible gifts in 2006-07,increasing about 11% per annum from$863 million in 2000-01. Other taxbenets enjoyed by organisations in theindustry include fringe benet taxconcessions (about $1.0 billion per year)and state payroll tax concessions (about$800 million per year).

Another set of laws that assists the

industry relates to the operation ofgaming machines. The specics of thelaws vary from state to state, but over$700 million worth of concessional taxbenets are claimed by sporting clubsand community-based organisations withlicences to operate gaming machines.

In addition to tax concessions receivedby not-for-prot organisations, local,state and federal government funding is asignicant source of income andresources for the industry.

Commonly made in the form of grants orcontracts, public money is allocated tonot-for-prot organisations who partnerwith government to provide services.The federal government department thatadministers Australias international aidprogram, AusAid, works with charitiesand not-for-prot organisations tomaximise the effect and reach ofAustralian aid. Currently, about 7.0% ofAusAids aid program is delivered bynot-for-prot organisations, with manylong-term partnerships in place.

Level & Trend

The level ofIndustry Assistanceis Highand thetrend is Steady


32/34


Key StatisticsRevenue

($m)

IndustryValue Added

($m) Establishments Enterprises EmploymentExports

($m) ImportsWages($m)

DomesticDemand

2002-03 62,896.5 37,072.0 44,662 37,250 713,154 3,271.0 -- 27,213.7 N/A

2003-04 69,466.2 39,079.7 45,900 38,218 765,214 3,391.3 -- 29,989.5 N/A

2004-05 75,791.3 41,397.4 46,935 38,982 811,893 3,785.3 -- 32,718.6 N/A2005-06 82,308.0 44,404.3 48,540 39,918 858,982 4,457.6 -- 35,597.8 N/A

2006-07 88,283.4 47,253.5 50,030 41,008 889,919 4,709.3 -- 37,982.8 N/A

2007-08 92,270.7 49,070.8 51,581 42,279 906,827 4,712.4 -- 40,185.8 N/A

2008-09 89,424.9 49,933.0 51,890 42,533 937,660 5,029.6 -- 41,230.7 N/A

2009-10 95,424.0 52,736.9 52,565 43,086 966,727 5,741.5 -- 44,611.6 N/A

2010-11 101,536.8 54,119.1 53,511 43,861 1,018,930 5,760.9 -- 47,600.6 N/A

2011-12 104,989.1 56,504.5 54,635 44,800 1,059,688 6,079.8 -- 49,742.7 N/A

2012-13 108,978.6 58,548.1 55,837 45,758 1,099,956 6,783.2 -- 51,533.4 N/A

2013-14 113,773.7 60,802.1 56,897 46,619 1,143,954 7,699.9 -- 53,491.6 N/A

2014-15 117,755.7 63,320.2 58,035 47,531 1,190,856 8,585.7 -- 55,738.3 N/A

2015-16 121,759.4 66,285.7 59,370 48,612 1,242,063 9,277.1 -- 58,413.7 N/A

2016-17 127,969.1 69,727.1 60,855 49,797 1,297,956 9,926.5 -- 61,451.3 N/A

Sector Rank 5/24 1/24 4/24 4/24 1/24 3/8 N/A 1/24 N/A

Economy Rank 12/495 6/495 13/495 11/495 2/495 13/210 N/A 4/495 N/A

IVA/Revenue(%)

Imports/Demand(%)

Exports/Revenue(%)

Revenue perEmployee

($000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of theEconomy

(%)

2002-03 58.94 N/A 5.20 88.19 43.27 15.97 38,159.64 3.56

2003-04 56.26 N/A 4.88 90.78 43.17 16.67 39,191.00 3.60

2004-05 54.62 N/A 4.99 93.35 43.17 17.30 40,299.15 3.712005-06 53.95 N/A 5.42 95.82 43.25 17.70 41,441.85 3.86

2006-07 53.52 N/A 5.33 99.20 43.02 17.79 42,681.19 3.97

2007-08 53.18 N/A 5.11 101.75 43.55 17.58 44,314.74 3.97

2008-09 55.84 N/A 5.62 95.37 46.11 18.07 43,971.91 3.98

2009-10 55.27 N/A 6.02 98.71 46.75 18.39 46,147.05 4.11

2010-11 53.30 N/A 5.67 99.65 46.88 19.04 46,716.26 4.15

2011-12 53.82 N/A 5.79 99.08 47.38 19.40 46,940.89 4.16

2012-13 53.72 N/A 6.22 99.08 47.29 19.70 46,850.42 4.15

2013-14 53.44 N/A 6.77 99.46 47.02 20.11 46,760.27 4.17

2014-15 53.77 N/A 7.29 98.88 47.33 20.52 46,805.24 4.22

2015-16 54.44 N/A 7.62 98.03 47.97 20.92 47,029.58 4.28

2016-17 54.49 N/A 7.76 98.59 48.02 21.33 47,344.67 N/A

Sector Rank 5/24 N/A 5/8 21/24 2/24 4/24 11/24 1/24

Economy Rank 88/495 N/A 127/210 452/495 37/495 143/495 303/495 6/495

Figures are inflation-adjusted 201

Documents

X0021 Charities & Not-For-Profit Organisations in Australia Industry Report