Transcript Radio National Breakfast with Fran Kelly 3 November 2011

Transcript of Interview – 3 November 2011

Radio National –Breakfast Program

Fran Kelly:  There are 60,000 charitable organisations in Australia from sporting, arts, housing, welfare and Church bodies but they are finding it pretty tough and are actually living hand to mouth, that’s according to the umbrella group representing the sector, the Community Council for Australia or CCA. A Senate report into the finance for the not-for-profit sector is due over the next few weeks and CCA says it’s critical that the sector gets access to capital to invest in itself. The number one priority they say is a new Better Australia Bank with $500 million of start-up funding. CCA has even identified where that money can come from.  David Crosbie is CEO of Community Council for Australia. David, good morning, welcome again to Breakfast.

David Crosbie: Good morning Fran

Fran Kelly: Thousands of Australian charities are regularly losing money, 20% are looking at merging in order to survive, 80% are looking for new sources of funding, these are recent statistics. What’s going on in this not-for-profit sector?

David Crosbie: It’s actually an interesting development in the not-for-profit sector over recent years, it’s actually getting bigger and bigger, it’s now a $43 billion sector, it is bigger than tourism or agriculture and it employs as many people as the manufacturing sector, so it is really only second to retailing in terms of its employment. So it is getting bigger but the problem is most of the money that comes into the not-for-profit sector is for new programs and services and not-for-profits aren’t investing in themselves as organisations and it makes it very difficult to plan for the future and have a sense if the organisation itself growing stronger.

Fran Kelly: There’s a fair git of money flowing from government, the Howard Government rearranged all the job placement programs, all that money’s going there and more and more services that were once provided by government are now being provided by the charitable sector so there is a sense their coffers are more inflated than ever.

David Crosbie: Well that is exactly right…

Fran Kelly:…so that’s the bigger charities I guess?

David Crosbie: Governments around the world are doing that. In fact in the US during the global financial crisis one of the very few industries that continued to employ more and more people with employment growing by at least 2% a year was the not-for-profit sector so it is a very resilient sector in the sense of bringing in new money. But what happens when you bring in new money it often comes with new obligations and sometimes the way governments contract it comes with more obligations than you have the money to meet and when you want to start doing things like improve computer systems, create new facilities, or train staff, develop a strategic alliance or even consider a merger, you need to invest in those things and where do you get the money from. It’s actually very difficult for not-for-profits.

Fran Kelly: So what’s happening within these groups at the moment, they don’t have the money and there’s pretty fierce accountability of this money too so everyone gets to look at what these groups spend on the delivery of what they are promising so they have to account for every dollar. What’s life like inside these organisations is it pretty skimpy?

David Crosbie: At one level you never felt richer because you have more programs and services, but at another level you’ve never felt poorer because your capacity to support the people using those services and to develop your own investments or income streams is non-existent.

Fran Kelly: So you’ve got an idea, and it’s called a Better Australia Bank – what does this mean and what would a bank like that do?

David Crosbie: Well we want to create an option for not-for-profits to invest in themselves to become stronger as organisations, for instance for a drug treatment agency to build more treatment beds so it can generate more income, or an aged care facility to build a special dementia ward as a way to generate additional income, and it’s very difficult for these types of organisations to access capital to be able to invest in themselves or create an income stream. Often they only have one or two year funding from government, they can’t guarantee finances for the next ten years and it makes them a higher risk in the commercial banking world. What we’d like to see is that there is a bank that is dedicated to investing in not-for-profits and encouraging not-for-profits to invest in themselves so they can become stronger as organisations. They can create their own income streams and be able to repay loans but build capacity as part of that process.

Fran Kelly: You’ve even got an idea about how this is funded, obviously money is tight. Who can provide the money for this start up bank?

David Crosbie: What we’d like to see is follow the lead from the United Kingdom. What they have done is identify monies which are lying dormant in bank accounts, superannuation funds and insurance funds for more than 20 years and they are using that to underwrite establishment of what they are calling a ‘Big Society Bank’, which is really a not-for-profit bank. We believe that bank would become self-sustaining so not-for-profits could repay the loans. It’s not a way of providing new grants but it’s a way of providing new investment. In Australia we know there’s over half a billion dollars that has been there for more than 20 years, rather than leave them languishing we should put them to good use. 

Fran Kelly: Sounds like a good idea. Thank you David for joining us.

David Crosbie: Thanks Fran