Impacts on community organisations

Community organisations function in different ways from commercial businesses. The impacts of a proposal on them may need to be considered separately in Impact Analysis. This guidance note explains factors specific to community organisations that may need to be taken into account in addressing the seven Impact Analysis questions listed in the Australian Government Guide to Policy Impact Analysis.

Back to top

Definition

The Australian Government Guide to Policy Impact Analysis defines ‘community organisation’ as ‘any organisation engaged in charitable or other community-based activity operating under Australian law and not established for the purpose of making a profit’. This definition can include not-for-profit entities pursuing a range of ‘for-profit’ commercial activities. It can also include organisations engaged in advocacy or other activities that may not be primarily charitable in nature.

The Australian Tax Office provides a definition of not-for-profit organisations that can also considered when assessing impacts on community organisations:

• A not-for-profit (NFP) organisation is an entity that is operating for its purpose and not for the profit or gain (either direct or indirect) of its individual members.

A few details on the community organisations sector

• In a 2010 report, the Productivity Commission noted that ‘The diversity of the not-for-profit (NFP) sector makes any attempt to describe how NFP organisations behave challenging at best, and quite likely impossible.’¹
• Around 90 per cent of community organisations are ‘small, non-employing organisations that rely on the voluntary contributions of members (and others)’. The other 10 per cent are ‘economically significant’ community organisations that have an active tax role (this includes all employing community organisations).²
• The community organisation sector’s main sources of funding are self-generated (50 per cent), government (33 per cent, which excludes indirect support, such as tax breaks), and donations (10 per cent).³
• Community organisations exist in many sizes and legal forms. The size and legal form of a community organisation can give some indication of its ability to respond to changes in regulation.

Back to top

What part of community organisations’ operations fall under Impact Analysis requirements?

In considering the Impact Analysis requirements, the operations of community organisations that are relevant are thecommercial activities or transactions of community organisations.

In most cases, this should be interpreted literally to cover commercial activities such as the selling of goods and services and partnerships with businesses. Many other activities of community organisations fall outside this definition, including attracting and collecting donations and participating in welfare activities.

The 10 per cent of community organisations that are ‘economically significant’ are the entities most likely to be engaged in commercial activities or transactions.

An appropriate level of Impact Analysis is required for all proposals to be decided by Cabinet. The Impact Analysis should describe the impacts of the proposal on community organisations (along with other impacts such as those on individuals, businesses, the community and the environment, where relevant).

For non-Cabinet decisions relating to proposals affecting community organisations, the Office of Impact Analysis (OIA) determines the need for Impact Analysis on the basis of the significance of the impacts imposed on community organisations (and the impacts on businesses and individuals, where they are also affected by the proposal).

Back to top

Other considerations in assessing whether Impact Analysis is required

Community organisations are not driven by a profit motive, but by their organisation’s mission.

If community organisations are likely to be affected by a proposed regulation, you should consider whether there is likely to be a disproportionate impact on the commercial activities of community organisations operating in that sector. The impacts of the regulation on the commercial activities of community organisations should be separately identified in assessing whether Impact Analysis is required.

Departments, agencies, and the OIA need to consider the ability of community organisations to cope with change, as most are similar to small businesses and do not have the resources or skill base of large corporations. Many are run by volunteers. While a particular regulation may have a minor impact on businesses, it could have a significant impact on the commercial activities of community organisations.

In supplying goods and services, some community organisations ‘face demand that is independent of the funding stream’ and, ‘in the absence of price as a rationing mechanism, demand will generally exceed supply’.⁴

Back to top

When does a government proposal constitute regulation?

Clearly, black-letter law can constitute regulation. However, many of the other ways the Government typically influences the community organisation sector can constitute regulation, depending on how proposals are implemented. Examples include quasi‑regulation, industry codes, purchaser–provider arrangements, accreditation schemes, guidance notes, grant programs and subsidies.

For Impact Analyses, compliance impacts imposed by the Commonwealth’s procurement, grants and cost recovery frameworks and processes are included in the definition of regulation. Changes to overall grant, procurement and cost-recovery frameworks and arrangements trigger the requirements for Impact Analysis where the proposal has a more than minor impact on community organisations (or people or businesses). See the Commonwealth programmes guidance note for more information on costing these changes.

Purchaser–provider arrangements can be considered relevant to this section if the contract includes clauses that do not relate to the procurement of the service. In such cases, the Government can be using the procurement of a particular good or service to implement change. For example, in 2009 the Government of the day announced that ‘All government contractors in the textile, clothing and footwear industry must be accredited or be seeking accreditation with the Homeworkers’ Code of Practice’. This constituted regulation because homeworkers in that industry who are employed by government contractors needed to comply with the Homeworkers’ Code of Practice for all the work they did, not just the work for government contracts. In other words, such purchaser–provider agreements constituted industrial relations regulation.

Subsidy arrangements can effectively constitute regulation and therefore potentially trigger Impact Analysis. For example, if the Government were to raise the requirements for aged care providers receiving government subsidies, community organisations providing care with the help of a government subsidy will have little choice but to comply with the new requirements. They would also have little scope to absorb any costs associated with the new requirements. Instead, they would be likely to scale back other parts of their operations. Changes to subsidy arrangements can affect both the community organisation and other parties. Subsidies paid directly to community organisations are captured under Impact Analysis requirements.

When assessing health care proposals, it is important to consider whether the service is bulk billed. If so, it is unlikely to be regulatory, as the Government is simply specifying details of the service it is purchasing. If the service requires co-payments, then the proposal may be regulatory.

Accreditation schemes can also affect community organisations in a regulatory manner. For example, a change in requirements for child-care centres to retain their government accreditation would affect some community organisations—potentially more significantly than it would affect for-profit organisations.

A guidance note is covered by the Impact Analysis requirements if there is an expectation of compliance, particularly if compliance with the guidance affects future dealings with government.

In any case, changes in regulatory costs associated with any of the above examples, regardless of whether Impact Analysis is required, need to be quantified using the Regulatory Burden Measurement framework.

Back to top

Action after Impact Analysis requirements are triggered

Once the Impact Analysis requirements are triggered, departments and agencies need to look at the broader impacts, including all of the impacts on the community organisation sector.

While the requirements are most likely to be triggered on the basis of expected impacts on the ‘economically significant’ community organisations, your analysis of significant impacts should capture all relevant community organisations, including the regulatory effects on small bodies.

The Impact Analysis should acknowledge the need for community organisations (that manage public funds) to be accountable and transparent. Changes that alter accountability and transparency should also be highlighted in the Impact Analysis.

Proposed changes are likely to affect community organisations in different ways from for-profit firms. In many cases, a community organisation will not be able to pass an increase in costs on to its customers or the people it serves. Instead, it may need to reduce its level of service or output in other areas. Stating this impact in units of the output or in terms of staff time (as was done in the Impact Analysis for the Australian Charities and Not-for-profits Commission⁵) can help to give a sense of the scale of the impact. It is also important to note whether the recipients of this output will have access to alternative providers.

You will need to tailor your consultation when a proposal has impacts on community organisations. In comparison to corporates, many community organisations may require a longer time to respond, and staff (or in some cases volunteers) may not have expertise in commenting on impacts. Additional time may also be required because many community organisations will be required to seek agreement of their board before finalising their submission. One method for consulting with community organisations is to present not only the proposed change, but also your view of the potential impacts on community organisations.

Back to top

Further information

If you have any questions about this guidance note, email OIA at helpdesk-OIA@pmc.gov.au or call

(02) 6271 6270.

Further information on the Impact Analysis process is in the Australian Government Guide to Policy Impact Analysis.

1. See Productivity Commission, Contribution of the not-for-profit sector, research report, 2010, p. 14. Return to footnote 1↩
2. Productivity Commission, Contribution of the not-for-profit sector, p. 53.Return to footnote 2↩
3. Productivity Commission, Contribution of the not-for-profit sector, p. 54.Return to footnote 3↩
4. Productivity Commission, Contribution of the not-for-profit sector, p. 26. Return to footnote 4↩
5. See Establishment of the Australian Charities and Not-for-profits Commission Regulation Impact Statement, 2011 Return to footnote 5↩

Back to top