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Report finds social service providers underfunded, over-reliant on philanthropy

September 06, 2019 at 10:01 AM

From the NZFVC

An independent study has found that New Zealand social service providers are underfunded by at least an estimated $630 million per year, and are over-reliant on the philanthropic sector.

Social Service Providers Aotearoa (SSPA) commissioned the study and report Social Service System: The Funding Gap and How to Bridge It (2019), by independent consultants MartinJenkins.

The study found that the government funds social service providers for less than two thirds of the actual costs of delivering the services they are contracted to provide. As a result, the organisations often rely on philanthropic funding to cover basic running costs, pay the wages they need to attract and retain staff, and meet service demand. 

RAN reported SSPA Manager Brenda Pilott described it as a "very flawed" model - contracting an organisation to do something, and then making them fundraise to actually be able to do it properly.

The research also finds that funding arrrangements with the service system as a whole have not kept pace with the scale and complexity of the services needed.

The study focuses on organisations that provide services to children, young people, individuals, families and whānau who are mainly funded by contracts with the Ministry of Social Development and/or Oranga Tamariki - Ministry for Children. It looks at the funding gap, its implications and future options.

The study found:

  • "Basic operating costs are being underfunded by about $130 million a year;
  • Wages are being underfunded by about $300 million a year;
  • The gap between funded and actual (absorbed) demand is nearly $200 million a year;
  • 83% of providers surveyed are reliant on philanthropy to meet their core costs"

The report states that drivers of the funding gap include (among others):

  • A historical preference for partial or contributory funding models for essential government services that have been devolved to non-government organisations
  • Funders tending to preference new initiatives or services, disadvantaging existing services
  • Limited agreement on what "good" looks like and limited use of the information that is collected in a systematic way

Impacts of the funding gap include (among others):

  • The community and provider workforce is underpaid and overworked, with a growing pay gap between the public and private sectors
  • The competitive tendering process benefits better resourced providers, providers are incentivised to accept under-funded contracts and disincentivised from collaborating

The report proposes a number of solutions for the immediate future, medium and longer term.

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Category: Reports