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

Bigger and better: Organisations in the industry are expanding their service offerings
IBISWorld Industry Report X0021
Charities & Not-for-Prot Organisations in Australia

March 2012 Craig Shulman
2 About this Industry
2 2 2 2 Industry Denition Main Activities Similar Industries Additional Resources 15 Demand Determinants 16 Major Markets 17 International Trade 18 Business Locations 28 Revenue Volatility 29 Regulation & Policy 31 Industry Assistance
32 Key Statistics 20 Competitive Landscape

32 Industry Data 32 Annual Change 32 Key Ratios 20 Market Share Concentration 20 Key Success Factors 20 Cost Structure Benchmarks 22 Basis of Competition 22 Barriers to Entry 23 Industry Globalisation
4 Industry at a Glance 5 Industry Performance

5 5 6 9 Executive Summary Key External Drivers Current Performance Industry Outlook
33 Jargon & Glossary
12 Industry Life Cycle
24 Major Companies 27 Operating Conditions

27 Capital Intensity 28 Technology & Systems
14 Products & Markets

14 Supply Chain 14 Products & Services
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Charities & Not-for-Profit Organisations in Australia March 2012 2
About this Industry

Industry Denition
This industry consists of organisations that exist for reasons other than financial gain. This broad industry classification includes charities and not-for-profit organisations engaged in activities such as healthcare, operating hospitals, education, sports, cultural and religious organisations.
Main Activities
The primary activities of this industry are Fundraising Advocacy Operating health, educational and cultural programs
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
Similar Industries
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 aimed at 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, or provide 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 conducting research and providing education services. O8600 Health Services in Australia Establishments in this subdivision supply health services to the public either directly or via proxies.
Additional Resources
For additional information on this industry www.ausaid.gov.au AusAID
About this Industry
Additional Resources continued
www.a.org.au Fundraising Institute Australia www.nfpn.com.au Not-For-Prot Network www.philanthropy.org.au Philanthropy Australia www.probonoaustralia.com.au Pro Bono Australia www.thirdsectormagazine.com.au Third Sector
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Industry at a Glance
Charities & Not-for-Prot Organisations in 2011-12 Key Statistics Snapshot
Revenue
$105.0bn 3.5%
Enterprises
Annual Growth 07-12
Annual Growth 12-17
44,800
Market Share
Exports
$6.1bn
7.0 6.5
4.0% 44,800
Businesses
Revenue vs. employment growth

15 10
Population aged 55 or older
People (million)
06 08 10 12 14 16 18
There are no major players in this industry

% change
6.0 5.5 5.0 4.5
5 0 5
Year 04 Revenue
p. 24
Year 02
4.0
04
06
08
10
12
14
16
Employment
SOURCE: WWW.IBISWORLD.COM.AU
Establishments
Key External Drivers

National unemployment rate Population aged 55 or older State funding for primary and secondary education Federal funding for the arts and related activities State funding for health services Natural disasters
p. 5
2.5% 7.6%
SA TAS
2%
NT
1.7%
ACT
11.1%
WA
30.9%
NSW
21.9%
QLD
22.3%
VIC
SOURCE: WWW.IBISWORLD.COM.AU SOURCE: WWW.IBISWORLD.COM.AU
Industry Structure
Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level
Growth Medium Low High Low
Regulation Level Technology Change Barriers to Entry Industry Globalisation Competition Level
Medium Medium High Low Medium
For additional statistics and time series see the appendiX on page 32
Industry Performance
Executive Summary
Charities and not-for-profit organisations may not sound like big business in Australia, however the industry employs over one million workers on a paid basis, and revenue is expected to increase by 3.4% in 2011-12 to reach $105 billion. Over the past five years, industry revenue has increased by an average of 3.5% per year, and only fell briefly during 2008-09 when private and business donors cut back amid uncertain economic conditions. The size of the industry is largely due to the huge array of products and services that Australian charities and not-for-profit organisations deliver. These range from operating hospitals, arts organisations, schools and churches, all the way down to
Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
grassroots fundraising and community causes. Government grants and funding are a crucial form of income for the industry, with not-for-profit organisations routinely partnering with government departments to provide services to the community. The future for the industry remains bright, with long-term government grants and service provision contracts keeping revenue volatility down. Industry revenue is expected to increase by an average of 4.0% per year in the next five years, to reach $128 billion in 2016-17. The essential services provided by the industry will continue to be delivered by charities and not-for-profit organisations, many of which are highly experienced and efficient.
Key External Drivers
National unemployment rate Households where adults are unemployed are more likely to use welfare and charity services, particularly where unemployment has been over the long term. Long-term unemployment is the most closely correlated social variable to demand for welfare, as it also correlates closely to levels of homelessness and mental illness. Population aged 55 or older Frail older people are more likely to require assistance in the home, delivered meals and health care.
Population aged 55 or older
7.0 6.5
State funding for primary and secondary education Not-for-profit entities providing education services are partially relianton public funding in order to fill their classrooms. An increase in government funding would allow expansion of services. Federal funding for the arts and related activities Federal funding is a major source of resources for not-for-profit organisations engaged in the arts. Increased government expenditure in
State funding for primary and secondary education
50000 40000
People (million)
6.0
Million
5.5 5.0 4.5
30000 20000 10000
Year 02
4.0
04
06
08
10
12
14
16
Year 01
03
05
07
09
11
13
15
Key External Drivers continued
this area enables these organisations to provide more extensive services. State funding for health services State governments are a significant source of funding for community-level health services, which are often provided by not-for-profit organisations.
Natural disasters Natural disasters can have a major shortterm effect on the demand for charity and not-for-profit services. Depending on the type and location of a natural disaster, public appeals can be launched by welfare or aid organisations to obtain additional funds with which to respond.
Current Performance
The Charities and Not-for-Profit Organisations industry can be seen as the glue that holds Australian communities together. Routinely performing valuable work in areas of little appeal to profitmaking enterprises, charities and not-forprofit organisations tend to complement the work of the public sector towards creating a dignified and compassionate society. The size of the industry is truly large, with revenue expected to be in the order of $105 billion in 2011-12, an increase of 3.4% over the previous year. Despite enduring a challenging few yearsdue to the global financial crisis, industry revenue has increased by an average of 3.5% per annum during the five years through 2011-12.
While the industry does not make profit by definition, it is quite common for charities and not-for-profit organisations to have more funds in their accounts at the end of a year than at the beginning. Recent economic turbulence has underlined the need for organisations in the industry to possess sufficient funding reserves to be able to adequately respond to needs during times of hardship in the community, often in an environment of falling levels of incoming funds. What constitutes an adequate level of reserves varies greatly, depending on the line of work that a charity or not-forprofit organisation is engaged in, its cost structure, size, and how variable its income streams are.
Effect of the nancial crisis
In late 2007, problems in the United States financial sector created a ripple effect that sank most of the worlds wealthy nations into recession by 2009. While Australia managed to narrowly avoid the same fate thanks to early government stimulus spending and the strength of the resources industries, the unemployment rate rose, and consumer and business confidence fell. This created a very challenging fundraising environment for charities and nongovernment organisations (NGOs), with some private donors and businesses seeing philanthropic activities as a luxury spend during the good times. In addition to greater strain on charities domestically, major natural disasters in Haiti, Pakistan and China occurred during this time, which NGOs responded to with funding and resources.
Whilemany humanitarian charities saw revenue levels rise significantly due to these 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 was mostly due to donations made by wealthier people being significantly reduced. During this time drops in investment income and corporate funding also furthered a decline in revenue levels according to The Centre for Corporate Public Affairs. However,the times of difficulty also drew greater empathy from more people, with the number of claims made increasing by 3.7% to 37.8% of Australian taxpayers, particularly due to the Victorian Bushfires during 2008-09. The provision of community-level essential services such as education,
Effect of the nancial crisis continued
healthcare and hospitals was relatively unaffected by the global financial crisis, with demand not faltering. While financial hardship reduced the capacity of some people to purchase these services, extensive government funding of essential segments such as these ensured that these services remained accessible to the vast majority of Australians. Not-for-profit organisations offering services in relatively more discretionary fields, such as arts and sport, were more vulnerable to a fall in patronage, but services such as kids sport remained in strong demand even as Australias economy wobbled during 2008-09. Demonstrating this, the Australia Business Arts Foundation found that a decrease in corporate support for their activities occurred in 2010. This financial strain has forced greater structural and strategic change boding well for the long term, but has still left the industry worse off financially. Inparticular, mid-size firms have been struggling in a new environment where greater frugality after the financial crisis combined with changing regulations and
Demand
for services increased during the global financial crisis, even as revenue from donations fell
greater demands for accountability and transparency are placing greater strain on their resources. Enterprise growth stagnated temporarily, and has only during 2011-12 started to move in a positive direction. In a commercial environment, this would normally leadto a greater occurrence of mergersand acquisitions, however dueto the niche, ideological nature of firms in the industry, these circumstances have seen some firms being forced to shut down entirely. The resumption of stronger economic conditions in Australia during 2010-11 has served to bring greater stability and confidence to donors, government budgets and the Charities and Not-forProfit Organisations industry.
New avenues to attracting donor dollars
Technology changes and industry competition has had significant effects on the industry through changing perceptions of how charities and NotFor-Profits should work. For instance, while it started as a PR and marketing exercise, the competition amongst firms in the industry has forced them to display greater accountability and transparency in order to attract potential donations from individuals, business and the government. Failing to display these characteristics is now likely to shed the firm in a negative light and arouse suspicion. Thus, annual reports for these organisations are now commonplace. At this stage charities are still struggling to communicate this message, with the Charities Aid Foundation Australia finding that 75% of donors do not believe that charities
communicate well about how their donations are used. However, this trend has the danger of removing the emotional appeal of these organisations which they all ultimately depend on to attract money in the first place. Technological changes have also fostered revision of fundraising methods by organisations in the industry. Financially, the industry further expects new financial instruments such as debt and equity to be utilised towards revenue raising. Mobile applications are now easily accessible and are able to provide awareness towards various causes and further the aims of various industry organisations; particularly health-focused NFPs. Donations via applications and texting, already occurring in the United States, is being looked into in Australia currently.
International context
Regularly, comparisons in the media are made between Australia and other developed countries in terms of government aid budgets, government community funding or the level of private charitable giving. Such comparisons can be misleading, because they typically look only at one part of the picture. Many of Europes nations are higher taxed than Australia, and as a result have larger government budgets to dedicate to domestic welfare provision and foreign aid. As a result, NGOs often play smaller roles. Otherwealthy nations such as Japan and the United States are lower taxed, and more of the aid and welfare functions fall to communities and NGOs to undertake. Australia falls between these two styles, with a robust NGO segment accompanying a government that is moderately active in domestic social welfare and is ramping up its foreign aid spend to reach a target of 0.5% of national income. As of 2009, Organisation for Economic Cooperation
and Development (OECD) data for international aid donated by governments revealed that Sweden and Norway spent over 1.0% of their national income, while Australias corresponding figure was 0.3%. Japan and the United States were at 0.2% each. To place this in context, a 2010 report by the Charities Aid Foundation (CAF) found that Australia and New Zealand were the most giving nations in the world, measured by the average prevalence of giving money, giving time and helping a stranger. The CAF report found that 38% of Australians volunteer their time, almost double the figure for Denmark, whose government aid program is three times larger than Australias as a share of national income. As this suggests, private giving to causes is relatively common and well developed in Australia. This cultural norm of personal giving needs to be kept in mind when assessing the extent to which the Australian Government is involved in the same sphere.
Staffed by all walks of A 2010 study by the Australian Institute of Company Directors (Directors Social life
Impact Study) found that over 60% of the 1,200 directors surveyed serve on a not-for-profit board, which suggests a deeply entrenched corporate culture of donating high-level business and strategic expertise to the Charities and Not-for-Profit Organisations industry. The availability of skilled and experienced oversight to the industry is important for setting out and achieving the mission statements of charities and not-for-profit organisations. Data from the ABS supports this point, with volunteer rates occurring at higher levels amongst those of higher socio-economic status, as well as those who hold
managerial or professional positions. At the other end of the scale, people from less lofty backgrounds carry out the vast majority of the work of charities and not-for-profit organisations. In addition to the workforce formally employed by the industry, 5.2 million people volunteered a total of 620 million hours of labour for non-profit organisations of all types in 2006. This number increased by 16.4% to 6.1 million in 2010. The presence of this huge pool of free labour vastly increases the amount of output that an organisation can produce with a given amount of funding. The industry employs an estimated 1.06 million paid workers, with wages averaging just under $47,000 per employee.
Industry Outlook
Due in part to many of the industrys largest players having long-term service provision contracts with various levels of government, the future is looking bright for the industry. It is uncommon for governments to re-centralise outsourced functions back under their direct control, so public-benefit services that are currently being provided by organisations in the industry are likely to remain nongovernment. Over the five years through 2016-17, industry revenue is forecast to increase by 4.0% per year to reach $128 billion by the end of the period. Growth in the industry will be underpinned by demographic and economic fundamentals such as the ageing of the population and the recovery of the economy. Australias economy has negotiated the global financial crisis without falling into technical recession. The forecast smoother growth conditions over the next five years are expected to make it easier for charities and not-forprofit organisations to budget their financial and human resources in order to operate efficiently and effectively.
Industry revenue
15 10
% change
5 0 5
Year 04
06
08
10
12
14
16
18
As the organisations cave to pressure to become more efficient, utilise more business practises and ultimately become more business savvy, more organisations will end each year with greater amounts of reserve funds, and thus become more profitable. However, since the industry still relies heavily on government grants, organisations will be unable to move outside of the industry and become self-reliant over the next five years.
The role of government
With government funding representing over a third of the industrys source of income, the policy behaviour of governments is of distinct relevance to charities and not-for-profit organisations. While shifts in the state political landscape around Australia already started to occur in 2010-11, the recent narrow victory by the Federal Gillard Government is likely to bring a degree of stability to federal funding arrangements. Though the minority Federal Government may not easily pass contentious legislation, the types of services typically provided by charities and not-for-profit organisations are not in the foreground of this. A notable exception is the proposed hospital reforms, which involve centralising responsibility for hospitals from state governments to Canberra. The effect on not-for-profit operators of hospitals, some of which are the industrys largest
companies, will depend on whether the centralisation of responsibility for hospitals is accompanied by alterations to funding levels. The 2011-12 Budget has nonetheless brought significant reforms to the industry, with an intention to streamline, simplify and enhance the regulation surrounding the industry. Specifically, these reforms include a tax on unrelated commercial activity (already in place since July 2011), the establishment of a national not-for-profit regulator for July 2012, and the establishment of a formal definition of the word charity in Australian law by July 2013. In November 2010, Foreign Minister Kevin Rudd announced the first full review of Australias aid program in five years, to be undertaken by an independent panel in 2011. The focus of the review was aid effectiveness, specifically in the area of poverty
The role of government continued
alleviation. The findings of the review are expected to inform the governments policies in the area. Thereview can be seen as timely, in the sense that Australias aid budget is expected to double between 2010 and 2015, reaching $8.6 billion. Treasury has advised the government that scaling up existing activities is unlikely
to deliver value for money. As of 2010, about 7.0% of the governments aid program was delivered via NGOs on the ground. If this percentage increases during the next five years, Australian NGOs will have incentive to expand their capacity, in terms of both knowledge and resources, to implement these projects.
Looking for bigger sh
The recognition that businesses are able to donate larger amounts than individuals is being picked up throughout the industry, with stronger competition emerging in the industry for business-sourced dollars. Previous to the global financial crisis crash in 2006 and 2007, private donations to the industry were particularly high, nearly doubling from previous amounts in 2005 thanks partly to business donations. While donations from
business leaders and businesses themselves dropped significantly during the crisis, these levels have started to recover in line with business confidence. Notably, the most successful lobbyists for business donations will be larger organisations in the industry. Theireconomies of scale and ability to present their organisation as accountable and transparent will appeal to a business audience, while smaller organisations will struggle to present such an image.
Expanding lines of work
Being the enormously diverse industry that it is, the Charities and Not-for-Profit Organisations industry contains areas that are undergoing significant growth. This growth can be generated by an organic expansion of demand for a product or service, or by the increasing involvement of the industry in a service that was previously the domain of government. Anexample of the latter can be found in public housing, with the Australian Bureau of Statistics (ABS) forecasting that not-for-profit organisations will own or manage about 35% of Australias public housing stock by 2014. Another area of need that is expected to continue its growth trajectory is the provision of services relating to health. The ageing of the Australian population is creating organic demand for services such
as palliative care, nursing homes, meals on wheels and transport. With the Federal Government having to spend a considerable portion of the next five years getting its budget back into surplus, it is expected that charities and not-for-profit organisations will be given the opportunity to tender for a range of service-provision contracts, in addition to providing volunteer support to the elderly. Education is another field for potential growth, with greater numbers of Australian families seeking to send their children to kindergartens and schools outside of the public education system. No longer the domain of inner city elites, demand for independent schooling is developing on urban fringes, creating opportunities for not-for-profit education services to be delivered in new areas.
A culture of giving
The notion of volunteerism in Australia is strong by international standards and this is expected to remain the case for
the foreseeable future. ABS data from 2010 suggested that there were 6.1 million volunteers in Australia, providing
A culture of giving continued
free labour to charities and not-for-profit organisations. This number is expected to grow in the next few years, already growing 16.4% from 2006. While these organisations may not be run in a profit-maximising manner, the capacity to call upon volunteer labour represents a meaningful competitive advantage when pitted against prospective corporate competitors for government contracts or service provision. The nature of Australian culture represents a challenge for charities and not-for-profit organisations in terms of future fundraising capacity. A 2011 study undertaken by the Australian Centre for Philanthropy and Nonprofit Studies suggests that the tall poppy syndrome that has prevailed in Australia for many decades means that charitable giving is often undertaken privately by donors and
is not a topic of conversation or outward pride. One effect of this is that peer group behaviour, one of the main motivators for an individuals action, may not induce charitable giving to the extent that it does in other nations. Organisations in the industry are thus faced with the task of increasing the prominence of philanthropy and charitable giving in Australian culture. By encouraging donors to display evidence of their giving, and discuss it with others, it is expected that new donors will commence giving, unlocking additional funds for the industry. A recently popular example of this is the charity initiative Movember, which as a tongue-in-cheek action encourages men to grow moustaches and consequently allows people to demonstrate their welfare concerns through their involvement.
Life Cycle Stage
Industry revenue and value added have outpaced national GDP growth Fiscal restraint by governments in the wake of the financial crisis has created new opportunities Emphasis on government policy concerning non-institutionalised care will direct public funding to the industry
% Growth of prot/GDP
30
25
Company consolidation; level of economic importance stable
Maturity
Quality Growth
High growth in economic importance; weaker companies close down; developed technology and markets
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
20
15
Quantity Growth
10
Many new companies; minor growth in economic importance; substantial technology change
Health Services Education
Charities & Not-for-Prot Organisations

Sport Organisations and Other Sports Services Welfare Services and Fundraising
Shake-out
5
Religious Organisations and Services
Shake-out
Decline
10 10 5
Crash or Grow?
Potential Hidden Gems

Future Industries 5 10 15 20
Time Wasters
Hobby Industries 25 30
% Growth of establishments
Industry Life Cycle This industry is Growing
With government budgets tight in the wake of the global financial crisis, charities and not-for-profit organisations are performing important roles in Australian society. Population growth and ageing are proving to be strong organic growth drivers. The Federal Governments decision to not heavily cut funding in most of the industrys segments has allowed organisations to keep meeting community needs. With the national economy returning to a growth pattern in 2010-11, private donors are increasing their contribution to industry revenue. The broader Australian trend, which
has prevailed over the past 15 years, is towards the involvement of private sector and not-for-profit organisations in the provision of services that were traditionally the domain of government. This includes functions as varied as road building and utilities, but in activities relating to this industry, an increasing percentage of Australias school students are outside of the public school system, more Australians are using private health insurance to be treated at private hospitals, and the Federal Government is in the process of increasing its foreign aid budget to 0.5% of national income.
Products & Markets

Supply Chain
KeY BUYing inDUstRies
M
Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Government Administration and Defence Charities and not-for-prot organisations may supply products and services to various levels of government, depending on their line of work. Consumers in Australia Private consumers purchase services provided by not-for-prot and charitable organisations, such as education, healthcare and cultural activities. In many instances, these services are provided to needy individuals free of charge.
Z9901
KeY selling inDUstRies

M Government Administration and Defence Government grants and funding are a signicant source of resources for charities and not-for-prot organisations. Consumers Private donors give their money or volunteer time to charities and not-for-prot organisations.
Products & Services
In a technical sense, charities and not-forprofit organisations in Australia arguably constitute an operational method more than an industry. The types of products and services offered by organisations in the industry vary immensely, ranging from a sausage sizzle to a PhD. Australian Bureau of Statistics (ABS) data has been used to classify the types of products and services offered by not-for-profit organisations into different segments. Not-for-profit culture and recreation organisations include hospitality clubs, sporting organisations, performing arts organisations, libraries and museums. This segment employs over 10% of the industrys workforce and earns about half of its revenue from the provision of services. For every employee working in the industry, there are approximately five additional volunteers, with labour costs constituting about one-third of the segments cost structure. Education and research is a particularly labour-intensive segment of the industry, employing almost 20% of the industrys workforce with a ratio of approximately one volunteer per paid worker. Over half of this segments income is derived from local, state and federal funding, with income from services accounting for an additional third. Increasing amounts of young Australians in non-government schools
have fuelled growth. About two-thirds of the segments expenses relate to wages. In 2007, there were about 100 not-forprofit hospitals in Australia, employing 5.0% of the industrys workers. Inaddition, there were about 800 not-for-profit health organisations, employing 15% of the industrys workers. This segments funding is heavily reliant on government, which provides about two-thirds of revenue. Due to the more demanding skill sets often required to work in this segment, there are relatively few volunteers per paid worker. The social services segment of the industry includes youth and family welfare services, child care, services for the disabled and elderly (excluding high-care residential services), refugee and homeless assistance, emergency accommodation and shelters. The segment employs about one-quarter of the industrys workers, predominantly in casual or part-time roles. In addition, there is a ratio of approximately one volunteer per paid worker. This segment receives about half of its income from government, and labour costs account for 60% of expenses. Other key industry segments include religion, business and professional associations and unions, and organisations that provide environment, development, housing, employment, law and philanthropic
Products & Markets
Products & Services continued
services. Due to the unusually broad array of industry activities, the remaining components of the industrys products and services do not lend themselves well to further
segmentation. Examples of other activities and services undertaken by the industry include cooperative schemes, manufacturing, wholesaling, retailing and operating cemeteries.
Products and services segmentation (2011-12)

Business and professional Environment, development, housing, associations and unions employment, law, philanthropic Hospitals and health
4.2%
2.6%
11.8%
Religion
1.7%
26%
Other
Education and research
Social services
15.4%
21%
Total $105.0bn
Demand Determinants
Culture and recreation

17.3%
The industry provides services that are often complementary to local, state and federal government. As a result, prevailing government policy and funding levels in any given year represent a big factor in determining industry demand. In addition to the scale of the governments direct involvement in the industry, industry participants in health care and hospitals count population size, ageing, natural disasters and epidemics as important determinants of demand. Education organisations, on the other hand, are more directly influenced by the birth rate, year 12 retention rates and unemployment. Charities and not-for-profit organisations undertaking welfare work are likely to have their demand levels influenced by the unemployment rate, divorce rates and broader economic growth. As services provided by charities and not-for-profit organisations are sometimes basic versions of more-expensive services provided by the private sector, broader societal trends have a bearing on the level of demand for the basics.
Unemployment crucial The level of direct government income and other assistance provided to lowincome or disadvantaged households (e.g. unemployment, aged pension, family, parental, child care, disability and disability carer benefit payments and tax expenditures) can reduce the need among some people for this industrys services. Households with low incomes are more likely to use most welfare and community health services, while households with higher levels of income are more likely to donate cash, goods and labour to welfare organisations. However,donations from wealthier households tend to be distributed among a variety of causes, including international ones, meaning that any increase in income and wealth disparity in Australia is likely to increase demand for industry services and place greater strain on the ability to deliver those services. The incidence of single parents, family breakdown, domestic violence and residential property eviction affects
Products & Markets
Demand Determinants continued
demand for counselling services, public housing and other crisis assistance services. In addition, the extent to which carers of disabled people use formal respite accommodation services, which is affected by the cost of these services (affected by the level of government funding) is of critical importance, and people aged over 75 years are more likely to be disabled relative to youngerpeople. In-house carers often work on a part time or voluntary basis and rely on other industry services, suchas meals on wheels. Voluntary work and government aid The availability and willingness of friends and family to assist those who suffer misfortune is of critical importance to the industry. Many disabled or mentally ill patients primary carers are spouses,
Households
with low incomes are more likely to use most welfare and community health services
parents or children, and the level of government support for informal carers has a marked impact on the ability of these people to feasibly perform such a function, and consequently on the level of demand for external health, welfare, housing and social assistance. The cost of attaining care for friends or family is critical in establishing the level of demand for industry services. However, cost is closely linked to the level of government assistance, which often increases if the demand for services goes up.
Major Markets
The markets for charities and not-for-profit organisations are all defined by interests that are seen as commercially unviable and lack interest from government bodies but nonetheless is seen by a significant amount of people as an important product or service. As a result, the industry is defined more by its business model rather than its target market, and thus the market is wide-ranging in nature. The industry, however, is most often associated with assisting those downtrodden in the community. Initiatives towards these interests make up 63.8% of all industry revenue spent. Breaking down this sector further, people suffering from physical disadvantages draws 20.6% of total industry revenue. These people include those who require assistance with a disability or mental health, and services for aged and elderly. People unsatisfied with living standard situations draw 18.4% of industry revenue, allocating money towards homelessness, economic development initiatives outside of Australia (foreign aid), and job training programs. Programs focused towards individuals dealing
Social trends in Australia relating to Charities & NPOs, 2010-11

Activity Used health services Religion afliation Cultural venue use Welfare service use Sports club member School attendance TAFE attendance trade union member Attending university Percentage of Population 80 65 41 29 26 15.5 8 8 4
SOURCE: IBISWORLD
with trauma make up 13.5% of industry revenue. Themes in this area include domestic violence and sexual assault assistance, and addiction. Financiallydisadvantaged individuals draw 13.3% of industry revenue, providing many services including scholarships, subsidised legal services, and financial support services. Outside of these causes, most other programs and organisations in the industry target niche interests that are not achievable in a commercial
Products & Markets
Major Markets continued
framework since the goals of the programs and organisations are concerned about achieving noncommercial goals. This broad category makes up 31.8% of industry revenue. General niche interests make up 15.3% of industry revenue, with examples of such interests include arts and cultural programs, sports clubs, as well as zoos and aquariums. Other niche interests relate to ideological causes (10.6%), including political, religious and social goals. Also, communal infrastructure programs attract 5.9% of industry revenue, including social clubs, professional associations and trade unions. Finally, programs and organisations Major market segmentation (2011-12)
focused towards scientific progress make up 4.4% of industry revenue. In terms of usage, sectors in the industry that see the most activity are health services and religious organisations, used by 80% and 65% of the population in the past year, respectively. Health services, in conjunction with an ageing population, are expected to be utilised on a more regular basis, while religious services are expected to follow a historical decline in terms of affiliation. Notably, community services are used by 29% of the population due to its broad nature. Also, the level of investment towards education services, similar to health services, only covers a total of 35.5% of the population.
Communal infrastructure Ideological causes
5.9%
Scientic progress
4.4%
10.6%
Physically disadvantaged
20.6%
Financially disadvantaged
13.3%
Economic development
16.4%
13.5%
Total $105.0bn
International Trade
Level & Trend xports in the E
Trauma
General niche interests
15.3%
industry are Low and Increasing
With the majority of organisations in the industry focused on community-level work, international interaction in the process of their fundraising or delivery of services is generally confined to the largest organisations, and those involved in international aid and development activities. Major aid destinations from Australia tend to be towards either Pacific or East Asian countries, or multilateral organisations. While Australias largest educational institutions are mainly public owned, some not-for-profit institutions cater to international students, though service exports do not comprise a major
part of overall industry revenue. Due to Australia being a wealthy country with strong domestic institutions, the country does not import any meaningful amount of aid or not-for-profit services. What is important to note is that the Australian government has chosen to increase its foreign aid commitments to 0.5% of GNI by 2015-16. Since during 2005 there has been a dramatic increase in AusAIDs grants to the industry, this will be expected to grant a strong revenue boost to the industry over the next several years, raising the stature of internationally focused charities.
Products & Markets

Business Locations 2011-12
NT
2.0
QLD
21.9
WA
11.1
SA
7.6
NSW
30.9
ACT
1.7
VIC
22.3
Establishments (%) Cold Zone (<10) <25 <50 Hot Zone (<100) Not applicable
TAS
2.5
Products & Markets
Business Locations
As an employer of one million Australian workers in a wide range of fields, the geographic distribution of revenue for the industry closely mirrors other national measures, such as government revenue and population distribution. New South Wales is the nations largest state in terms of population and economic output, and there are significant numbers of large not-forprofit organisations headquartered in Sydney. Hospital, health, cultural and educational not-for-profit organisations all have a major presence in New South Wales proportional to population. Victoria can be summarised in much the same way, with its high population density and full breadth of services attracting large-scale involvement, often on large government contracts. States with low population densities and remote areas attract charities and not-for-profit organisations for somewhat different reasons. Low or scattered populations make service delivery less efficient and often not commercially viable at the standards that people may be used to in large capital cities. The industrys organisations are more likely to be
Distribution of establishments vs. population

40 30
Percentage
20 10 0 VIC ACT QLD NSW TAS WA NT SA
Establishments Population
involved because of this reality, delivering services to communities of lesser interest to big business. The inefficiencies of undertaking these tasks are generally subsidised by the government in the form of grants. Recently, rurally focused firms have noted an unintentional move towards providing assistance with information and communications technology due to the technological divide between metro and non-metro areas.
Competitive Landscape
Market Share Concentration
Level Concentration There are over 600,000 not-for-profit organisations currently operating in Australia, including about 40,000 economically significant ones. Accordingly, industry concentration levels are very low, with the four largest players in the industry accounting for well under 10% of industry revenue between them. Many organisations are community focussed and operate only in their local areas. Another important factor is the large range of products and services offered by organisations in the industry. Because organisations in the industry generally exist for non-
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalisation
in this industry is Low
commercial reasons, commercial logic when analysing merger and acquisition potential is of little use. Many charities and not-for-profit organisations possess self-sufficient organisational cultures, which do not always translate well to consolidation. While many charities have board members with high levels of business acumen, it is generally not deployed towards assessing industry concentration. Recent economic difficulties in Australia associated with the global financial crisis had minimal effect on industry consolidation.
Key Success Factors IBISWorld identies 250 Key Success Factors for a business. The most important for this industry are:
Ability to attract local support/patronage A large number of organisations inthis industry are communitybased, and rely heavily on the communitys support. Ability to effectively manage risk Revenue streams for many charities can be volatile, and depend on economic conditions or one-off events. Many larger charities and not-forprofit organisations set aside cash reserves or other investments to reduce short-term funding risks.
Optimum capacity utilisation Charities and not-for-profit organisations often operate on tight budgets and use volunteer labour. Using both financial and human resources efficiently is very important in such a situation. Ability to raise revenue from additional sources In addition to traditional forms of fundraising and revenue from service delivery, many organisations derive considerable funding from government grants, deceased estates, and corporate giving programs.
Cost Structure Benchmarks
The cost structure of a not-for-profit company looks different to a profitgeared company. Charities and not-forprofit companies do not distribute any of their operating surpluses to members, and their reason for existence is not to maximise margins. That is not to say that a not-for-profit company cannot be in a situation where its level of income exceeds its level of expenses over a given period. It is quite common for organisations in the industry to deliberately underspend their incomes. The reason for this is that prudently run organisations of most types seek to maintain a financial buffer against unforeseen events.
During times of economic or political upheaval, the industry may find that its level of income unexpectedly dips at precisely the same time that its services are most crucial to the smooth functioning of society. By being able to call on financial reserves, these organisations will be better positioned to achieve their organisational objectives. While there is considerable variation in operating margins between organisations and segments in the industry, IBISWorld estimates that about2.2% of annual income is currently being allocated to reserves. The largest expense for the industry is that of wages. Comprising almost half of the industry cost structure, paid workers
Cost Structure Benchmarks continued
in the industry undertake tasks ranging from driving vehicles to performing heart surgery. Wages as a percentage of industry revenue have risen in recent years, with increasingly qualified workers occupying non-volunteer positions at charities and not-for-profit organisations. While organisations in the industry are major recipients of grants, many of them themselves allocate grants and other payments. This can relate to subcontractors and smaller industry participants who undertake work for larger ones. Depending on an organisations line of work in the industry, purchase expenses can include medical supplies, educational materials, food, or equipment hire and purchase to conduct cultural or sporting events. Sector vs. Industry Costs
Average costs of all industries in sector (2011-12) 100
Depreciation and amortisation expenses account for just under 5.0% of industry income. During 2006-07, organisations in the industry undertook an estimated $8.7 billion in new capital expenditure including land, with surpluses from current operations being the main source of funding. It is common for smaller charities and not-for-profit organisations to be provided with free or nominally expensive equipment and facilities by benefactors or public bodies, reducing depreciation and rental costs below normal commercial levels for equivalent operations. Other expenses incurred by organisations in the industry include standard administrative costs, training and recruitment expenses.
Industry costs (2011-12)
6.40 16.2 47.0 41.2 16.8 3.5 3.8 26.6 2.2 4.3 4.0 24.6 3.3
80
Percentage of revenue
60
Prot Wages Purchases Depreciation Utilities Rent Other
40
20
0
Basis of Competition
Level & Trend ompetition C
in this industry is Medium and the trend is Steady
In recent years, there has been a growing trend towards organisations outsourcing some or all fundraising activities to consultants. Increasingly, donors and potential donors are requiring information on the costs of charities programs and are directing donations to those charities that are efficient and can direct a high proportion of the funds thatthey raise directly to the people requiring welfare assistance. Thisincreasing level of awareness among donors of charity and aid effectiveness is compelling organisations to try to outdo each other on this measure. With organisations in the industry motivated by service to recipients rather than returns to investors, the manner of competition differs from an industry driven by commercial forces. That is not to say that these organisations do not strive for excellence and prominence however, with abundant examples of competitive behaviour evident in various segments of the industry. With government funding such an important part of the industrys income, the competition for lucrative long-term tenders can be fierce among charities and not-for-profit organisations. Failure to obtain or retain important government income sources has the potential to force organisations to sharply cut back their
staff and output, or merge with other organisations. There is also competition in raising funds (e.g. donations and raffles) and in obtaining volunteer labour, both of which are used to supplement any funding initiatives. Inaddition, present in many parts of the industry is competition mainly based on the cost and quality of service, and on marketing the benefits of services offered to the community generally. In competing for donations and government funding, organisations also compete with other welfare and charitable services (as well as with the arts and sporting organisations). There is a finite amount of private charitable donations that are made each year, and all not-forprofit organisations compete with one another for those donations. Communityservices organisations tend to focus fundraising initiatives on local efforts, rather than broader drives such as those undertaken by groups like World Vision. Government budgets each year are finite in size, with the different segments of the industry all seeking to be allocated as much funding as possible. This often means that lobby groups for hospital spending will be seeking money that may come at the expense of the arts, education or other lines of business also catered to by charities and not-for-profit organisations.
Barriers to Entry
Level & Trend arriers to Entry B
in this industry are High and Steady
Entering the industry may seem easy enough, particularly on a small scale thadoes not require a significant income stream. Start-up costs can be negligible for community-based service providers, and there is the theoretical capacity to tap into a pool of volunteer labour to minimise expenses. However, it is not quite so simple for charities and not-forprofit organisations that seek to operateon a larger scale. The high proportion of non-profit firms already gaining significant tax concessions makes accessing funding from federal, state or local governments increasingly difficult, particularly as governments are
Barriers to entry checklist Competition Concentration Life cycle stage Capital intensity Technology change Regulation and policy Industry assistance
Level Medium Low Growth Low Medium Medium High

increasingly inclined to offer funding to larger, privatised services that offer a broad range of services to numerous geographic regions. Inaddition, for those who do gain government
Barriers to Entry continued
funding, maintaining government contracts and tax concessions can be expensive, placing greater pressure on industry entrants attempting to gain equal status without the necessary funds to access these concessions. Contracts offered by state and federal governments for community services are most commonly medium-to-long term (i.e. five years or greater), meaning that new entrants must have a specific contract in mind when entering the industry, or will be forced to compete without public funding, assistance or clients for a prolonged period. The industry experiences a high level of
regulation and often stringent requirements must be met to gain all necessary licences and accreditations to operate in the industry, further increasing the costs for new entrants. The reputation of established organisations in the industry is a very real barrier to entry. Many iconic charities and not-for-profit organisations have been in Australias national consciousness for decades and potential donors are familiar with their line of work, credibility and previous campaigns. As a result, a new entrant to the industry may find it difficult to raise funds in a similar industry niche to an established organisation.
Industry Globalisation
Level & Trend lobalisation G
in this industry is Low and the trend is Steady
The vast majority of the organisations in the industry are small scale and operate in local communities. Most of the sectors that not-for-profit organisations work in, such as sport and recreation, the arts, and community health care require little to no coordination across national borders. Themost notable exception to this relates to numerous charities and not-for-profit organisations involved in international aid
and development. Organisations such as World Vision, the Red Cross, and Care, are global organisations dedicated to using skills and resources from developed countries such as Australia to benefit people living in poverty and conflict overseas. In addition to poverty alleviation, these organisations are commonly at the forefront of natural disaster response programs around the world.
Major Companies
There are no major players in this industry | Other Other Companies
The sheer volume of charities and not-forprofit organisations operating in Australia is such that even large not-for-profit hospital operators such St John of God Health Care account for barely 1.0% of total industry revenue. It is estimated that there are approximately 50,000 economically significant not-for-profit organisations operating in Australia today. November 2004, a hospital in Bendigo, VIC, in February 2005 and a psychiatric hospital in Dandenong, VIC, in March 2005. A merger between St John of God Health Care and the Hospitaller Order of St John, effective 1 July 2007, added psychiatric beds, disability support services and a youth service to the group, and extended the operational reach to New South Wales and New Zealand.
St John of God Health Care
Estimated market share: 1.0% St John of God Health Care is a national not-for-profit Catholic healthcare provider, with facilities and services in Western Australia, Victoria, New South Wales and New Zealand. The organization employs about 8,900 people nationally and operates 14 hospitals (predominantly located in regional areas), with 2,086 beds and St John of God Pathology. In the four years through 2008-09, St John of God Health Care spent $221.3 million 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 accounting for $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 $411.2 million in 2004-05 to $678.8 million in 2008-09, representing average annualised growth of 10.5%. There were 88,565 inpatient separations in 2008-09 (up 2.2% on 2007-08) and 95,836 day-case separations (up 7.4%). Capital expenditure amounted to $92.4 million in 2008-09, up 25.8% on 2007-08. St John of God Health Care acquired PathCare Consulting Pathologists in
Mater Health Services
Estimated market share: 1.0% Mater Health Services, established by the Sisters of Mercy in 1906, operates a network featuring seven hospitals in Brisbane (three public and four co-located) and employs about 4,850 staff. Mater was incorporated in 2002 as Mater Misericordiae Health Services Brisbane Ltd. The company generated sales revenue of $839.4 million in 2009-10 (up from $423.9 million in 2005-06) and produced a net surplus of approximately $28.6 million (up from $3.0 million in 2005-06).
Australian Red Cross Society
Estimated market share: 0.9% Australian Red Cross Society is an Association associated with the international Red Cross Red Crescent Movement that operates in 187 countries, making the worlds largest humanitarian organisation. In Australia, the movements aim is to improve lives and reduce vulnerability in Australian society. In practical terms, this entails distribution of funds and resources towards assisting disadvantaged and disaster areas in Australia and around the world, including Aboriginal and
St John of God Health Care Inc nancial performance

Year 2007-08 2008-09 2009-10 2010-11 Revenue ($ million) 759.1 804.3 895.1 942.8 (% change) N/C 6.0 11.3 5.3 NPAT ($ million) 38.2 29.6 39.8 26.9 (% change) N/C -22.5 34.5 -32.4
SOURCE: IBISWORLD
Major Companies
Other Companies continued
Torres Strait Islander people and fostering community inclusion. Themost significant and obvious presence the society has within Australia is their Blood Donor Service, which is where the organisation generates the majority of its income from. The Societys Blood Donor Service has been increasingly marketed towards regular blood donors and general society and as a result has seen increased dividends for the organisation. Over the three years to 2011, revenue from their blood services segment has increased by around $140 million. Their humanitarian services have also benefited, with the success of fundraising efforts ever increasing, particularly due to several significant disasters around the world and in Australia in recent years, including the Victorian Bushfires in 2008-09, the Queensland Floods in 2010-11, the Japanese Tsunami in 2010-11 and the Haiti Earthquake in 2009-10, among others. The significant amount of outreach for the Victorian Bushfires in particular saw revenue levels skyrocket in 2008-09, like other Australian humanitarian organisations, raising their revenue levels above $1 billion that year and increasing their market share temporarily to 1.3% from 0.7% the year previous. Since then market share has remained somewhat steady at its current level.
Salvation Army Australia Eastern Division nancial performance

Year 2006-07 2007-08 2008-09 2009-10 2010-11 Revenue ($ million) 292.1 293.0 341.7 306.9 328.4 (% change) N/C 0.3 16.6 -10.2 7.0
SOURCE: ANNUAL REPORT
Salvation Army Australia
Estimated market share: 0.7% The Salvation Army, which splits its operations into its southern and eastern territories, is a major provider of emergency services, employment services, meals, aged care and rehabilitation services to people who have problems with alcohol, drugs and gambling. Other activities include the provision of evangelical programs. Thecombined assets of the Australian territories are worth over $1.2 billion, split between social-welfare activities and church activities. In 2008, the Salvation Armys eastern and southern territories assisted 1.5
million people. Each week these organisations provided, among other things, rehabilitation support for 1,200 people; 4,000 counselling calls; employment services to 7,000 people; 180,000 meals; and 20,000 food vouchers. During a downturn, such as one experienced during 2008 and 2009, charitable giving tends to slip markedly. However, the high level of government funding for large groups such as the Salvation Army ensures that it is insulated from the worst of this. Moreover, there is a far lesser prevalence of Australian charities and endowments investing on the stock market, preventing the kind of financial collapse experienced by charities in the United States. In 2008-09, government funding accounted for 48.6% of total operating income; legacies and donations 27.5%; social service client contributions 10.6%; dividends and interest 5.8%; and other income 7.5%. Expenses from operating activities were broken down into social programs (19.9% of expenses from ordinary activities); evangelical and other programs (24.9%); aged care (17.1%); employment and youth training (28.1%); recycling operations (8.2%) and the Red Shield Appeal (1.8%).
Epworth HealthCare
Estimated market share: 0.5% Epworth HealthCare, a not-for-profit organisation, is the largest private hospital operator in Melbourne, through three campuses. Epworth generated revenue of about $461 million in 2009-10 and had over 2,700 employees.
Major Companies
Other Companies continued
Theorganisation has improved its financial performance in recent years and has completed plans for major building works. In October 2006, HealthSouth Corporation of the United States closed a transaction to sell Cedar County Rehabilitation Hospital in Melbourne and related assets to Epworth Foundation and ING Management Ltd. The Cedar Court assets include a 74-bed rehabilitation hospital and outpatient centre, a standalone rehabilitation facility at Oasis Leisure Centre and an occupational medicine rehabilitation therapy business.
Salvation Army Australia Southern Division nancial performance

Year 2007-08 2008-09 2009-10 2010-11 Revenue ($ million) 285.9 295.3 285.4 334.6 (% change) N/C 3.3 -3.4 17.2
SOURCE: ANNUAL REPORT
World Vision Australia
Estimated market share: 0.4% Founded in the United States in 1950, World Vision is a major Christian fundraising and charitable organisation, with a particular focus on youth poverty, especially in Africa. Working on six continents, World Vision is one of the largest Christian relief and development organisations in the world, with a budget of over $1.5 billion per year. The groups total revenue, including grants, product sales and foreign donations, was about $2.6 billion in 2008. World Vision International operates as a federation of interdependent national offices, each overseen by their own boards or advisory councils. Each office and its members have created a common mission statement. Through an ongoing system of peer review, each national partner is held
accountable for and abides by common policies and standards. The groups Australian operations reached revenue of about $346.7 million in 2008-09, which was a drop of $7.0 million on the previous years figure indicating that donations over Christmas were severely curtailed by collapsing consumer sentiment in the wake of the crash of global financial markets in September. The largest share of the groups revenue, unlike many other charities in Australia who rely on government funding, comes from the activity that they pioneered: child sponsorship. Thismethod involves individuals or groups paying a predetermined amount per week or month to World Vision, which is then assigned to a specific childs school or village, with whom the donor is encouraged to interact. This program of developing an awareness of the effect of donations has proven successful as a driver of continued donations.
Operating Conditions
Capital Intensity
Level The level With so much of the industrys activities focused on the provision of services, wage costs account for a large amount of the industrys revenue. Many of these services are delivered in the community, rather than in institutions (i.e. reducing the level of capital needed to deliver services). The presence of hundreds of thousands of volunteers in the industry reduces wage costs from what they may have otherwise been, but there remain almost a million paid positions in various administrative, managerial and operational roles. While there are a high number of volunteers in the industry, it is often necessary to pay a salary in order to get either the specific expertise or time commitment required by an organisation. Thus, the capital-to-
Capital Intensity | Technology & Systems | Industry Volatility Regulation & Policy | Industry Assistance
Capital units per labour unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Special Reports Charities & for Australia Not-for-Prot Organisations
Capital intensity
of capital intensity is Low
Dotted line shows a high level of capital intensity
labour ratio is 10.9:1, thus signifying that for every $1.00 spent on capital, $10.90 is spent on labour.
Tools of the trade: Growth strategies for success

New Age Economy Recreation, Personal Services, Health and Education. Firms benet from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labour skills are key to product differentiation. Investment Economy Information, Communications, Mining, Finance and Real Estate. To increase revenue rms need superior debt management, a stable macroeconomic environment and a sound investment plan.
Capital Intensive
Labour Intensive
Health Services Charities & Not-for-Prot Organisations Education Sport Organisations and Other Sports Services Welfare Religious Organisations and Services Traditional Service Economy Old Economy Services and Wholesale and Retail. Reliant Agriculture and Manufacturing. Fundraising
on labour rather than capital to sell goods. Functions cannot be outsourced therefore rms must use new technology or improve staff training to increase revenue growth. Traded goods can be produced using cheap labour abroad. To expand rms must merge or acquire others to exploit economies of scale, or specialise in niche, high-value products.
Change in Share of the Economy
Technology & Systems

Level The level
of Technology Change is Medium
The level of technology usage by organisations in the industry varies considerably, primarily due to scale, funding levels and the type of service that the charity or not-for-profit organisation provides. A large part of the activity in the industry focuses on interpersonal interaction and providing hands-on care. Users (or customers) of industry services such as aged care, welfare and education often have low incomes and a low level of exposure to technology (e.g. low computer and internet use), and often require personal assistance with information provision and dissemination. Organisations operating on a large scale need to have adequate accounting and management information systems in place to allow an analysis of the client base, and the income from and costs of providing each service to specific types of clients. Nonetheless, technology requirements are heightening quickly for the industry as it continues to acknowledge the high value technology can add to their processes, despite an often high labour intensity. However,strong resource restrictions do not allow technology change to occur quickly for most players in the industry.
Increasingly, charities are using the internet to raise awareness and funds. Online campaigns can be effective methods of reaching large, geographically scattered audiences, and the capacity to execute online donation transactions can lower costs for the charity. Recentinnovations have included Facebooks Causes application, which embeds a charity into social networking feeds, and the popularisation of microlending by websites such as Kiva. org. One of the more notable success stories on the domestic front is the Movember campaign, which allows participants in a charity event to personalise an online profile and campaign for online donations. Despite technological advancements, many donations given to the industry are in the form of cheques. About 30% of not-for-profit firms receive more than 50% of their donations via cheque. Consumers who tend to use cheques are, according to the Australian Payments Clearing Association, the elderly, rurally isolated and unwaged. Since older people tend to give to not-for-profit firms more, this reflects the difficulty of not-for-profits towards reaching out beyond this audience.
Revenue Volatility
Level The level
of Volatility is Medium
As an industry that derives a significant share of its funding from private donations and philanthropy, revenue can suffer during periods of economic strife. Anothermain source of funding is government grants, which can fluctuate depending on government policy, the electoral cycle, and competition from other charities and not-for-profit organisations. Government grants are a steadier
medium-term source of funding for organisations in this industry, but the capacity to access these grants varies. During the economic downturn in 2008 and 2009, government-funding levels remained solid, while private donation levels dipped over a 12-month period. By2010-11 however, private donation conditions had become stronger as donors felt surer about their own circumstances.
Revenue Volatility continued
Revenue volatility* (%)
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment. When a rm makes poor investment decisions it may face underutilised capacity if demand suddenly falls, or capacity constraints if it rises quickly.
Volatility vs Growth
1000 100 10 1 0.1
Hazardous
Rollercoaster
Charities & Not-for-Prot Organisations

Stagnant
30 10 10 30 50
Blue Chip
70
Five year annualised revenue growth (%)

* Axis is in logarithmic scale
Regulation & Policy

Level & Trend he level of T
Regulation is Medium and the trend is Increasing
With operators in the industry involved in activities ranging from junior soccer to tsunami relief, the regulation and policy framework for particular charities and not-for-profit organisations depends heavily on their line of work. However, the federal government is seeking to reform the currently state-based not-forprofit regulation legislation, as specified in the 2011-12 budget. New Federal Legislation to be introduced In the 2011-12 budget, the Gillard Government declared its intention over the next several years to overhaul and nationalise third sector regulation, by establishing the Australian Charities and Not-for-Profits Commission (ACNC) as a national industry regulator for operation in July 2012, and redefining the word charity from July 2013 which has not been modified from Englands 1664 definition in Australian law. The aim of such reforms is to create greater consistency between state regulations, and create greater industry transparency as well as simplify the system by implementing a report-once, use-often strategy to reporting. These measures are expected to bring greater efficiencies to the industry for larger players, with Bradfield Nyland Group finding that current reporting requirements account for about $100 million worth of lost hours
with the current system. Smallerplayers, however, are likely to take on greater reporting burdens, straining their resources even more so. More immediate concerns to the industry, however, is that since July 2011 the industry has been taxed for unrelated commercial activities in order for the government to help guarantee that not-for-profit organisations maintain their altruistic intentions. This move is expected to also prevent individuals and companies from sheltering themselves from tax evasion. Community services regulation Each state and territory government has responsibility for all aspects of child adoption as well as corrective services within its jurisdiction, in addition to having their own legislation relating to child adoption and corrective services (including parole). The Commonwealth Government is principally responsible for family affairs through the Family Law Act and the Marriage Act. The HACC Act authorises the Commonwealth Government to pay financial assistance to state and territory governments under agreements with the Commonwealth Government for the provision of home and community services. The objective of the agreement is the provision of moneys by the
Regulation & Policy continued
commonwealth, state and territory governments to assist governments and community organisations in developing a range of integrated home and community care for the frail aged and younger people with disabilities and their carers. The agreement also facilitates the maintenance of those people in their own homes, and avoids their premature or inappropriate admission to long-term residential care, thereby improving their quality of life. The Supported Accommodation Assistance Act 1994 provided a basis for the Commonwealth Government and state and territory governments to fund support accommodation and other assistance services. The program (SAAP) aims to provide transitional supported accommodation and related services to help people who are homeless, in crisis or at imminent risk of being homeless to achieve the highest possible degree of self-reliance and independence. Thecommonwealth, state and territory governments fund the SAAP program. The Commonwealth Government provides about 60% of SAAP funding. The Commonwealth State/Territory Disability Agreement (CSTDA) is a funding agreement between governments that provides a framework for a system of administering services for people with a disability. Under the agreement, state andterritory governments are responsible for providing, inter alia, non-residential care (as well as accommodation support and respite services). Commonwealth, state and territory governments have additional community, individual and family support programs that provide funds to welfare organisations that deliver the service.
Most state and territory governments have legislation controlling fundraising. The legislation seeks to protect the public against fraud, misappropriation of funds, misleading conduct; and ensure that the public have access to information and that organisations use acceptable fundraising practices. Fundraising and nancial regulation The industrys knowledge of their legal environment, according to law firm Makinson & dApice, needs much improvement, with many players in the industry stating they are unable todeal with bequests and property legal issues sufficiently. The states and territories have trustee legislation that imposes obligations governing how trustees, including charities, invest their funds. Children adoptions are principally arranged by state and territory government welfare departments, although adoptions are also arranged by non-government organisations in some states. Once an adoption order is granted, the adopted child becomes the child of the adopted parents as if he or she had been born to them. Parole services arise out of orders imposed by courts, which prescribe conditions and place offenders under controlling supervision for less than 50% of the time. These services are funded and provided by state and territory governments. The Fundraising Institute Australia has issued a code of professional conduct. It provides guidelines to members requiring disclosure to donors and specifying correct procedures for telephone solicitation.
Industry Assistance
Level & Trend he level of T
Industry Assistance is High and the trend is Steady
While charities and not-for-profit organisations commonly exist for assisting others, the organisations themselves are also assisted in various ways. Arguably,the most significant manner is via taxation concessions that apply to registered not-for-profit organisations. Asof June 2009, 52,149 not-for-profit organisations were registered as tax concession charities, and about 40% of those endorsed as deductible gift recipients. Organisations endorsed as deductible gift recipients enable donors to offset their donations against their annual tax liabilities, creating an incentive to donate. Australian taxpayers claimed $1.8 billion for deductible gifts in 2006-07, increasing about 11% per annum from $863 million in 2000-01. Other tax benefits enjoyed by organisations in the industry include fringe benefit tax concessions (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 of gaming machines. The specifics of the laws vary from state to state, but over $700 million worth of concessional tax benefits are claimed by sporting clubs and community-based organisations with licences to operate gaming machines. In addition to tax concessions received by not-for-profit organisations, local, state and federal government funding is a significant source of income and resources for the industry. Commonlymade in the form of grants or contracts, public money is allocated to not-for-profit organisations who partner with government to provide services. Thefederal government department that administers Australias international aid program, AusAid, works with charities and not-for-profit organisations to maximise the effect and reach of Australian aid. Currently, about 7.0% of AusAids aid program is delivered by not-for-profit organisations, with many long-term partnerships in place.
Key Statistics
Industry Data
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Sector Rank Economy Rank Revenue ($m) 62,896.5 69,466.2 75,791.3 82,308.0 88,283.4 92,270.7 89,424.9 95,424.0 101,536.8 104,989.1 108,978.6 113,773.7 117,755.7 121,759.4 127,969.1 5/24 12/495 Industry Value Added ($m) Establishments 37,072.0 44,662 39,079.7 45,900 41,397.4 46,935 44,404.3 48,540 47,253.5 50,030 49,070.8 51,581 49,933.0 51,890 52,736.9 52,565 54,119.1 53,511 56,504.5 54,635 58,548.1 55,837 60,802.1 56,897 63,320.2 58,035 66,285.7 59,370 69,727.1 60,855 1/24 4/24 6/495 13/495 Enterprises 37,250 38,218 38,982 39,918 41,008 42,279 42,533 43,086 43,861 44,800 45,758 46,619 47,531 48,612 49,797 4/24 11/495 Employment 713,154 765,214 811,893 858,982 889,919 906,827 937,660 966,727 1,018,930 1,059,688 1,099,956 1,143,954 1,190,856 1,242,063 1,297,956 1/24 2/495 Exports ($m) 3,271.0 3,391.3 3,785.3 4,457.6 4,709.3 4,712.4 5,029.6 5,741.5 5,760.9 6,079.8 6,783.2 7,699.9 8,585.7 9,277.1 9,926.5 3/8 13/210 Imports ---------------N/A N/A Wages ($m) 27,213.7 29,989.5 32,718.6 35,597.8 37,982.8 40,185.8 41,230.7 44,611.6 47,600.6 49,742.7 51,533.4 53,491.6 55,738.3 58,413.7 61,451.3 1/24 4/495 Domestic Demand N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Annual Change
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Sector Rank Economy Rank Revenue (%) 10.4 9.1 8.6 7.3 4.5 -3.1 6.7 6.4 3.4 3.8 4.4 3.5 3.4 5.1 10/24 142/495
Industry Value Added Establishments (%) (%) 5.4 2.8 5.9 2.3 7.3 3.4 6.4 3.1 3.8 3.1 1.8 0.6 5.6 1.3 2.6 1.8 4.4 2.1 3.6 2.2 3.8 1.9 4.1 2.0 4.7 2.3 5.2 2.5 9/24 12/24 123/495 93/495
Enterprises (%) 2.6 2.0 2.4 2.7 3.1 0.6 1.3 1.8 2.1 2.1 1.9 2.0 2.3 2.4 13/24 79/495
Employment (%) 7.3 6.1 5.8 3.6 1.9 3.4 3.1 5.4 4.0 3.8 4.0 4.1 4.3 4.5 12/24 60/495
Exports (%) 3.7 11.6 17.8 5.6 0.1 6.7 14.2 0.3 5.5 11.6 13.5 11.5 8.1 7.0 4/8 40/210
Imports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Wages (%) 10.2 9.1 8.8 6.7 5.8 2.6 8.2 6.7 4.5 3.6 3.8 4.2 4.8 5.2 7/24 68/495
Domestic Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Key Ratios
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Sector Rank Economy Rank IVA/Revenue (%) 58.94 56.26 54.62 53.95 53.52 53.18 55.84 55.27 53.30 53.82 53.72 53.44 53.77 54.44 54.49 5/24 88/495 Imports/Demand Exports/Revenue (%) (%) N/A 5.20 N/A 4.88 N/A 4.99 N/A 5.42 N/A 5.33 N/A 5.11 N/A 5.62 N/A 6.02 N/A 5.67 N/A 5.79 N/A 6.22 N/A 6.77 N/A 7.29 N/A 7.62 N/A 7.76 N/A 5/8 N/A 127/210
Revenue per Employee ($000) 88.19 90.78 93.35 95.82 99.20 101.75 95.37 98.71 99.65 99.08 99.08 99.46 98.88 98.03 98.59 21/24 452/495
Wages/Revenue (%) 43.27 43.17 43.17 43.25 43.02 43.55 46.11 46.75 46.88 47.38 47.29 47.02 47.33 47.97 48.02 2/24 37/495
Employees per Est. 15.97 16.67 17.30 17.70 17.79 17.58 18.07 18.39 19.04 19.40 19.70 20.11 20.52 20.92 21.33 4/24 143/495
Average Wage ($) 38,159.64 39,191.00 40,299.15 41,441.85 42,681.19 44,314.74 43,971.91 46,147.05 46,716.26 46,940.89 46,850.42 46,760.27 46,805.24 47,029.58 47,344.67 11/24 303/495
Share of the Economy (%) 3.56 3.60 3.71 3.86 3.97 3.97 3.98 4.11 4.15 4.16 4.15 4.17 4.22 4.28 N/A 1/24 6/495
Figures are ination-adjusted 2012 dollars. Rank refers to 2012 data.
Jargon & Glossary
Industry Jargon
CHARITY The Pemsel Promises identies four charitable purposes: the relief of poverty, the advancement of education, the advancement of religion, and other purposes benecial to the community as a whole. NGO Stands for non-government organisation.
NOT-FOR-PROFIT ORGANISATION An organisation that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.
IBISWorld Glossary
BARRIERS TO ENTRY Barriers to entry can be High, Medium or Low. High means new companies struggle to enter an industry, while Low means it is easy for a rm to enter an industry. CAPITAL/LABOUR INTENSITY An indicator of how much capital is used in production as opposed to labour. Level is stated as High, Medium or Low. High is a ratio of less than $3 of wage costs for every $1 of depreciation; Medium is $3-$8 of wage costs to $1 of depreciation; Low is greater than $8 of wage costs for every $1 of depreciation. CONSTANT PRICES The dollar gures in the Key Statistics table, including forecasts, are adjusted for ination using 2011-12 as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the real growth or decline in industry metrics. The ination adjustments in IBISWorlds reports are made using the Australian Bureau of Statistics implicit GDP price deator. DOMESTIC DEMAND The use of goods and services within Australia; the sum of imports and domestic production minus exports. EARNINGS BEFORE INTEREST AND TAX (EBIT) IBISWorld uses EBIT as an indicator of a companys protability. It is calculated as revenue minus expenses, excluding tax and interest. EMPLOYMENT The number of working proprietors, partners, permanent, part-time, temporary and casual employees, and managerial and executive employees. ENTERPRISE A division that is separately managed and keeps management accounts. The most relevant measure of the number of rms in an industry. ESTABLISHMENT The smallest type of accounting unit within an Enterprise; usually consists of one or more locations in a state or territory of the country in which it operates. EXPORTS The total sales and transfers of goods produced by an industry that are exported. IMPORTS The value of goods and services imported with the amount payable to non-residents.
INDUSTRY CONCENTRATION IBISWorld bases concentration on the top four rms. Concentration is identied as High, Medium or Low. High means the top four players account for over 70% of revenue; Medium is 4070% of revenue; Low is less than 40%. INDUSTRY REVENUE The total sales revenue of the industry, including sales (exclusive of excise and sales tax) of goods and services; plus transfers to other rms of the same business; plus subsidies on production; plus all other operating income from outside the rm (such as commission income, repair and service income, and rent, leasing and hiring income); plus capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of xed tangible assets are excluded. INDUSTRY VALUE ADDED The market value of goods and services produced by an industry minus the cost of goods and services used in the production process, which leaves the gross product of the industry (also called its Value Added). INTERNATIONAL TRADE The level is determined by: Exports/Revenue: Low is 0-5%; Medium is 5-20%; High is over 20%. Imports/Domestic Demand: Low is 0-5%; Medium is 5-35%; and High is over 35%. LIFE CYCLE All industries go through periods of Growth, Maturity and Decline. An average life cycle lasts 70 years. Maturity is the longest stage at 40 years with Growth and Decline at 15 years each. NON-EMPLOYING ESTABLISHMENT Businesses with no paid employment and payroll are known as non-employing establishments. These are mostly set-up by self employed individuals. VOLATILITY The level of volatility is determined by the percentage change in revenue over the past ve years. Volatility levels: Very High is greater than 20%; High Volatility is between 10% and 20%; Moderate Volatility is between 3% and 10%; and Low Volatility is less than 3%. WAGES The gross total wages and salaries of all employees of the establishment.
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X0021 Charities &amp; Not-For-Profit Organisations in Australia Industry Report

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Bigger and better: Organisations in the industry are expanding their service offerings

IBISWorld Industry Report X0021

Charities & Not-for-Prot Organisations in Australia

32 Key Statistics 20 Competitive Landscape

4 Industry at a Glance 5 Industry Performance

33 Jargon & Glossary

12 Industry Life Cycle

24 Major Companies 27 Operating Conditions

14 Products & Markets

www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com

Charities & Not-for-Profit Organisations in Australia March 2012 2

About this Industry

For additional information on this industry www.ausaid.gov.au AusAID

Charities & Not-for-Profit Organisations in Australia March 2012 3

About this Industry

Additional Resources continued

Charities & Not-for-Profit Organisations in Australia March 2012 4

Annual Growth 07-12

Annual Growth 12-17

Revenue vs. employment growth

Population aged 55 or older

There are no major players in this industry

6.0 5.5 5.0 4.5

Key External Drivers

Growth Medium Low High Low

Medium Medium High Low Medium

Charities & Not-for-Profit Organisations in Australia March 2012 5

Key External Drivers

5.5 5.0 4.5

30000 20000 10000

Charities & Not-for-Profit Organisations in Australia March 2012 6

Key External Drivers continued

Effect of the nancial crisis

Charities & Not-for-Profit Organisations in Australia March 2012 7

Effect of the nancial crisis continued

New avenues to attracting donor dollars

Charities & Not-for-Profit Organisations in Australia March 2012 8

Charities & Not-for-Profit Organisations in Australia March 2012 9

The role of government

Charities & Not-for-Profit Organisations in Australia March 2012 10

The role of government continued

Looking for bigger sh

Expanding lines of work

Charities & Not-for-Profit Organisations in Australia March 2012 11

A culture of giving continued

Charities & Not-for-Profit Organisations in Australia March 2012 12

Company consolidation; level of economic importance stable

Health Services Education

Charities & Not-for-Prot Organisations

Religious Organisations and Services

Potential Hidden Gems

Charities & Not-for-Profit Organisations in Australia March 2012 13

Industry Life Cycle This industry is Growing

Charities & Not-for-Profit Organisations in Australia March 2012 14

Products & Markets

KeY selling inDUstRies

Products & Services

Charities & Not-for-Profit Organisations in Australia March 2012 15

Products & Markets

Products & Services continued

Products and services segmentation (2011-12)

Culture and recreation

Charities & Not-for-Profit Organisations in Australia March 2012 16

Products & Markets

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

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