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

Tue 03 Sep 2019

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 philathropic 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. For more information see the information from SSPA, which includes video comments from organisations included in the research and resources to share the research.

SSPA National Manager Brenda Pilott said:

“There have been some positive recent developments with our sector’s funding. We want to see the Government build on this and make a serious commitment in the 2020 Budget to close the funding gap. And we want the Government to commit to working with social service providers and the philanthropic sector on the longer term issues we have identified, to achieve an effective and sustainable funding model that ensures the wellbeing of New Zealanders.”

Brenda Pilott also highlighted the urgent need for the government to address the pay gap between government social workers and community-based social workers. In some cases the gap was increased as a result of pay equity agreements reached last year. Ms Pilott said:

“If there is any capacity for the government to respond on the wages issue they should not wait, because the need is urgent. We know of cases where community-based social workers are being offered 30% or 40% more to move into government social work roles, making it unsustainable for providers to be able to hold onto staff,  or attract new staff.”

The New Zealand Council of Christian Social Services (NZCCSS) welcomed the report, saying:

"This structural underfunding means that people, particularly those in vulnerable communities, struggle to receive the amount of services they require to achieve and maintain wellbeing. Underfunding of community-based social services is not a new phenomenon – it has been occurring for many years."

Trevor McGlinchey, NZCCSS Executive Officer said:

“This underfunding is occurring at the same time as our members experience an increasing level complexity of need and a rise in the demand for services. It is significant this report has been able to identify and place a cost on these complexities and demands.”

Other non-government organisations have welcomed the report and supported its findings including the Salvation Army and Barnardos

Related news

Public Service Association (PSA) members at social service providers Barnados, Wellington Sexual Abuse HELP, Christchurch Methodist Mission, Stand for Children and Ngāpuhi Iwi Social Services have filed equal pay claims with their employers.

The PSA said "Their employers tell us funding constraints prevent them from paying staff according to their levels of skill and responsibility. We say our members are worth 100%, and they shouldn’t have to rattle buckets to get it." The PSA also highlighted that the vast majority of these workers are women.

This follows the landmark pay equity settlement in 2018 for Oranga Tamariki social workers. This provided social workers with an 30% pay rise over a two year period. At the time, SSPA national manager Brenda Pilott welcomed the agreement but also called for it to apply to social workers working for the community organisations that Oranga Tamariki contracts to deliver services. Brenda Pilott highlighted that there was already an average 20% pay gap and that the pay equity settlement would widen it further.

The Human Rights Commission (HRC) recently launched a campaign to support pay transparency. The HRC is calling for the establishment of an independent pay transparency agency to help close the gender and ethnic pay gap.

The Equal Pay Amendment Bill was introduced in 2018. After a consultation process, the Education and Workforce Select Committee released their final report and recommendations in May 2019. The bill is currently waiting for its second reading in Parliament. 

Related media

Stopping Violence Needs Men, Press Release: National Network of Family Violence Services, Scoop, 22.09.2021

ANZASW calls for social worker pay equity, Press Release: ANZASW, Scoop, 21.09.2021

Government not sure how much it is spending on third-party social service organisations, Stuff, 28.01.2021

Undoing neglect, violence and addiction, but paid $25k less, Stuff, 30.09.2019

Funding fears for family violence services despite Govt boost, Newsroom, 12.09.2019

To improve well-being, govt must fund NGOs fairly, Press Release: Aotearoa NZ Association of Social Workers, Scoop, 05.09.2019

CPAG says new study supports vastly improved social services funding, Child Poverty Action Group, 05.09.2019

Urgent response needed to close social service funding gap, Press Release: Trust Waikato, Scoop, 05.09.2019

The $630 million funding gap – how do we work together to close it?, ComVoices Blog, Scoop, 04.09.2019

Philanthropic sector seeks action around social service funding gap, Philanthropy NZ Press Release, 03.09.2019

Social service providers point to $630m shortfall in funds, RNZ, 03.09.2019

Social workers call for pay increase as wages differ by $30,000 across sector, Stuff, 01.09.2019

'Undervalued' social service workers make pay equity plea, Stuff, 29.08.2019

Government urged to address pay secrecy in bid to fix gender pay gap, NZ Herald, 27.08.2019

Small Decrease in Gender Pay Gap shows Need for Legislation, Press Release: Pay Equity Coalition, Scoop, 22.08.2019

NGO social services losing workers because of salary, RNZ, 11.07.2019

NGOs struggle to retain social workers after Oranga Tamariki pay rise, RNZ, 10.07.2019

Pay gap difficulties for NGOs hiring social workers, RNZ, 10.07.2019

Social workers aim to use public sector pay rise as leverage, RNZ, 15.11.2018

Image: Andrew Khoroshavin from Pixabay

More news articles about Community