The Benefacts Nonprofit Sector Analysis for 2017 confirms what many already knew - a changing pattern in the ways by which government invests in the nonprofit sector. Compared to 2013, in 2015 overall government investment in nonprofits increased by €650 million, to just over €5.3 billion. In 2015 government invested in nonprofits in two ways – by providing grants (€2.0 billion) and by paying the sector to deliver specific services (€3.3 billion). Between 2013 and 2015 grants decreased by 1.1.% (an decrease of €21.5 million) and service fees increased by 16.5% (an increase of €431 million). These figures reveal the implementation of policies that prioritise commissioning, contracting and procurement in how the state invests in the nonprofit sector.
The Benefacts analysis demonstrates that overall nonprofits are less reliant on state funding than previously understood (government investment represents 49% of the total income of the sector). There are very good democratic, social and economic reasons why the state should invest in the nonprofit sector; however, the mechanisms by which that investment is achieved have very significant implications for nonprofits and the people who use their services. While the nonprofit sector is very diverse and the trend towards service fees will affect different parts of the sector differently, broad ranging concerns have been expressed about this approach. The Benefacts analysis quite rightly points out service contracts are subject to change and “could be awarded to other nonprofits, or to for-profit providers” (p. 11). As well as representing an inherently less reliable source of financial investment to the sector, service contracts can also undermine the independence of the sector, and constrain its capacity to generate innovative solutions to the most intransigent social problems facing our society.
I am reminded of the words of a senior civil servant some years ago when she said to me that procurement and contracting are likely to be the biggest single challenge facing nonprofits in the coming decade. This prediction that is borne out in the Benefacts 2017 nonprofit analysis, which provides, for the first time, a macro level analysis of how state investment in nonprofits is changing.