Understanding the impact of Royal Commissions on NFP resources

Broader implications of the Royal Commissions.

After a 10-month inquiry, the Royal Commission into Aged Care Quality and Safety released its interim report on 31 October 2019. The report, titled Neglect, detailed how the sector has failed to meet the needs of older, vulnerable Australians.

The inquiry investigated aged-care housing, in-home care and care for young people with disabilities living in a residential aged-care environment.

While the government has responded with an additional $537 million in funding for the sector, the report noted that no amount of funding could repair the deep-seated flaws in the system and that nothing less than “a fundamental overhaul of the design, objectives, regulation and funding of aged care in Australia” would be appropriate.

The report identified three areas for immediate attention, including more home-care packages to aid those on waiting lists, a reduction in the ‘over-reliance’ on chemical restraints, and a reduction in the intake of young people with disabilities into aged-care homes.

The final report is due by November 2020 and is expected to focus on governance and accountability in the sector and provide a road map for the transformation of the industry. Indeed, hearings over recent weeks have had a much stronger focus on the governance of aged care organisations.

While the not-for-profit sector has been welcoming of Royal Commission hearings and findings, less considered are the extra costs and implications for not-for-profit organisations in responding to the Aged Care and other Royal Commissions.

Some questions were asked in the 2019 AICD NFP Governance and Performance Study about the effect of Royal Commissions on the NFP sector as part of its broader focus on NFP trends and governance. The AICD study, now in its tenth year, is the largest of its kind on NFP governance in the world.

As with any survey, care is needed in extrapolating the results to all NFPs. The 2019 AICD NFP Governance and Performance Study represented a small sample of NFP organisations and their experience with Aged Care, Disabilities, and Child Sexual Abuse Royal Commissions may not be reflective of the NFP sector generally.

Findings

The study found the NFP sector’s response to the Child Sexual Abuse, Aged Care and Disabilities Royal Commissions is having a significant financial impact on NFP resources. For example,159 directors reported their organisation had, collectively, spent $47.3 million on responding to Royal Commissions – an average of almost $300,000 per NFP.

Costs included out-of-pocket expenses, additional staff requirements, professional fees, impact on insurance premiums, training, record collection and communications relating to Royal Commissions. Costs for redress and compensation, if required, were not included.

NFP directors also reported significant non-financial costs from Royal Commissions for their organisation and its stakeholders:

• In some cases, stakeholders of their NFP (including clients and families) became anxious or stressed that their organisation’s reputation was at risk because it operated in a sector under investigation in a Royal Commission.
• Directors reported that the Royal Commission timeframes, in many cases, were tight, creating extra stress for the organisations. Some NFPs had struggled to provide information required because it did not exist.

Other findings included:

• 29 per cent of directors reported their organisation was involved in one or more Royal Commission;
• Of these:
  • two thirds have made, or are expected to make, written submissions;
  • half have provided, or will provide, information requested by Commissioners;
  • one in five have, or expect to have, staff appear before the Commissioners.

The Royal Commissions have had varying effect on NFPs. Directors said their organisation was most affected by the Aged Care Royal Commission, followed closely by the People with Disabilities Royal Commission and Child Sexual Abuse Royal Commission.

It is important to note that survey responses and focus-group interviews confirmed strong NFP support for Royal Commissions. Directors surveyed said their organisation’s board and executive team welcomed Royal Commission findings, no matter how confronting.

AICD has developed a range of resources to assist NFP organisations with their governance, including the revised NFP Governance Principles launched in January 2019.

In addition, a range of other tools and resources exist, including, the board governance in the aged care sector director tool and also the governing to protect vulnerable people short course, which has proven extremely popular since its launch 18 months ago.