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Funding and service agreements

Funding for non-government community services in Victoria isn’t keeping pace with rising costs.

The Victorian Government has indexed funding at 2% p.a., but the real costs of service delivery are increasing by about 2.4%. Recent changes to the Superannuation Guarantee Levy (up 0.5% over recent years) have only made the situation worse.

The result is a real funding cut for community organisations, which now have less money to help Victoria’s most vulnerable and disadvantaged or plan for the future with certainty.

VCOSS wants a fair funding deal that recognises the real cost of providing services.

This funding should increase over time as the sector’s costs grow.

fudning gap

Current Arrangements

The Victorian Government’s Service Agreement sets out the key obligations, objectives, rights and responsibilities of organisation funded by the Department of Health & Human Services and the Department of Education & Training.

The agreement was updated in December 2015 and features significant changes, including:

  • Extension to a four year agreement: Other than for disability services, the Service Agreement will extend to 30 June 2019.
  • Notice periods: In some instances the department will have to give a minimum of five business days’ notice when they request certain things. This is a change from no notice in many cases. Further, the Organisation can request an extension which will not unreasonably be refused.
  • Assets: Amendment to clause 7.2 states that value of Asset on disposal will be depreciated value. New clause 7.10 states that clause 7 applies only to assets for which funding has been specifically allocated.
  • Dispute Resolution: The Service Agreement will permit a voluntary mediation process that can be entered into prior to or following the Dispute Resolution Officer deciding on disputes.
  • Suspension: Amendments to clause 12 give the Organisation 5 business days’ notice of suspension in certain circumstances.
  • Cessation: The department will have to give three months’ notice if cessation is due to change in government policy or insufficient funds. Further, there is a new definition of ‘Material Breach’ that means the department cannot require cessation of services for a single minor breach.
  • Termination: Three months’ notice will be required to terminate a contract when there is a change in Government policy or insufficient funds from parliament or the Commonwealth Government. Further, the organisation will be able to claim reasonable costs arising from the termination to be paid by the Department. These costs will be capped at the amount of funding.
  • Intellectual Property: The Department must have regard to the Whole of Victorian Government Intellectual Property Policy. If the Department considers it should own intellectual property it must give written notice to the Organisation prior to the delivery of relevant services. Further, a new clause will be added that clarifies that background IP will only be licensed if it is needed for the Department to enjoy the full benefit of the services.
  • Privacy and data protection: There are some changes required by the Privacy and Data protection Act 2014. This change will require an Organisation to inform their clients that they may disclose personal or health information to the department for specific purposes.

VCOSS has serious concerns about ‘record ownership’ obligations in the Service Agreement.

Under existing arrangements the Department owns an organisation’s records that relate to the Service Agreement, including governance, client and other records.

Funded community organisations would rather they own these records with access given to the Department as required. Ownership by the Department often interferes with the relationship between the client and the organisation and limits an organisation’s independence.

VCOSS will continue to push for the removal of these clauses.


Equal Remuneration Order

In February 2012, Fair Work Australia handed down an Equal Remuneration Order (ERO) that will increase wages for workers in the social and community services sector.

The decision recognises the historical under-payment of community service workers, and was rightly heralded as an important step toward achieving equal pay for workers in the sector.

But the ERO also has financial implications for organisations, which must now pay wage increases of between 23% and 41% over eight years, through to December 2019.

Funding for the wage increases has been included in Victorian Budget forward estimates from June 2015.

VCOSS will monitor funding commitments in this space to ensure community sector organisations are supported to deliver on these much needed wage increases.

Renewing the Service Agreement 2015-18

Principles underpinning a renewed Service Agreement

Professor Shergold’s report Service Sector Reform: A roadmap for community and human services reform (July 2013) recommended that the sector reform process be conducted on principles of:

  • partnership and a collaborative relationship between public service agencies and non-governmental organisations “…founded on appreciation of the constraints under which all sides operate, mutual respect, reciprocated trust, authentic consultation, genuine negotiation and a shared recognition of common purpose”; and
  • shared governance:  All providers of publicly funded services “ … should be regarded as ‘co-producers’ of government services, jointly contributing to service design and sharing responsibility for program delivery.”

The development of a revised Service Agreement should be conducted in accordance with these principles. In our view, the current review of the 2012-15 Service Agreement is an important opportunity to rethink and rearticulate the contractual relationship between government and funded organisations via new and more collaborative form(s) of agreement.

Without limiting our request for a redefined framework for agreement-making between government and the funded sector, we below are our key issues of concern with the current Service Agreement.

Main issues with the 2012-15 Service Agreement

  1. Drafting approach to the Service Agreement

The Service Agreement has been drafted with extensive rights and very broad discretion in favour of the Department. This approach is not in line with the principles mentioned above and the Victorian Government’s stated support for partnerships and shared governance with all publicly funded services.  It is also legalistically drafted. A more balanced, plain language Agreement should be pursued for the 2015-18 period.

  1. Subjective clauses and vague standards in Service Agreement

The significant subjective discretion afforded to the Department in the Service Agreement, as well as reference to vague standards, creates uncertainty for Organisations. For example in many clauses the terms ‘in the Department’s reasonable opinion’, ‘to the Department’s reasonable satisfaction’, ‘expected community standards’ or ‘ethical standards’ are used but not sufficiently defined.  More objective measures are needed in many cases to ensure organisations understand (and can meet) appropriate standards, and fair processes which provide an organisation with a right of reply are required where performance is in dispute.

  1. Powers of the Department to materially vary, suspend, cease or terminate the Service Agreement lack consistency and procedural fairness

The clauses in the Service Agreement that provide the Department with a right to unilaterally withhold funding, vary, suspend, cease or terminate the Service Agreement are unfair, overly complex and inconsistently drafted.  A simpler, fairer, more transparent process is required.

  1. Not-for-profit community organisations are independent, self-governing entities that have obligations under other laws

The current Service Agreement has clauses that do not appear to recognise that community organisations are independent entities with separate governance and legal requirements. For example, clauses requiring Organisations to hand over original records do not recognise organisations’ record-keeping requirements under incorporation, tax, charity and other laws. The 2015-18 Agreement should acknowledge and respect the sector’s independence, and reporting requirements should be streamlined with existing legal and regulatory obligations wherever possible to alleviate compliance burdens on Organisations.