The $21 billion sector locked out of delivering its own funding

There is a pattern in how Australian governments fund the social enterprise sector, and once you see it you cannot unsee it. A government announces investment to grow social enterprises. The media release talks about jobs, inclusion and sustainable businesses. The money is then routed through an intermediary organisation, a peak body or network or capability builder, under that organisation’s existing arrangements. And there it stays.

The enterprises the funding was announced for do not deliver any of it. They are not invited to. There is no expression of interest, no panel, no co-delivery model, no procurement opportunity. The investment that was framed as enterprise growth becomes, in practice, intermediary growth. The sector is the headline and the intermediary is the recipient.

I run a social enterprise. I have spent seven years working with government at every level, across multiple states and federally, and I want to be precise about what I am arguing, because it is not what it will be mistaken for.

I am not arguing that intermediaries are bad. Peak bodies, networks and capability builders do necessary work. Sectors need connective tissue, and connective tissue needs funding. I am arguing that one model of sector funding has a structural flaw, that a better model already exists inside Australian government, and that the gap between the two is costing the sector jobs every funding cycle.

Two models, one country

Australia is currently running both models at once, which makes the comparison unusually easy.

The Commonwealth’s Social Enterprise Development Initiative is demand-side design. Capability building grants of up to $120,000 are paid to social enterprises themselves. The enterprise holds the money. The enterprise chooses which providers to engage, and it can engage several. Providers, including intermediaries, compete to be chosen. The Department of Home Affairs runs the same logic through its refugee employment program, which funds social enterprises directly to create jobs. In both cases the money lands inside enterprises and the market for support forms around them.

Then there is supply-side design. Money is granted to an intermediary under its existing arrangements to deliver support to the sector. The intermediary holds the money. The intermediary decides what the sector needs. The enterprises receive whatever is delivered, and deliver none of it themselves.

The first model grows enterprises and disciplines providers through choice. The second model grows the intermediary and centralises the delivery of sector support. Both are described in media releases using identical language about strengthening the sector. The first strengthens enterprises directly. The second strengthens the organisations positioned between government and enterprises.

The flaw in the second model

The supply-side model has a structural problem that gets worse the longer nobody names it. Many funded intermediaries are not only intermediaries. They also operate as service providers. They sell capability building, education, facilitation, consulting and events. They bid for government and philanthropic money. They sit on the supply side of the same markets as the enterprises they exist to represent.

When public investment flows to an organisation in that position under its existing arrangements, the investment does not just strengthen the sector’s connective tissue. It expands the intermediary’s delivery capacity in markets where its own members are trying to win work. The peak body becomes a publicly funded participant in markets occupied by the businesses it speaks for.

Nobody designed this maliciously. That is exactly the point. It does not require bad intent. It only requires a funding model that treats the intermediary as the natural delivery vehicle and never asks whether the enterprises themselves could deliver any of it. Intent is not a safeguard. Design is.

What the numbers say we are ignoring

Sector research now adopted by the Commonwealth puts the Australian sector at around 12,000 social enterprises, employing more than 200,000 people and contributing over $21 billion to the economy every year. Those are the figures the Department of Social Services itself uses when it announces sector funding. This is not a fragile cottage industry waiting to be built by intermediaries. It is a mature national ecosystem of businesses already delivering training, employment programs, advisory services, community engagement and disability inclusion work, often for the same governments that fund the sector’s peak bodies.

So when a government invests in growing the sector and the design contains no pathway for a single one of those businesses to participate in delivery, something has gone wrong at the level of logic, not just fairness. The capacity the investment claims to be building already exists. The investment just is not allowed to reach it.

The enterprises that feel this most are the ones the sector likes to photograph for its annual reports. Small enterprises. Regional and remote enterprises. First Nations enterprises. Disability led and neurodivergent led enterprises like mine. We are the impact story in the funding application and the absence in the delivery model.

Why governments should care

This is not a fairness argument dressed up as policy. It is a value-for-money argument.

A dollar that stops at the intermediary does one job: it funds the intermediary. A dollar that lands in an enterprise does several. It pays wages, often to people facing the steepest barriers to employment. It purchases local goods and services. It builds organisational capability that persists after the program ends. It generates economic activity in the regions and communities governments keep naming in their employment, participation and regional development strategies.

Social enterprises disproportionately employ people facing barriers to work, which means the same dollar often delivers participation outcomes governments would otherwise fund through separate programs. This matters particularly for enterprises led by the communities governments are actively seeking to support through employment and participation strategies, including First Nations, disability led and neurodivergent led enterprises, where delivery opportunities build economic self-determination rather than service dependence.

Governments across Australia have placed social enterprise at the centre of their disability employment, economic inclusion and regional development agendas. If those agendas are serious, then the delivery design of sector funding is the difference between announcing outcomes and producing them. Jobs are created inside enterprises. They are not created adjacent to them.

Delivery design is not an administrative preference. It determines the multiplier on every dollar of sector investment.

What good design looks like

Not every intermediary function is contestable, and the distinction matters. Certification, representation, advocacy and convening require independence from the market, and enterprises cannot credibly do them for themselves. That is genuinely intermediary work, and it should be funded properly as such. Capability building, training, facilitation, consulting and events are different in kind. They are services with an existing market, and enterprises across the network already sell them.

A simple rule follows: where a function requires independence from the market, fund the intermediary to do it. Where a function is a market, open it. The organisations that get into structural trouble are the ones doing both with nothing in between.

With that distinction in place, none of this is hard to fix, because the fix is already running at the federal level. A funding design that took the sector seriously would do a few simple things.

It would put money in enterprise hands where possible and let enterprises choose their support, the way the Commonwealth’s capability grants already do. It would recognise independent certification instead of making enterprises re-prove themselves to every body that holds a database. It would put open expressions of interest around program components so enterprises can bid to deliver work in their own areas of expertise. It would build co-delivery into intermediary funding agreements as a condition, not a courtesy. It would use the social procurement frameworks governments spent years building to buy delivery from the sector the funding is meant to serve.

And where an intermediary also operates commercially, it would require a published information barrier between the representation function and the commercial one, because no organisation should hold a sector’s data and compete against that sector at the same time.

Every one of those mechanisms exists in Australian public administration right now. None of them is exotic. The only thing missing is the requirement to use them consistently across every jurisdiction.

The test

With social enterprise now firmly embedded in economic participation and employment agendas across Australia, the design of sector funding is no longer a niche administrative question. It is a question of economic policy, and it deserves to be examined like one.

There is a simple test for any sector investment, and I would put it to every minister, every departmental program designer and every intermediary board in the country. When this money has been spent, what will be bigger: the institution that received it, or the ecosystem it was announced for?

If the honest answer is the institution, the design has failed before the first dollar moves. Public investment in a sector should grow the sector. It should create jobs inside enterprises, build capability inside enterprises, and route opportunity to enterprises, with intermediaries funded properly to do the connecting and convening work that is genuinely theirs.

Significant public money is flowing into social enterprise right now, federally and in every state, and the budgets just handed down have allocated the next round of it. The sector spent nearly two decades earning that attention. The question is no longer whether governments should invest in social enterprise. The question is whether that investment creates capability, jobs and opportunity inside enterprises themselves, or whether it remains concentrated in the institutions positioned around them.

Whether the money lands in the sector or stops one level above it is a design decision. Those decisions are being made right now, in the weeks between budget night and the new financial year, when allocations are turned into program guidelines, mostly without the enterprises in the room.

Ask who delivers. It is the only question that matters, and it is the one question the announcements never answer.

Sources

The sector figures of around 12,000 social enterprises, more than 200,000 jobs and over $21 billion in annual economic contribution are from Business for Good: The Size and Economic Contribution of Social Enterprise in Australia (Gales and Khalil, Social Enterprise Australia, 2022). The same figures are used by the Department of Social Services in announcing the Social Enterprise Development Initiative, which also details the capability grants of up to $120,000 paid directly to social enterprises. The Economic Pathways to Refugee Integration program, which funds social enterprises directly to create employment, is described by the Department of Home Affairs, and its recent budget extension was welcomed jointly by the Settlement Council of Australia and Social Enterprise Australia.

First published on Substack, 10 July 2026.