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"Bringing in outside management does not eliminate the perverse incentives" No, obviously. That is why they are two *separate* items in my off-the-top-of-my-head list of improvements that can be made. "there should be no way for these organisations to make profit" Typically their profit is less than would be acceptable to private companies, so it doesn't mean it doesn't encompass market failure scenarios. The 'profit' can include positive externalities that don't go on the normal financial statement but are beneficial for everyone. "If there were [profit], the market would step in and supply those goods and services" False. Absolutely false. This is one of the problems with private provision of goods and services. There has to be a rather high minimum return before the market will supply them. A trigger level, if you will. Of course, this is one of the good things about markets - the highest returning investment is the most desirable, therefore efficient allocation of resources etc. But if it can't/isn't counted on the balance sheet (ie the benefits to everyone of an educated and non-destitute population) then it won't be provided by private enterprise.
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