The sustainability of charities and not-for-profits has been a risk discussed consistently over many years. This risk has heightened as the sector is facing a perfect storm. Three key issues are at play in Australia:
These three factors alone would be enough to challenge the sustainability of many charities but it is the next storm front that is coming that will be the greatest challenge and that is the economic forecast. The Grattan Institute has recently published their estimations of unemployment which they expect to be up to 26% of Australian workers. The report states lower-income workers are twice as likely to be out of work and younger Australians and women are likely to be harder hit due to the times of roles and industries they mainly work in. The Grattan Institute states, "If our estimates are even close to accurate, Australia is facing either the worst or one of the worst economic downturns in its history. And there could be a 'second wave' hit to the economy even after the immediate health threat eases".
The ability to continue delivering relevant social impact over the long term has always been important to charity leaders. The spread of the Coronavirus has impacted pretty much every aspect of society and highlighted the deep social inequities many charities are working to address. The need for charities will increase as the economic conditions take hold and therefore charity sustainability is becoming even more of a top priority. Over the past couple of weeks we have spoken to many charity leaders who are worrying about how they will continue to sustain the important services their organisations deliver.
Even the largest charities are fearing a "systemic collapse" in the sector unless the government provides support. The heads of Uniting Care, Anglicare, St Vincent de Paul Society, the Salvation Army and Catholic Social Service Australia have written a joint letter to the Prime Minister requesting an industry support package. As reported by 7 News the letter stated, "Our organisations are deeply concerned that we face the systemic collapse of the community care, NDIS and homelessness services without urgent assistance from Australian governments. Many are already drawing on their reserves to operate. Smaller organisations will not survive without support measures, leading to the loss of important care to our most vulnerable citizens. We cannot allow a collapse of service providers during this critical time."
Every not-for-profit, if they haven't already, should review their financial position and viability, their social impact and their capacity to deliver in order to remain relevant and viable both now and into the future. The following are key areas Australian charities should prioritise.
It is fair to say the conditions being faced now are challenging for well resourced corporate organisations, small businesses and not-for-profits. This situation will test even the most experienced team let alone charities which are often under-resourced and often do not have the breadth of skills and experience needed to face some situations.
Now is the time to review your vision for social impact—the reason your charity was formed and the impact you are trying to have in your community. You need to ask if it is still relevant and whether you are delivering to the needs or you have broadened and lost focus. Does your social impact need to change? In addition to informing decisions on finances and capacity, this helps ensure that your work remains relevant. Many organisations have had to shift the way they deliver programs and services, forging new partnerships to extend their reach and impact, or using this moment to advocate for systemic change. If you have changed, or you have seen other similar charities successfully adapt, what can you learn and would it help your charity's sustainability?
Another important consideration is how you frame the value of your work in the current context—why your mission matters now—to rally donors, engage partners, and motivate staff. For example, although social distancing guidelines have disrupted many charities and the services offered the need still exists and the services will be a very important part of Australia's recovery from the crisis. As with many other issues, this crisis also highlights, and will likely exacerbate, the disparities that already exist in access to services.
Charities need to be financially viable to deliver impact. Being sustainable means having predictable and reliable revenue, expenses that align to expected revenue, sufficient cash on hand to cover routine and emergency needs, and processes in place to monitor risk, financials and plan for contingencies.
The increase in demand for services, coupled with significant disruptions to funding streams (either fundraising or revenue generation) is playing out now in real time. A recent survey from the Nonprofit Finance Fund in the United States of America found that approximately 60% of not-for-profits are experiencing destabilising conditions that threaten their long-term financial stability, and a further 4% (64% in total) expect to experience continued threats in the months ahead. Charity leaders need to prioritise the following activities to mitigate this risk now.
Delivering social impact requires talent, systems, and processes. In response to stay-at-home orders across the world, organisations have had to shift to virtual operations, make up for lost volunteers, and deal with other challenges to capacity. Meanwhile many have experienced a dramatic decrease in earned revenue from events and giving from donors. Each charity will have different capacity needs but it is important to note the following four core areas for sustainability:
The speed and evolving challenges and responses over the past two months has left many charity leaders feeling exhausted and overwhelmed. Just as this crisis has caused many individuals to gain perspective on the things that matter most, charities should use this time as an opportunity to bring that same lens to your organisation. Anchor yourself in why your charity does what it does, and use that as your guide post to help determine what you need to support that vision, both financially and in terms of your required resources.
