Covid-19 has dealt “a huge financial blow” to Australian charities and not-for-profits but many of the organisations were already under pressure prior to the pandemic, a new survey suggests.
With an “unpredictable” road to recovery ahead, many directors in the not-for-profit sector are worried about the looming rollback of the federal government’s jobkeeper wage subsidy, according to the Australian Institute of Company Directors (AICD) poll.
The study – drawing on answers from 1,303 respondents from across the not-for-profit sector in July – provides an insight into the challenges facing the sector as it seeks to navigate the current crisis. Some 40% of surveyed organisations said they had made a loss in the previous three years.
The findings were also based on 10 virtual focus groups held with leaders working in areas covering mental health, education, arts, sport, child welfare, domestic violence, philanthropy, community housing, disability services as well as emergency and relief service providers.
The report, published by AICD on Thursday, says the pandemic has “amplified the challenges that many organisations were already facing”.
“Covid-19 was the tide that went out and showed all those who were swimming naked,” said one unnamed survey respondent cited in the report.
It notes profitability in health and aged care had already been going down for several years before facing another significant drop during the pandemic.
Only 48% of organisations surveyed expected to achieve a profit in the financial year ending June 2020, with the rest either making a loss or breaking even.
But in a sign the financial impacts varied widely across the sector, nearly two-thirds of social services organisations that responded to the survey reported they were likely to make a profit. That stood in contrast with the about 60% of health and residential aged care organisations and business and professional associations that anticipated breaking even or making a loss.
“Our research found significant variations in the impact of Covid-19 on organisations depending on such things as funding sources, timing, location and, in some cases, luck,” the report says.
The AICD, which has produced an annual study on not-for-profit governance and performance since 2010, said Covid-19 had intensified pre-existing pressure “pushing boards and organisations to their limits”.
“Just when demand for NFP services increased, their revenue took a huge hit,” the institute’s managing director, Angus Armour, said.
About 55% of the respondents said their organisation was receiving jobkeeper – while about a third were not eligible. Some 87% of directors reported being worried about the national economy, with a high degree of uncertainty about the future.
Armour described jobkeeper as “nothing short of a lifeline for many”, but raised “significant concerns” about how organisations would manage when the current scheme ends in March next year.
“These organisations need to be able to continue their vital work through the pandemic and on the other side, but unless issues of funding are addressed, it is likely some will be forced to wind up,” he said.
“Given the vital role these organisations play in our society, targeted assistance is required to ensure these organisations survive over the long-term.”
The report points to inadequate pre-pandemic baseline funding in certain not-for-profit sectors. It says organisations in human services sectors, such as aged care, disability and mental health, and the arts “have struggled with inadequate funding, inefficient funding structures and inequitable distribution of support”.
Regarding the road to recovery, the report also suggests that not-for-profits should approach governments to suggest ways to use fiscal stimulus to achieve both economic and broader social objectives.
“For instance, some of the stimulus measures aimed at the construction industry could be allocated for rebuilding social infrastructure like social and affordable housing,” the report says.
“Focus group participants cited concern about the ability to cater for future demand as the recession bites harder and an already stretched sector needs to respond.”