Working it out
Not-for profits and charities are facing challenges across multiple fronts, ranging from solvency and liquidity concerns to operational matters.
First it was the cancellation of the Bunnings sausage sizzle and now 196 charities report they expect a 20 per cent decrease in fundraising in 2020, according to a Fundraising Institute of Australia survey. The survey, conducted in late March, showed that fundraisers in the sector are facing the most challenging time of their careers, with donations down and the cost of setting up staff and volunteers to work remotely "hitting members very hard", according to the institute's CEO Katherine Raskob GAICD.
Raskob welcomed the government's decision in early April to allow charities whose revenues have fallen 15 per cent, rather than 30 per cent initially required, to claim the JobKeeper government subsidies for staff. However, the institute is calling for more help, including a bonus charity tax deduction incentive providing a 150 per cent or greater tax deduction on donations made before 30 June. But it's not just about the money.
Cutting services has been heartbreaking for many charities, especially given increased need among vulnerable people trying to come to grips with dramatically changed health and economic situations.
In mid-April the government pledged $100m over six months to more than 300 charities and community organisations faced with the economic fallout of COVID-19. Boards are developing new strategies, working closer with management and scenario planning in case things get worse.
Family support Julia Davenport GAICD, a director of Barnardos, which supports children and families, says the charity has temporarily discontinued the face-to-face nature of its services and is assessing budgets and risk management strategies. COVID-19 had "an immediate impact" on the organisation's income at the very time demand for services increased with the stress faced by clients facing health and economic disadvantages due to the pandemic. In 2018-19, Barnardos managed programs with $111.6m of funding - 77 per cent from government funding, 13 per cent from fundraising and the rest from sources such as philanthropy.
Barnardos CEO Deirdre Cheers GAICD has worked in the NFP sector since 1986. She says she has never seen a more challenging time and expects some charities will go under, especially those without financial reserves.
"It was tough in the global financial crisis because donations dried up and companies didn't have the money to support us," says Cheers. "This is harder, because if you can't get to the families, you can't do the work, but we have to be safe. There will be even more demand for services in six to 18 months' time. The stress on families of having children home from school is enormous. Many of our families have parents who aren't literate; often there's not even a book in the house." The charity helped 14,400 children, young people and their families last year and reports that every day there are 186 substantiated reports of child abuse or neglect in Australia.
"While those working in the NGO for-purpose sector such as Barnardos bring a do-what-it-takes approach, boards need to support their CEOs as they readjust mindsets to align service delivery with changing operating conditions for staff safety," says Davenport. "Some operational staff can find it challenging to pull back from delivering face-to-face essential services to children and families.
Barnardos is experiencing this, particularly in our work in remote areas and small communities, where basic supplies are quickly exhausted and families have limited transport." Mental health While social distancing is required for physical health, the isolation is increasing demands on some charities such as Beyond Blue and Lifeline. Beyond Blue CEO Georgie Harman says the service has seen a 30 per cent increase in contacts and on some days, one in three calls is about COVID-19. Lifeline reports a similar trend, with daily calls to its crisis line up 28 per cent since November, and up 16 per cent the bushfires. One in two calls is in relation to loneliness and anxiety. "People are telling us they're feeling overwhelmed, worried, lonely, concerned about their physical health and the health of friends and loved ones, and anxious about money, job security and the economy," says Harman.
"This is harder... There will be even more demand for services in six to 18 months' time. The stress on families of having children home from school is enormous." Deirdre Cheers GAICD, CEO Barnados Beyond Blue chair and former prime minister Julia Gillard AC has announced a free Coronavirus Mental Wellbeing Support Service to help Australians manage the impact of the pandemic on their mental health and wellbeing. The service is funded by $10m from the federal government and a $5m donation from Medibank.
"We anticipate growing demand for mental health support as this pandemic develops, both from people who are already managing mental health issues and those who have never struggled before," said Gillard. "Just as people are looking after their physical health, we're asking people to actively look after their mental health. We need to support people to cope and stay well, and we need to intervene early to halt any decline in the conditions of those already living with mental illness so that we reduce the longer-term impacts." Like many charities, Lifeline has closed its faceto-face services and many of its 260 retail stores, and cancelled its popular book fairs. The Lifeline board is scenario planning and considering changing its practice model to add more paid staff to take crisis calls. The charity has spent $2m setting up 1000 of its 2500 volunteers to work remotely, rather than in Lifeline centres.
Lifeline's annual revenue is $45.5m (65 per cent from government grants, 19 per cent fundraising, and 13 per cent from its retail stores). Under its governance model, each Lifeline centre operates as a stand-alone legal entity. The charity expects a minimum 25 per cent decrease in donations in 2020 and welcomes increased government funding, including $6m from the NSW government, and $5m from the federal government. As a response to the ongoing crisis, on 9 April, Lifeline launched the first national emergency appeal in its 57-year history.
Making changes Phil Butler GAICD, AICD's NFP sector leader, says the crisis has reflected the diversity of the sector and that different parts will require different assistance.
For example, he's heard from a disability service provider whose business model remains reasonably intact and which was able to take advantage of a grant from the National Disability Insurance Agency, which has helped cashflow.
Butler expects mergers and potential collaborations will become a theme. In contrast the sports, arts and culture sectors have been substantially affected and organisations are responding by going into hibernation for a period of time. "This is the time when the relationships you've managed to build with stakeholders in normal times come to the absolute fore," says Butler.
Dr Elaine Miles, vice-president of operations at the Ruthven Institute, says during this time, NFPs require "a sensitivity SMEs don't necessarily need".
She says some NFPs operate with budgets under $50m and some function with faulty business models and/or infrastructure, as many have missions to address a social need or gap in the community. This can mean the organisation isn't necessarily commercially viable. Success is often community or social-based, rather than defined in monetary terms. She suggests that in the long term, some organisations should consider merging so they are operating on more than $50m. NFPs should also tap into extra volunteers who, given social distancing rules, have extra time to help out.
Sue Woodward GAICD, chair of the Shine for Kids cooperative, which helps children with parents in prison, says each of these charity boards is navigating a new world due to COVID-19. Shine has cancelled face-to-face activities such as prison visits and school holiday programs, and has called for computer donations to enable children to video visit with their parent. "The safety of our staff and volunteers is a priority, as is the manner in which they interact with children and families so no-one is put at risk," says Woodward.
Fundraising issues While fundraising from a cash-strapped Australian public, at first glance, seems to be off the agenda for the coming months, at least, some NFPs such as the Cerebral Palsy Alliance and the Cancer Council are doing things differently.
"Fundraising represents about $35m out of our $200m budget," says Paul Masi MAICD, chair and president of the Cerebral Palsy Alliance (CPA) and the Girls and Boys Brigade Foundation. "The bulk of that goes to research, so it's the research going forward that may be impacted." Masi says most of the alliance's face-to-face events have been cancelled until September.
However, it has a community of about 35,000 donors and has ramped up its communication with this group in order to keep them engaged.
"We need to support people to cope and stay well, and we need to intervene early to halt any decline in the conditions of those already living with mental illness." Julia Gillard AC, chair Beyond Blue SAVING THE NFP SECTOR Many NFPs will be unable to financially withstand the impact of COVID-19 without substantial government regulatory relief to ensure funding certainty, writes AICD senior policy adviser Christie McGrath.
To recognise the extreme funding challenges in the NFP/charities sector, the AICD has put a proposal to governments recommending an urgent relief package to support their financial sustainability, including the following measures: Accelerated funding: Bring forward the payment of committed government funding as soon as possible and extend funding commitments for an initial 12 months to give organisations certainty and capacity to address cashflow constraints. This should be provided at Commonwealth, state and territory levels.
Default application of government packages to NFPs: The default position should be that any measures to support businesses should also automatically apply to NFPs. This has not been the starting case in some instances.
"We're really grateful to them," says Masi. "In terms of fundraising, we have plenty of digital activities, but now we've got to be a more creative in how we approach and communicate with potential donors." Masi said both the NFPs he is involved with have strong balance sheets. "We will use the balance if and when needed," he says. "We have no insight on how this will affect donors yet, but clearly everyone's income levels have been impacted, so I expect a fall." The alliance also has three board members with significant fundraising expertise, which has been useful, especially because two also have expertise in digital marketing. Some board members called early on for staff to be consulted on creative ways to carry out fundraising through new partnerships.
"One of our board members is very strong on the view that while it's easy to cut costs, it's growing revenues that is the challenge," says Masi. "So let's start take a bit of a time to really to engage the staff and their creativity." The CPA is using this period to look to the future.
"We're doing a lot of work and a lot of planning," says Masi. "The teams are all working from home and obviously we're asking them to be as creative as possible and to think about when this thing does end. What are we going to do? We can't just come into it flat-footed." Access to credit: Ensure NFPs/charities have access to credit on favourable terms.
Currently, many can't access credit from banking institutions as they fall outside lending guidelines.
Charitable donations: Additional tax incentives to support charitable giving at this time.
Government taxes/charges/fees: A 12-month moratorium at all levels of government from all (relevant) tax liabilities, charges and rental fees.
Additional funding: Extral direct funding for NFPs/charities, building on measures announced to date in broader economic stimulus packages.
This is an edited extract. Access the full article at aicd.com.au/relief-package