A new report urges government to better support the sector that supports the most vulnerable.

Vital support: building resilient charities to support Australia’s wellbeing reportReleased in early May, Vital support: building resilient charities to support Australia’s wellbeing, a  report from Social Ventures Australia and the Centre for Social Impact, details the necessary investment needed to create a resilient and thriving charity sector post-COVID-19.

This is the fourth publication in the Partners in Recovery project, looking into the current landscape of the sector and presents new analysis from two projects: the CSI Pulse of the For-Purpose Sector survey and the Sustaining Our Partners Taskforce, an initiative of Paul Ramsay Foundation and Social Ventures Australia.

Weathering the storm

The pandemic hit each nonprofit organisation differently. Most saw immediate drops in fundraising as events and face to face activities were cancelled; some later saw increases as corporate Australia and philanthropy stepped in. Anecdotally, donors responded positively to direct mail. Lockdowns were relatively short in states like Western Australia compared to cities like Melbourne, creating a different experience across the country. But what seemed to be universal was the increase in demand for services.

The CSI Pulse of the For-Purpose Sector and the Building Back Better initiative showed the following trends for the sector as COVID-19 hit:

  • More than half of charities faced some form of closure
  • More than 80% made a shift towards partial online service delivery
  • Fewer than a fifth of all charities made staff redundant (does not capture casual staff given less or no hours)
  • 86% of charities reported a reduction in revenue
  • More than three quarters saw a reduction in donations
  • 52% of charities were worried they would not be able to provide their services in the current economic climate.

Despite the strain and uncertainty, the sector proved vital to keeping communities together and supporting the most vulnerable – particularly those not supported by government initiatives.

Post-COVID-19 concerns

There’s no doubt JobKeeper was a lifeline for the sector. Almost half of the charities surveyed were eligible for JobKeeper. Almost two-thirds of the charities who were eligible said that government stimulus measures had allowed their organisation to remain operational. 55% of respondents said that stimulus measures had prevented staff layoffs, while 20% said that it had prevented them from shutting down entirely.

While the report was written prior to the end of JobKeeper, this combined with other factors could provide dynamic challenges for the sector. With both JobKeeper and JobSeeker increases ending, plus the end of rental eviction moratoriums, nonprofits are expecting – and indeed already reporting – increases in service demand.

But how does the sector do this without increases in funding?

While philanthropic support seems to have grown, it still only equates to 7% of the sector’s total income. Non-monetary support is also yet to bounce back. As of February 2021, only 28% of volunteering organisations had returned to the same levels of activity pre-COVID-19.

Other factors have made charities particularly vulnerable when faced with weathering a pandemic and global recessions. Restrictions on moving funds around the organisation to meet emerging priorities and donor reservations or refusals to cover overheads or administration costs have pushed nonprofits into running on lean reserves. Prefaced with natural disasters like the bushfires of 2019-20, COVID-19 left many in a vulnerable position.

Six factors to survive and thrive

When the pandemic hit, the Paul Ramsay Foundation established the Sustaining our Partners taskforce, an internal group dedicated to supporting its existing partners to survive and thrive through COVID-19 and beyond. Working closely with their 80 nonprofit partners, the Foundation not only wanted to ensure their partners remained financially viable but also capitalised on new opportunities arising from the pandemic. Paul Ramsay Foundation brought in Social Ventures Australia to help the Taskforce and their partners better understand the immediate impacts of COVID-19 on each individual organisation.

The Taskforce outlined six factors that recognise charities’ unique challenges and can be used as a launchpad to inform future action and opportunities.

  1. Funding mix is a predictor of vulnerability
  2. Regular analysis helps to understand vulnerability
  3. Grant funding can create unique vulnerabilities
  4. Agility is a protective factor
  5. A crisis creates opportunities
  6. Organisational capability needs to be strengthened

These six factors were identified as indicators for an organisation’s ability to not only survive but thrive during a crisis.

Funding channels were affected differently throughout the pandemic. A different funding mix, through service delivery, philanthropy or government funding, led to different complications.

Understanding your funding source and being able to analyse your finances – and highlighting potential vulnerabilities – is instrumental to ensuring resilient organisations. However, many nonprofits don’t have the resources to undertake this task.

Grant funding also comes with its own challenges and vulnerabilities. Are grants flexible enough for grantees to be able to respond to emerging priorities Do grants properly cover the full cost of delivery? Does the power imbalance between funders and organisations inhibit charities from disclosing the challenges they face?

Shifting focus, finding other revenue streams and reducing costs to counteract reduced funding were key ways to survive the pandemic.

An organisation’s ability to move and make decisions quickly also indicated their ability to weather the storm and maximise opportunities the crisis presented.

The Taskforce uncovered two types of opportunities:

Political influences: Changes to the way governments engaged through the pandemic opened up opportunities for some organisations to have better access and opportunities to advocate for their cause.

New or changed markets: Many industries had to evolve throughout the pandemic and the agile nonprofits took note and capitalised on this. A focus on hygiene, cleanliness and personal protective equipment opened up new opportunities. Digital took its place front and centre.

In order to safeguard against vulnerabilities, the Taskforce investigated ways to build capability in the sector and identified five key key capabilities:

  1. Strengthening leadership capabilities
  2. Improving business model sustainability
  3. Shifting to online service delivery
  4. Supporting workforce wellbeing
  5. Better enabling collaboration and partnerships

What is evident is that organisations will need the support of funders to achieve these capabilities.

Government’s role in supporting charities

Given the sector’s importance in terms of the size of its workforce, its contribution to the GDP and supporting our most vulnerable, there is a clear need and business case for targeted government support.

The report identified six actions that government could take to support charity resilience.

  1. Continue to provide targeted support to charities facing long-run effects of the pandemic, including ensuring that business support is structured so charities can benefit on an equal footing
  2. Appropriately fund government contracted services delivered by charities
  3. Make fundraising and philanthropy simpler to encourage increased giving
  4. Establish a Resilient Charities Fund to enable charities to invest in capability building and organisational transformation
  5. Support further research to better understand how to build back the charities sector so that they are funded for impact
  6. Meaningfully increase the rate of JobSeeker payment to reduce poverty and financial stress

Resilient Charities Fund

One key recommendation is to create a Resilient Charities Fund with a one-off commitment of $200-$400 million to support charities to undertake strategic and operational transformation to withstand pandemics and operate effectively post-pandemic to support people in need. A Fund of this size could help 8,000 charities transform their operations – a quarter of the sector.

The Fund would aim to drive charity sector reform, providing incentives for charities to develop efficient ways to operate and create impact through and beyond COVID-19. Such a Fund would help organisations undertake strategic and operational transformation in the following areas:

  • Business sustainability and operating model adaption
  • Governance, collaboration and partnerships
  • Leadership development and workforce capability
  • Technology and cyber security
  • Outcome measurements and data analytics capability

The report has suggested that charities could access support from the Charities Resilience Fund through a combination of: capability support (in the form of a voucher model allowing charities to access professional support from a panel of approved suppliers); and cash (via direct grants for investments in technology, staff time and capacity, or changes in governance or operational approaches).

This initiative would not only give charities the opportunity to invest in structural change, but the ability to do so in a collaborative, sector-wide approach.

There is no doubt that a pool of funding like a Charities Resilience Fund would help the sector better weather future crises, including large-scale natural disasters and pandemics. Investments into capability building will also help the sector evolve, keep up with service delivery demands, and have the capacity to innovate and transform.

The Federal Government’s recent budget missed an opportunity to significantly support a sector that was both greatly affected by the pandemic and crucial to the country’s ability to make it through to the other side. With examples of social sector innovation funds in NSW, Victoria and abroad in New Zealand and Ireland, let’s hope the government soon sees the value in investing in the nonprofit sector.

You can download the full report here.

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