Uncertain future for charities
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More than 200,000 jobs could be lost in the charities sector nationwide if financial supports, including JobKeeper, end in October, a new report has found.
Social Ventures Australia and the Centre for Social Impact created the report, Will Australian charities be COVID-19 casualties or partners in recovery? A financial health check, used Australian Charities and Not-for-profit Commission data to model the impact of COVID-19 on 16,000 charities.
Modelling of 20 per cent of revenue cuts to the charity sector found 88 per cent of charities would immediately be making a loss and 17 per cent would be at a higher risk of becoming unviable and closing within six months, compared to 6 per cent in 2018.
The research shows when charities receive the JobKeeper subsidy, nine per cent of organisations, instead of 17 per cent, have a high risk of having to close.
Only 27 per cent of charities would be able to maintain an operating surplus in this time, compared to 65 per cent in pre-crisis times.
Centre for Social Impact professor Kristy Muir said most charities already run with very tight margins and have little in reserve to use in a crisis, which was why sustainable financial models were needed to support the sector.
“Governments, philanthropists, business, and charities need to work in partnership to ensure viability and long-term financial support for the not-for-profit sector so they can deliver on their purpose,” Professor Muir said.
“While most charities and not-for-profits are creative, agile and efficient, their funding models are often not viable for impact.
“They are often cross-subsidising, unable to invest in organisational capacity and innovation and were already on very thin margins before COVID-19.”
Professor Muir said in order for Australia to thrive, charities need financially viable business models in the recovery phase and into the future.
“Stronger charities will be well positioned to provide the services needed to support the community and assist to accelerate our collective recovery,” she said.
“This impending crisis of an ‘October cliff’ could disrupt the provision of services to some of Australia’s most vulnerable, including those directly affected by the COVID crisis.”
“They are going to need ongoing support not just to ensure their survival but to maximise the impact of their contribution to our recovery,” Ms Riddell said.
Ms Riddell said while the research didn't look at states individually, there was no reason to expect Western Australian charities to be affected differently.
She said charities which provide goods and services, such as cafes and op shops had been heavily impacted, and those which rely on donations and fundraising.
The report recommends a gradual transition of JobKeeper and other temporary supports in October, retain JobSeeker at a higher level to mitigate service demand and create a one-off charities transformation fund to help organisations transition to move services online.
It also suggested the government increase funding for government contracted services delivered by charities, make fundraising and philanthropy similar by creating nationally consistent laws and support further research to better understand how to build a more sustainable charities sector.