Not-for-profits struggling across Australia with short-term funding

By Leon Gettler, Talking Business >>

AUSTRALIAN not-for-profits are struggling.

Unlike the US, Australia does not have an ongoing culture of philanthropy. What makes it even worse is that only one in four not-for-profits here are financially stable.

Andrew Binns, the CEO of the Australian Communities Foundation said the problems are the rising demand for services, cost of living issues and volunteer shortages that are impacting not-for-profit organisations.

A lot of them, he said, also rely on short term funding, like grants from governments or philanthropists. 

“That plays a hinderance in organisations doing long term planning and think about sustainable sources of funding,” Mr Binns told Talking Business.

NFPs relying on government

Mr Binns said a lot of not-for-profits rely on government because they provide services that are complementary to government services and a lot rely on philanthropic dollars, whether that be regular gifts or one-off donations.

“And in a cost-of-living crunch, those tend to drop off,” he said.

“Or what we might call philanthropic dollars, so major donors, larger gifts, that can be sometimes on off as well. So you’ll get a large gift one year and that potential donor doesn’t provide the same level of support the following year because there are other organisations they want to support.”

Mr Binns said one of the issues was that many not-for-profits have reserves for ‘rainy day’ funds but often they are not invested well.

“Particularly small organisations don’t have the capacity to find investment advisors and investment managers.” he said.

“A lot of the time, our research has found that 40% of not-for-profits that we surveyed hold their reserves in low-yield bank accounts or in term deposits. About 23% in term deposits.

“So they’re not necessarily getting income from the investments they’re making.”

Mr Binns said the Australian Communities Foundation is fundamentally a philanthropic intermediary,

“We come at this from two sides as an organisation,” he said.

“We support Australians to give effectively through restructures. So for as little as $10,000, you can start a fund at Australian Communities Foundation and then we’ll help you figure out what organisations you might want to give to.”

Mr Binns said there were 700 different fund holders – which are individuals, families and corporates – and about $175 million under management.

Future funds provide another avenue forward

The second way is through a future fund.

“It’s where we are helping not for profits build financial stability on the investment side,” Mr Binns said.

“So a future fund product is essentially a philanthropic endowment that a not for profit can open.

“It enables them to access a sophisticated investment strategy.”

Mr Binns said in the last couple of years, the future fund had generated 10% per annum compared with 3-4% that a not-for-profit could get from other sources.

“The other part is that it is 100% responsibly invested,” he said.

“So for not-for-profits, values and where your funding is invested can be quite important.

“For example, if you’re an environmental organisation, you don’t want to be investing in oil and gas or things that are potentially harming the environment,” Mr Binns said.

“So (it provides) that ability for not-for-profits to access a really sophisticated financial product, but it also enables them to say that they’re ethically invested.” 

www.communityfoundation.org.au

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness 

https://shows.acast.com/talkingbusiness/episodes/talking-business-3-interview-with-andrew-binns-from-australi

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