Pulse of the For-Purpose Sector: How Funders Responded to 2020

By: Isabella Olsson   |   Policy & Research Officer, Philanthropy Australia   |   https://www.philanthropy.org.au/about-us/staff/isabella-olsson/

There has been an abundance of anecdotal evidence about the severe financial toll caused by the pandemic on charities, as service demand skyrocketed and income stagnated or declined. Now we have the research and data to prove that organisations operating on the frontline during 2020 suffered a deep and potentially long-lasting impact.

A recently launched research program from the Centre of Social Impact aims to accurately measure the experience of the charities sector as we emerge from one of the most difficult years in recent memory, to gauge what is changing, what is lacking, and what needs to be further supported.  

The report forecasts the additional challenges of the conclusion of financial supports of JobKeeper scheduled to end later this month, and changes to JobSeeker, ahead of the new rate unveiled by the Federal Government last week. 

As part of the first wave of the CSI project, a survey of not-for-profits was released in December. The insights paint a stark picture of a sector that has shouldered the burden of much of the hardship suffered in the past year – 85 percent of organisations experienced a reduction in revenue last year, during a time of greatest need. And as we move further into this year, there is every reason to believe things will get tougher.   

The end of the JobKeeper payment, a lifeline for many charities stretched beyond capacity over the past year, is causing concern for the sector: “[W]hen JobKeeper finishes in March 2021 and if the projections about decreased philanthropic funding come to fruition … [t]he sector faces a significant potential cliff edge.”i CSI and Social Ventures Australia have estimated that with the loss of JobKeeper, 14 percent of charities are at risk of becoming unviable by this September.  

Coupled with this is an expected surge in demand for charities’ services when the $150 per fortnight JobSeeker Coronavirus Supplement is withdrawn at the end of the month. Last week, the Australian government announced a long anticipated permanent raise to the JobSeeker benefit. Despite years of sustained campaigning from anti-poverty advocates, the announcement came as a disappointment to many. With an increase of only $25 per week, the new rate will still leave recipients living on less than $44 a day, well below the poverty line. Increased mutual obligations will further test recipients with additional red tape, and a hotline for employers to report candidates who decline offers has already attracted criticism. 

This sudden drop in government support will be keenly felt by the charities sector, who will be increasingly relied upon by financially vulnerable Australians: “There has been a significant loss of employment in our area and people will experience more homelessness, domestic and family violence and mental health issues when the additional funding supports are withdrawn.”

With charities stretched thin, philanthropy has a crucial role to play in ensuring they can continue to deliver their programs throughout 2021. At a time where government funding is constrictive or uncertain, philanthropy is being sought out by charities: “We are constantly trying to increase philanthropy as a per cent of revenue as it is more flexible than government funding.”iii Promisingly, and in line with Philanthropy Australia’s own funder survey conducted earlier last year, 57 percent of the Pulse survey respondents reported that one or more of their philanthropic grant makers had increased flexibility around reporting and administrative requirements.  

These findings are encouraging, but it’s clear there’s plenty of room for improvement: the report found that across grant types, a common experience of charities was that their funding didn’t cover the full direct or indirect costs of their programs. This was particularly the case with philanthropic grants, which were least likely out of all funding types to adequately cover charity costs, with only 34 percent of philanthropic grants sufficient to break even or achieve surplus. 2020 proved that the ancillary costs of charity service provision – costs such as digitisation and capacity building – are crucial to effective operations. When the pandemic set in, only 30 percent of not-for-profits were equipped with the IT systems needed to effectively work from home. Supporting capacity building through either additional funding or non-financial support is a key way that funders can ensure charities are able to quickly and efficiently adapt to crisis periods without compromising their service delivery. Philanthropy Australia has long supported a ‘Pay What it Takes’ approach to philanthropic practice, encouraging our members to offer grants that pay the full costs of programs and overheads. Pay What it Takes was a focus of our thought leadership in 2020 and will be featured in our upcoming National Conference in April.

The CSI findings also touch on the ongoing importance of funding advocacy. Nearly two thirds of the organisations surveyed felt that there is not currently enough advocacy for the people they support. Advocacy is critical when it comes to systems change and addressing the root causes of social and environmental issues, which traditional charity service provision cannot resolve. For example, the Raise the Rate campaign, lead by ACOSS and supported by Philanthropy Australia members, has been instrumental in the long fight to increase JobSeeker, and despite the disappointing news of the past week, their advocacy will be essential in continuing to push for a fair rate that allows people to live with dignity. Funding advocacy is often a long term proposition, but the potential benefits are enormous. If we want our charities sector to be proactive rather than purely reactive, and geared towards long term structural progress, it is essential that they are empowered to engage in advocacy and target injustice at its root.   

Throughout 2020 we saw examples of exceptional generosity and compassion from grant makers and ordinary Australians alike. We know that the challenges of last year will have lasting repercussions, and we will need to continue to draw on this spirit of generosity to give Australia’s charities the best chance of meeting the demands placed on them in 2021. 

CSI will soon release results from the second wave of the survey.

Pulse of the For-Purpose Sector, 17.
[ii] Pulse of the For-Purpose Sector, 25.
[iii] Pulse of the For-Purpose Sector, 16.

Mar. 04, 2021

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