When the giving gets tough: Donations shortfall puts charities on life support

The crisis has already forced the cancellation of key fundraising events, with future events also in doubt. Economic uncertainty is drawing donor purse strings tight.

Many individuals who regularly supported charities are now tightening their purse strings due to COVID-19 and an uncertain financial future. The impact is being felt.

By Engel Schmidl

The coronavirus pandemic has put Australia’s charities and not-for-profit (NFP) sector under immense pressure, with many smaller charities facing the prospect of having to cease operations. 

The sector regulator, the Australian Charities and Not-For-Profits Commission, classifies almost 61 per cent of the country’s 36,858 registered charities as either ‘small’ or ‘extra small’.

The sharp and sudden rise in demand for charity services brought about by the coronavirus pandemic and its economic fallout threatens to overwhelm the NFP sector’s stretched resources. With the economy in freefall, the public donations that fund the majority of charities are also drying up. 

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Eric Passaris, Partner Audit & Assurance at Grant Thornton, says it is widely felt some smaller charities will not survive the current crisis or may face severe solvency issues over the forthcoming period.

“There are many charities that are not overly sophisticated, whether it be with communication or service delivery systems, so there is some uncertainty as to how these charities will continue to function in an environment of self-isolation,” says Passaris.

He says charities are having to consider the wellbeing of their workforce, including a large number of volunteers, as well as grapple with an imminent and steep decline in public donations.

Measures like self-isolation are expected to severely impact on their ability to deliver frontline services in vital areas such as homelessness, mental health and domestic violence, too. 

“Charities with a heavy dependence on volunteers will likely face a decrease in volunteer availability, which will restrict their service capacity,” he says.

The Commonwealth and State governments have already stepped in to provide support to the sector, including:

  • Cash boosts of up to AU$100,000 for businesses, including charities, with turnovers of less than AU$50m.
  • The ability to defer BAS payments for the February through July lodgments, as far as September 2020. 
  • Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quick access to GST refunds.
  • Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter.
  • Partial refunds of payroll tax and deferral of payroll tax payments.

Sector leaders have welcomed the initiatives. However, they say as the full extent of the crisis becomes more apparent and demand for services skyrockets, more will need to be done.

“The measures will not save all charities, and are not all we might have asked for, but they will help some charities hold on to staff and survive a little longer,” Community Council for Australia (CCA) CEO David Crosbie says in an interview with charity and not-for-profit sector news outlet Pro Bono News.

Philanthropy Australia CEO Sarah Davies says in a media release the stimulus package will “allow the sector to continue to support the most vulnerable members of our community during these unprecedented times.”

“With more than a million employees working across the charitable sector in Australia, these measures will also provide much-needed employment and income support for workers and their families.”

As  the treasurer of the charity Bears of Hope Pregnancy & Infant Loss Support, Adrian Raftery is well aware of the uphill battle charities face. 

He says the crisis has already forced the cancellation of key fundraising events, with future events also in doubt. He says economic uncertainty is drawing donor purse strings tight. 

“Donations are simply a discretionary spend which can be easily stopped to help budgets at home without affecting people’s lifestyles,” he says.

For Raftery, one of the saddest aspects of how the crisis is affecting charities is in the delivery of human services, including counselling sessions. 

“Aside from fundraising activities, we have had to cancel our weekly group face to face sessions with parents and our psychologists, which have huge mental health benefits to bereaved parents.”

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