With a large percentage of not-for-profits’ funding coming from corporate donors, the squeeze has been crippling during COVID-19. Here’s the prognosis for the sector.
In the wake of the devastating Australian bushfires, donations flooded in from around the globe. Just as not-for-profits were helping Aussies get to their feet again, coronavirus affected nearly every country in the world.
While workers struggle with loss of income, many businesses that lend a hand to the NFP sector are now accepting stimulus support themselves.
Volunteers, a mainstay of many charitable organisations, have also become a scarce commodity because of the necessity to self-isolate.
A report by JBWere, Where to from here? The outlook for philanthropy during COVID-19, by John McLeod, estimates that giving will fall by 7.1 per cent in 2020 and a further 11.9 per cent in 2021.
According to the Charities Crisis Cabinet (CCC), Australian charities employ 1.3 million people, rely on more than 3.5 million volunteers, and contribute 8 per cent of Australia’s GDP. Yet up to 300,000 people could find themselves unemployed.
“It is quite possible that some NFPs have already gone to the wall, especially if their fundraising activities rely on non-essential services such as cafes, or licensed premises,” says Ram Subramanian, Policy Adviser, Reporting, CPA Australia.
Other charities have been forced to mothball projects or downsize to survive.
However, the picture globally is not as glum as it seems, with the opportunity to show management and leadership for those attempting to keep the financial wheels turning.
Reaching out to the community
The factors affecting the level of donations between now and June 2020 are dramatic, concedes McLeod, who co-founded the Philanthropic Services team in 2001 and sits on the board of Philanthropy Australia.
On the positive side, Australians have always responded generously to natural disasters and since discretionary spending is lower, their desire to help the community financially may increase, he says.
If reaching out to the mass market, McLeod suggests NFPs make sure messages are clear and simple to stand out among the saturation of COVID-19 news.
Messaging should also highlight the ways your charity is able to help in the current situation, while you maintain awareness of what others are doing and, where possible, how you are part of the broader solution, he says.
With most people unable to put money in a collection box, and with many fundraising events cancelled, NFPs may be turning to online portals to raise funds, says Subramanian.
More attention may need to be paid to digital platforms, including complex compliance requirements.
In Australia, the CCC, which has joined a call for a simplification of the red-tape burden on fundraising during COVID-19, says: “If a charity has a donate button on its website, it needs to comply with seven different regimes as well as Australian Consumer Law.”
Accessing corporate and government funding for NFPs
Some large corporates and philanthropic organisations may be able to dig deep during these difficult times to support NFPs and supplement government aid.
“In the case of funds designated internally by the Board for a particular project or purpose, NFPs may need to consider whether it would be appropriate to redirect some of these funds to a different COVID-19 related activity,” says Subramanian.
“Speaking to funders about the possibility of cancelling or delaying activities associated with restricted funds may also help.”
McLeod suggests NFPs explore opportunities to use any spare capacity donors may now have for either goods or services, rather than simply asking for cash.
For those applying for government assistance, the Commonwealth and State governments have provided cash boosts of up to AU$100,000 for businesses, including charities, with turnovers of less than AU$50 million.
A positive: “For JobKeeper payments, charities only have to show a 15 per cent drop in turnover,” Subramanian says. “The alternate test for turnover will also assist charities.”
In other initiatives, The Australian Communities Foundation and Philanthropy Australia has launched a COVID-19 National Funding Platform that connects philanthropic funders with NFPs.
In the United States, the National Council of Nonprofits has put together this guide.
In early April, the United Kingdom announced a UK£750 million package of support for charities.
Details about assistance for charities in Singapore can be found here.
In China, more than 6000 public charities have raised more than US$5billion as of April 12, according to YISHAN – the China Philanthropy Data Center.
In Hong Kong, the Council of Social Services (HKCSS) has warned that smaller organisations are at risk of closure because of a lack of funding sources.
“Non-profits have a lean reserve by nature,” says Sue Toomey, executive director HandsOn Hong Kong, a charity that connects volunteers with community needs as well as running programs.
“For some, assistance has come too late.”
In early April, the Hong Kong government announced it would pay eligible employers 50 per cent of their employee’s wage, capped at HK$9000 per month per employee for six months.
Under agile management, HandsOn has pivoted to virtual services to provide some of what it normally offers, as well as fundraise.
“We are also offering online, skills-based volunteering, for example copywriting or design, for NGOs,” says Toomey.
For the Crossroads Foundation, a non-profit non-government organisation whose services include delivering aid to more than 90 countries, experiential programs, global and virtual goods warehouses, and a global handicraft shop, COVID-19 has presented multiple challenges.
“For the safety of the core team of 70 families or more onsite, short- and long-term volunteers and visitors, training programs here and internationally, and retail and cafe operations have been stopped,” says consulting financial officer Ian Thomson CPA, principal of the CFO Centre, Hong Kong.
This has caused a drop of about 15 per cent in net or free cash flow revenues.
“At least a short-term downturn in financial flows from corporates and other supporters, such as school fundraising programs, represents a further decline in free cash flow being generated.”
Small, one-off donations from those interacting with programs, for example, has also declined because of isolation.
“But the major negatives are arising from corporate donors needing to restrict support,” says Thomson.
On the positive side, the foundation has been able to maintain some activity by restricting and reducing the team, government funding programmes and relying on our existing and other significant corporate and foundation groups.
Thomson believes it is well-placed to help with the supply of basic items after the virus passes and the economic crisis takes hold. He adds that there has been an uptick in the support through long-term personal, corporate and foundation relationships and involvement in bodies such as the Hong Kong Council of Social Services.
Reducing red tape for NFPs
On behalf of CPA Australia, Subramanian has been involved in the #fixfundraising initiative led by not-for-profit law group Justice Connect.
Their recommendations include a streamlined, nationally consistent legislative framework, through Australian Consumer Law, to cover the fundraising activities of charities and NFPs, allowing each state and territory to adopt the same requirements and abolish state-based laws on fundraising.
“Although the [Australian] Government has rejected this proposal, we still believe a nationally consistent regulatory regime for fundraising is necessary, particularly during this time of crisis,” says Subramanian.
“Blanket or case-by-case deferral on lodgement deadlines for financial information, relaxation of rules around holding AGMs, or a position of ‘no action’ by regulators in the case of minor regulatory breaches, are all going to help to some extent.”