The Australian Institute of Company Directors (AICD) has released its annual not-for-profit (NFP) governance and performance study, which reveals that the future of many organisations was under threat even before the challenges of COVID-19.

The AICD’s NFP Governance and Performance Study is in its 11th year and is one of the world’s largest study in NFP governance.

COVID-19 unsurprisingly dealt a huge financial blow to the NFP sector, however, the study reveals that many organisations were facing considerable financial challenges even before the crisis.

While a majority of NFP organisations expect to make a loss this financial year, notably, almost 40 per cent of organisations had made a loss in the previous three years.

AICD Managing Director and CEO, Angus Armour, said, “Many organisations entered the pandemic already facing serious financial challenges and COVID-19 intensified that pressure, pushing boards and organisations to their limits.”

Just when demand for NFP services increased, Angus said these organisation’s revenue took a huge hit. The Government’s JobKeeper program has been nothing short of a lifeline for many, but significant concerns remain about how organisations will manage when the current scheme ends.

“These organisations need to be able to continue their vital work through the pandemic and on the other side, but unless issues of funding are addressed, it is likely some will be forced to wind up,” he said. “Given the vital role these organisations play in our society, targeted assistance is required
to ensure these organisations survive over the long-term.”

The NFP Study has highlighted the disparity of different sub sectors’ abilities to navigate the crisis, with organisations in the arts, sports and health, and aged care sectors seeing greater impacts than those in other sectors.

Sources of funding played a significant role in this, with those reliant on government funding faring better than those reliant on philanthropy and face-to-face fundraising.

Key findings of the 2020 NFP Governance and Performance Study shows in FY20 the number of respondents expecting to make a profit dropped to 48 percent, with over half expecting to make a loss, break even or come close.

Fifty-five per cent of survey respondents noted their organisation is receiving JobKeeper payments as of August 2020. However, more than one third of organisations were not eligible.

With boards focused on the survival of their organisation merger activity and discussions on mergers reduced considerably. Only three per cent of directors reported they were currently undertaking a merger, which was down from five per cent last year.

One-third of respondents stated that their financial position was not negatively impacted by COVID 19. The onset of COVID-19 brought immediate change, with 77 per cent reporting that their organisation significantly changed the way it operates.

Directors were particularly proud of their NFP’s response to COVID-19, with 90 per cent agreeing or strongly agreeing that their organisation has responded well to COVID-19. When asked to rate the effectiveness of their organisation in achieving its stated purpose, sentiment was 94 per cent higher than in previous years.

Eighty-seven per cent of directors stated they are worried about the Australian economy and there is also a high degree of uncertainty about the future. Forty-four per cent of respondents expect client numbers to increase and 45 per cent predict service volumes will increase. However, 27 per cent expect a decrease in clients.