Focusing on Cost Reduction in Small NFPs is Like Getting ‘Blood From a Stone’

There’s limited opportunity for operational cost savings in community legal centres due to an existing underinvestment in expenditure, not specifically related to providing direct services, writes Rosslyn Monro from Community Legal Centres Queensland.

Most Australians agree that waste is a bad thing and in fact war must be waged against it.

While Australia is having a long overdue conversation about waste and the impact that it has on our environment and our communities, community legal centres, like many not-for-profit organisations, are under constant pressure to be careful stewards of scarce resources and to avoid wasting resources at all costs. The code words for “waste” in the not-for-profit sector are “high” operating costs or overheads.

It is seen as desirable in the world of not-for-profit organisations to “keep overheads” low as a sign that resources from governments and philanthropic sources are not being wasted. Yet the investment in “overheads”, including skilled and dedicated people, is at the very heart of being able to achieve big goals and important social outcomes.

For-profit enterprises know, and are rewarded for, investing in infrastructure to achieve big audacious goals. There are fewer goals that are bigger than access to justice, which can only be achieved with investment to build infrastructure that can sustain success.

Community Legal Centres Queensland recently undertook a project to identify areas for cost savings for community legal centres’ operating budgets. The investigation found that there were limited opportunities for operational cost savings due to the underinvestment in expenditure not specifically related to providing direct services. This underinvestment is consistent with benchmark research across the social and community sectors: a Deloitte Access Economics report suggests that not-for-profit organisations cut budget corners on the non-service delivery side of operations in order to fund the cost of labour, and this is echoed in similar research.

Our research found that the buying power of the Queensland community legal sector is an insufficient incentive to external retailers/service providers to reduce their prices. Savings through group buying schemes are only possible if Queensland community legal centres can join schemes that cover more than the Queensland community legal centre sector, like FairGo or other initiatives.

While there may be limited blood that can be extracted from the community legal centre stone, there is certainly scope for some future work, such as:

• Structured Volunteering: scoping the potential for non-legal support by pro bono firms through a structured volunteering process.
• Capacity Building and Sector Sustainability: developing an ongoing sector sustainability strategy for Queensland community legal centres to add value to their existing operating budgets.
• Professional Development and Training: continuing to maintain a strategic focus on providing appropriate training and development activities for free or at highly affordable costs.
• Information and Communication Technology: identifying future opportunities to contribute to and leverage specific ICT projects occurring in other jurisdictions.

The findings of our project reflect the lived experience of community legal centres across the Australia, but as such don’t challenge the dominant paradigm that frugality of not for profits is akin to morality, as raised eloquently by Dan Pallato’s 2013 TED talk.

This project should prove to current and future investors in community legal centres that the war on waste has been waged and any pressure to reduce overhead costs further risks the success of their missions. Rather, we should focus on building on our strengths, by supporting and retaining our people (including investing in their development and career progression), strengthening our collaborative partnerships, better measuring and reporting on our impact for our clients, and strengthening our organisations’ strength and sustainability.

Community legal centres work to achieve justice and fairness; investment by governments, philanthropists and donors is central to achieving this mission, recognising that they’re investing in a safe pair of hands.

The Community Legal Centres Queensland costs saving report can be accessed online.

About the author: Rosslyn Monro is the sector sustainability coordinator at Community Legal Centres Queensland. Her 2015 Churchill Fellowship examined how the community legal sector can be sustainable by pro-actively diversifying funding streams.