Funding uncertainty causing headaches for NFP sector

New analysis shows charities desperately desire greater funding flexibility and certainty

The funding of social services is in need of structural reform to offer greater certainty for charities and allow the sector to address long-term systemic issues, a new report says.

Grant Thornton has released a 10-year retrospective of the federal budget, analysing the government funding landscape across a variety of industries.

For the not-for-profit sector, the report said more funding was desperately needed, but this must be underpinned first by structural reform.

“Changing government priorities and uncertain funding models for the sector don’t tie in with the ability to invest financially towards solving a problem,” the report said.

“The uncertainties in the current structure make it hard for the sector to invest in setting proactive strategies to invest in five or 10 year plans to work towards solving underlying causes of long-term systemic issues – all they can do is be reactive to issues as they arise day to day.” 

The report said while the sector was one of the few industries that the government continues to heavily invest in, the level and timing of funding was inconsistent from year to year.

It noted the funding landscape was also highly competitive with more and more NFPs wanting to access the same funding pie.

Simon Hancox, Grant Thornton’s national head of not for profit, told Pro Bono News that the budgets tended to focus on specific funding needs – such as mental health or domestic violence – rather than on general funding for the sector.                                                                       

He said he didn’t think the budget itself was necessarily where change needed to happen. 

“I think a lot of the change needs to happen in the underlying funding models,” Hancox said.

“There is a certain amount of money that is allocated to the sector under that ‘business as usual’ approach… and the issue is that it is generally for set periods of time and so there’s no real certainty.

“This makes it very difficult for sector providers to plan and structure where they’re going in the longer term and how they then build infrastructure to provide those services.”

Hancox said there was no real funding mechanism for infrastructure within the sector, although he noted the National Housing Finance and Investment Corporation (NHFIC) had helped in the social and affordable housing space.

He said another issue with funding was that it was often very prescriptive in how money could be spent and did not offer flexibility to organisations.                                                                                                          

“So if you look at COVID, under a lot of programs, there was money there for services that organisations may not have been able to provide because they didn’t have access to those clients,” he said. 

“Clients may not have been comfortable coming along to those services in a COVID environment, but they didn’t have the flexibility to provide that in another way that would end in the same outcome.”

More than 40 per cent of respondents to a Pro Bono News reader poll in July said their organisation had been unable to fulfill its contractual obligations or spend allocated government funds due to COVID-19.

And while 43 per cent of those surveyed said they had been able to roll over or re-purpose unspent funds rather than return them to government, 23 per cent said they had not been able to.

Hancox said greater flexibility for organisations was vital for the future sustainability of the sector.

“There needs to be an element of flexibility in how the organisations provide the service and funding [should be] for outcomes rather than outputs,” he said.

“And there needs to be a better look at how we actually fund infrastructure to enable these charities to provide the services going forward.”