EXCLUSIVE: CSI report shows extent of pandemic pain, but it’s not over yet

Charities are managing ongoing disruption to services, persistently high demand, a declining volunteer workforce and higher costs as a result of inflation in a post-pandemic world, a new report shows. 

Four out of five community charities struggled with increased demand for services during the worst  of the COVID-19 pandemic, according to a new report by Social Ventures Australia and the Centre for Social Impact (CSI). But the worst is not over yet. 

The report analysed charities to ascertain financial viability and found only 76 per cent of registered charities had an operating surplus.

The report warns modelling of a five per cent drop in income from all sources would see the proportion of surviving charities drop to 58 per cent, from 76 per cent.

If income falls by 10 per cent, projections show surviving charities would drop to 43 per cent. A 20 per cent drop in income would see surviving charities plummeting to 23 per cent.

The new report – the fifth in a series titled Partners in Recovery – aims to fill knowledge-gaps regarding the financial health of charities in the aftermath of the COVID-19 crisis. 

The report uses data from the Annual Information Statements (AIS) submitted by over 48,000 charities to the Australian Charities and Not for profit Commission (ACNC) in 2018, 2019, 2020 and 2021.

More than a quarter of not for profits reporting to the ACNC (27.2 per cent) were categorised as either health, social services or development and housing organisations and another 19.5 per cent were education and research.

While the report shows almost 55 per cent of aged care charities and 48 per cent of income support charities made a loss or small surplus in 2021, it also contends that charities are managing ongoing disruption to services, persistently high demand, a declining volunteer workforce and higher costs as a result of inflation.

Major findings

It says governments did well with temporary support during the crisis however, as the economic, health, environmental and social crises continue to unfold, concerns remain about charities capacity to withstand and respond to these ongoing shocks.

Following the Albanese government’s commitment to better supporting the sector through its Building Capacity, Building Community, the report warns decisions made now will strongly affect the capacity of the charity sector to “survive and thrive” in a “challenging operating environment”.

In the report, charities were shown as performing better financially than anticipated due to JobKeeper payments –76 per cent in 2021 and 77 per cent in 2020, up from 66 per cent in 2019. But despite the temporary financial help, many still struggled to keep up with demand.

Data from the report shows four out of five community sector charities struggled with increased demand for services during the pandemic.

Assistant Minister for Competition, Charities and Treasury Andrew Leigh said the latest installment in the SVA and CSI Partners in Recovery research series will help government understand how charities have been  affected by service disruption, falling income, rising demand and higher operating costs.

“Australia’s remarkable charities do vital work in our communities – helping the vulnerable, advocating on environmental issues, encouraging the arts, and much more,” he said.

“But recent years have been tough. The Partners in Recovery reports help us understand the challenges and opportunities, and provide a valuable roadmap for building a reconnected Australia.”

CEO of CSI Arminé Nalbandian added that high inflation, a significant drop in volunteer numbers and increased demand for critical programs highlights the need to invest more in charities.

“Increased demand for critical programs like homelessness services and food relief action [as] people respond to rising cost of living [show] we need to invest in charities, now, to meet the needs of today and create the vibrant and resilient communities we want to live in,” she said.

Data shows the charities economy offers the same value to Australia’s GDP as retail (10 per cent) and employs more people than mining and manufacturing combined, employing 1.4 million people, or close to 11 per cent, of workers in Australia.

Charities need tech support

Following the worst of the pandemic crisis, the number of not for profits who moved, or are or in the process of moving, to cloud-based technologies increased from 58 per cent in 2020 to 69 per cent in 2021.

However, charities also observed that a transition to online services delivery highlighted the digital divide. 

Many clients were unable to access electronic devices, could not afford the necessary data technology or did not feel comfortable using digital platforms to access services.

While in 2021, not for profits spent six per cent more on technology than they did the year before and 6.4 per cent more on operating expenses.

The report states the biggest challenge to improve technology infrastructure was funding with 37 per cent of respondents indicating that access to affordable, skilled and technical advice and resources remain the top challenges for not for profits.

The report also shows  just over half, or 56 per cent, of respondents have a security incident response plan in place, showing a greater need to invest in security, risk management and business continuity plans to keep up with changes to the digital operating environment.

SVA, CSI, and Hon Dr Andrew Leigh MP will hold a free online event to launch the research on
Wednesday 21 September at 9:30am AEST.  You can register here.