NFP Benchmark Report Calls for Alternative Financing

An inaugural benchmarking survey says there is a need for Not for Profit organisations to develop alternate means of financing and social enterprise in the light of changed funding policies.

The Survey by Russell Kennedy Lawyers and financial management firm, Pitcher Partners, highlights that many Not for Profit organisations rely strongly on Government assistance.

The survey report said organisations need to ensure that they can maintain solvency in the event of a change in policy or funding by setting aside monies for existing commitments.

The report recommends “a fund for short term operations, together with managing their cost base to be flexible enough to respond appropriately to changes in funding streams”.

The authors said the aim of the benchmark survey is to let Not for Profit organisations and charities to benchmark themselves against their peers. More than 100 organisations responded to the survey between August and October 2014.

“The inaugural benchmark survey focused on governance, strategy, fundraising, risk management and the use of volunteer and professional resources,” the authors said.

“It is also necessary for NFPs to consider the management of various tax status benefits to ensure no compliance issues arise. Recent ACNC and ATO activity evidences a willingness to revoke tax benefits of NFP entities when non-compliance occurs, which is a risk that most NFPs cannot afford to expose themselves to.

“We have also identified that there is an opportunity for NFP organisations to move toward more sustainable funding models by adopting commercial funding streams, rather than relying on fundraising as an ancillary source of monies.

“Most respondents indicated that there is value to be derived from external regulatory requirements. This supports findings last year that almost 80 per cent of submissions to the Senate Economics Legislation committee inquiry into the possible repeal of the Australian Charities and Not-for-profits Commission (ACNC) do not support the government’s plans to repeal the ACNC Act and disband the ACNC.

“Clearly there is a role for an external regulatory body to support and sustain the sector, and both Pitcher Partners and Russell Kennedy advocate ongoing commitment to this pursuit,” the report said.

On the issue of Board  governance the survey results show that many board members are generously donating their time and even paying their own expenses as a further way to support their organisation.

“Not for Profit board members should be applauded for these efforts. We note that about 12 per cent of respondents indicated that honorariums of $5,000 or more are being paid. The rules of some NFP organisations allow the payment of “reasonable fees”.

“Particularly for the largest Not for Profits (eg $10 million+ revenue),it becomes difficult to expect board members to receive nothing whatsoever as the time commitment increases for managing significant organisations.”