Major Challenges Ahead for Charities - Commissioner

The Commissioner of Australia’s national charity regulator has warned that over the next five years the Not for Profit sector will face major challenges in the areas of income, performance measurement and efficiency.

In an address to the Leadership Victoria Conference in Melbourne today, Australian Charities and Not-for-profits Commissioner, Susan Pascoe AM, likened the NFP sector to Cinderella, saying it was under-recognised for the contributions it makes to the community.

“The NFP sector hasn’t been given the glass slipper yet,” Pascoe said.

“However, people are starting to take a second look, realising the sector has some very attractive qualities.”

ACNC Commissioner Susan Pascoe AM

Pascoe said that the NFP sector’s ability to contribute to the Australian community was underpinned by its sheer size.

“The NFP sector in Australia is enormous,” she said.

“According to Australian Bureau of Statistics figures, the sector has annual revenue of over $100 billion, assets of almost twice that, and it employs 8 per cent of Australia’s workforce.

“To put that in perspective, the income of the NFP sector is larger than the Agriculture and Fishing Industry, and the number of employees is five times higher than the mining sector.

“While there is no doubt that the Australian NFP sector is economically significant, the sector is not without its challenges.”

Pascoe, who rarely addresses issues outside of regulation, highlighted three key issues facing the NFP sector going forward.

“Over the next five years, I believe that the sector will face three particularly important challenges: income, performance measurement, and efficiency,” she said.

Pascoe said maintaining or increasing income, and diversifying funding sources were “perennial problems for most NFPs” that were difficult to solve.

“Changes in government policy and the impact on grants or procurement can be swift and deep for many NFPs and in some cases, threaten the viability of the organisation. Governments everywhere are reducing or reallocating funding in response to budget pressures, however the demand for housing, employment, drug and alcohol support and child protection doesn’t slow down with the economy,” she said.

“This presents significant challenges for mission-based organisations, and particularly for boards and front-line staff who have to make some hard choices.”

Pascoe said income pressures also meant performance measurement would become a “vital” issue for NFPs.

“Charities will need to show their funders that they are achieving their mission, rather than simply reporting on quantities and costs,” she said.

“As the charity regulator, the ACNC has advocated the assessment of charity impact, rather than a focus on arbitrary measures such as administration costs. Improved performance measurement is vital to helping funders understand a charity’s impact.”

In an environment of reduced income and improved transparency of performance measurement, charities will need to ensure they are acting as efficiently as possible, according to Pascoe.

“This is not to imply that charities act irresponsibly with their funds, but more so to encourage them to approach financial management more strategically,” she said.

“The ACNC has a role to play to help charities navigate these issues, through the promotion of good governance, the provision of support and guidance and increased transparency through the Charity Register.”

Pascoe said despite the major challenges facing the sector, there was reason to be optimistic about its future.

“There will always be challenges in the sector and a continual need to improve,” she said.

“However, I think we have every reason to be very confident in the future of our NFPs and in the directors who lead them.”