Diversify or die

To cope with increasing demand, not-for-profit organisations will have to do more with less and find a diverse range of revenue streams, according to a new report.

Above: The cover of Deloitte Private’s Survey into the Not for Profit Sector: 2012  Fundraising.

By Stephen Easton

Not-for-profit (NFP) organisations must diversify their revenue streams as increasing demand for their services forces them to do more with less, according to a national survey by Deloitte Private.

In partnership with the National Roundtable of Nonprofit Organisations (NRNO), Deloitte asked a range of NFPs for their perspectives on fundraising for the rest of 2012, including education, aged care, disability support, health and community services providers, as well as professional bodies, religious institutions and international aid groups.

Most respondents expected that demand for their services would increase – as aged care providers do – and according to Deloitte Private partner, Alison Brown, this means they will have to focus on an assortment of innovative, cost-effective revenue streams.

“It is vital for not-for-profit organisations to diversify their revenues to avoid over reliance on one main income stream,” Ms Brown said. 

She added that retail side-businesses like op-shops were a smart way of reducing reliance on government funding.

The report also reveals concern in the NFP sector about new compliance requirements and the likely establishment of the Australian Charities and Not-For-Profits Commission (ACNC) later this year, as the sector’s new national regulator.

“The sector is very diverse with a variety of entity types, Ms Brown said. “Their different reporting and compliance requirements will present a challenge for the Commission.”

Gerard Menses, CEO of Vision Australia and chair of the NRNO, which helped Deloitte conduct the survey, used the report’s release to state his view on what the ACNC’s main role should be.

“The focus of the new Charities Commission should be on transparency and ethical fundraising practice,” Mr Menses said.

While most NFP reform stakeholders have suggested changes to an initial exposure draft of legislation to establish the ACNC, particularly strong concerns have been raised by some large groups of NFP health and aged care providers, including Catholic Health Australia and Uniting Care Australia.

According to Uniting Care Australia’s national director, Lin Hatfield Dodds, the draft bill “did not adequately account for the diversity of the sector’s structures and operating arrangements and was too focused on compliance”.

“The draft bill, if implemented, is likely to impact negatively on the current diversity of the sector and will bring additional costs both in terms of immediate compliance and longer term administration,” Ms Hatfield Dodds said recently in an email to AAA. 

“We also have serious concerns that the Uniting Church and/or its entities will be required to change their structure or operations in order to meet the bill’s new compliance and reporting requirements.”

Ms Hatfield Dodds expressed concern that large, complex religious institutions would suffer under the proposed national framework, which she argued was too heavily influenced by the Corporations Act, and based on the idea that most NFP entities “have simple (standard) governance structures and a narrow or single purpose”.

“While this assumption may be correct for many NFP entities, it is not the case for a large number of church-based entities,” she said. “The implications of such an assumption on agencies within the Uniting Church would be significant both in terms regulatory compliance and reporting obligations.”

The Deloitte survey also confirmed that many NFPs faced similar challenges to commercial businesses, including “doing more with less, and often from a revenue base that can be largely out of the organisation’s control”.

“There is no doubt that in a changing political landscape, [with] a challenged economy, a new regulatory body and overall competition for a fair share of public giving, the not-for-profit space will remain at the edge of their comfort zone for the immediate future,” the report concludes.

“Organisations that can embrace these challenges and adapt quickly to changing conditions are likely to emerge as winners in the race to keep up with the demand for their services.”

Tags: acnc, charity-tax-concessions, deloitte, nfp, reform, report, unitingcare,

1 thought on “Diversify or die

  1. This report serves to reinforce discussions that have been taking place in a good many board rooms in our nonprofit sector over recent years.

    The aged care sector, should reform take place as recommended by the Productivity Commission faces a future unlike anything it has experienced in the past.

    While some point to possible issues with a single regulatory body for the nonprofit sector, I believe that even without this level of accountability, nonprofit organisations, in general, cannot maintain their current high level of dependence upon a single source of revenue.

    Globally the conversation is about a shift from dependency towards an integrated and strategic approach to funding, where revenue is gained from a variety of sources including government grants, philanthropy, corporate sponsorship, social ventures, membership, donations and social investors.

    What is required for this to be successful is for a board to accept funding is a strategic imperative and set strategic outcomes and then hold the executive team responsible for achieving those outcomes. For many boards their focus is on cost containment, rather than revenue generation.

    The reality is that future government revenue towards the community sector is not assured. It may not even be sustainable. Clearly the real cost of supporting aged care services is beyond Government alone, without taking into consideration disability, families, children, youth, mental health, hospitals, education and employment.

    While nonprofit continue to focus upon matching costs to revenue rather than setting revenue targets and achieving them, then they will continue to operate on the slimmest of margins and never truly achieve their full potential.


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