Philanthropy report highlights sector concerns

Posted on 13 Nov 2023

By Greg Thom, journalist, Institute of Community Directors Australia

Inflationary pressure, high staff turnover and cyber security threats are three of the top issues keeping not-for-profits awake at night, according to a new report.

The study, published by Perpetual Wealth Management, analysed some of the macroeconomic and key operational risks faced by NFPs.

Perpetual’s 2023 Philanthropy Insights Report found that the increasing impact of inflation on vulnerable communities and the organisations that support them was of particular concern in a sector under stress on multiple fronts.

Perpetual's national manager of philanthropy and non-profit services, Jane Magor, said inflation was not only making programs and services costlier to deliver, but also making fundraising levels harder to predict.

“As well as their own fundraising efforts, many NFPs rely on a combination of community giving, government grants and the generous donations of philanthropists to help fund their programs, which enable them to continue providing the many important services they deliver to communities, individuals and families,” said Ms Magor.

“In the current high inflation environment, not only do programs and services cost more to deliver, but fundraising income has become unstable, resulting in an ever-growing gap between budgets required and funding available, highlighting the incredibly important role philanthropy plays in the NFP sector.”

One of Australia’s largest managers of philanthropic trusts and charitable bequests, Perpetual helped distribute more than $185 million to the community in the 2023 financial year.

Cyber threats

The report found that NFPs that collect and store potentially sensitive information were increasingly concerned about being embroiled in a cyber security incident.

The recent Pareto Phone malware attack sent shockwaves through the sector, after the details of more than 50,000 donors to 70 charities that used the telemarketing company were dumped on the dark web.

Ms Magor said smaller organisations with less capacity to invest in digital technology security and governance training protocols were finding it particularly challenging to meet the cyber security challenge.

‘’Many of the philanthropists who we work with recognise the specific value provided by smaller not-for-profit organisations and the need to invest in their internal systems and capability,” she said.

‘’Over the past three years, funding to small and community organisations has increased from $10.7 million to $13 million.”

‘’More important than ever will be the need for trust and for philanthropists to listen to the voice and needs of communities and the organisations that support them."

Perpetual’s 2023 Philanthropy Insights Report.

Staff turnover

High levels of staff turnover, particularly in fundraising and philanthropy roles, have also become an issue of concern for NFPs.

The Perpetual report said feedback from the sector suggested the issue was exacerbated by stretched capacity and limited support for skills development and training.

Ms Magor said that in response to this trend, Perpetual had partnered with Fundraising Institute Australia in June to fund scholarships for FIA’s professional fundraising courses.

‘’The response from applicants was unprecedented, further confirming the need for investment in this specialised space.”

Philanthropy helping hand — Not-for-profits are under being squeezed for funding while under increasing pressure to deliver services to disadvantaged Australians.

Philanthropy trends

The report provided a breakdown of philanthropic funds distributed by Perpetual in FY23.

Under the IMPACT Philanthropy Application Program (IPAP), which helps connect philanthropists with organisations driving positive cultural, social, and environmental change, Perpetual helped distribute $29.4 million in new grants.

An additional $8.7 million funded ongoing multi-year commitments.

About 362 out of 800 applications received from 1,397 organisations were granted an average of $105,000 in funding.

Social and community wellbeing received the largest amount ($11.9 million), followed by health and medical research ($9.8 million), education ($7.3 million), health ($6.6 million), arts and culture ($1.2 million), conservation and environment ($951,000) and animal welfare ($364,000).

The report noted that philanthropists' confidence in funding medical research, which dipped during the pandemic, appeared to have returned.

Funding for cancer research projects grew significantly to comprise 27% of IPAP medical research commitments, or $9.8 million.

The report said that as the negative effects of the pandemic and extended lockdowns became better understood, funding for primary and secondary school programs had become a priority for some philanthropists.

A $1.2 million increase in funding to $11.9 million for the social and community wellbeing sector in FY23 reflected philanthropists’ recognition of the pressure faced during the cost-of-living crisis by vulnerable people and the organisations that supported them.

The road ahead

The report predicted that NFPs would continue to grapple with the complexities of responding to communities in need in the year ahead, while also dealing with their own capacity and resourcing challenges.

It said the role of philanthropists would be critical, particularly amid the backdrop of falling donations from the public.

“We expect to see a continuation of the hybrid funding approach, with philanthropists supporting immediate community need and tangible projects, while also providing untied grants and committing to long-term initiatives where trusted relationships are already established.”

The report said securing long term funding commitments would also be dependent on NFPs’ ability to clearly articulate their mission and priorities.

‘’More important than ever will be the need for trust and for philanthropists to listen to the voice and needs of communities and the organisations that support them."