A new report that could have serious implications for the Not For Profit sector.
Social Ventures Australia (SVA) and the Centre for Social Impact (CSI) have published a report which suggests over 200,000 jobs could be lost among Australian charities as support like JobKeeper, and lease and loan deferrals come to an end in October without extra support.
Titled ‘Will Australian charities be COVID-19 casualties or partners in recovery? A financial health check’, the report looks at the 2018 financial statements of 16,000 registered charities – including those that provide aged care, home care and retirement living – and the likely impact of COVID-19.
Its modelling shows that if charities suffered from a 20% drop in revenue due to COVID-19, 17% would be at high risk of being forced to close their doors within the next six months.
The report notes that prior to COVID-19, 60% were already in a risky financial position with 35% operating at a deficit and only 25% of the remainder having a surplus of more than 5%.
The pandemic saw further losses of income. In the social services sector, a survey of 170 organisations in mid-April found that 78% reported a downturn in revenue as a result of COVID-19. One in five (19%) of those surveyed reported a drop between 15% and 30%.
Another survey from late April showed 35% had already reduced staff, 8% were planning to do so and another 40% were unsure if there will be further reductions.
The report concludes the Not For Profit sector is facing an ‘October cliff’ when stimulus payments run out, and calls for a range of measures to support the sector, including:
- Gradual transition of JobKeeper and other supports to create and ‘ramp’ not a ‘cliff’ in October
- One-off Charities Transformation Fund to help organisations transition to the ‘new normal’ including operating online, restructuring etc
- Maintain funding for government contracted services delivered by charities to reflect the true cost of delivering services
- Retain JobSeeker at higher level to mitigate the increase in service demand while also stimulating the broader economy
Not For Profit aged care providers do have the guarantee of Government funding, but we know many have few cash reserves and are invested in assets that are earning little to no income thanks to record-low interest rates and increasing vacancies.
Given they must also pay out RADs to departing residents – and other warnings of increasing insolvencies in August and September – it would seem the ‘cliff’ is fast approaching for some operators.
You can read the full report here.
