The battle for funding

Government funding cuts, greater demand, and more competition for fundraising dollars are all putting pressure on the not-for-profit sector.

We are seeing philanthropy fatigue" setting in as the number of causes grows, says Chris Hall, CEO of MercyCare, a Western Australia-based Catholic provider of hospital, health, aged-care and family and community services.

At the same time governments are increasingly moving to contracts with service-provider organisations that have scope and size, together with national-provider capacity and capability, he says.

All in all it makes a tough environment for NFPs to maintain a healthy flow of cash into the organisation

How do you see these trends developing in the health sector?

"Multinational for-profit providers are becoming an increasingly attractive option for governments to deliver services that have traditionally been provided by NFP organisations. Employment services, out-of-home care, disability and mental health services are examples of where this is happening.

We will see more national contracts awarded to national NFPs and for-profit providers, with subcontracting arrangements offered to local and smaller NFP providers.

Smaller, single-service NFPs and those that are regionally and remotely based will be particularly vulnerable as the scope and size of organisations become more important to the survival of traditional NFP organisations."

What effect does this commercial approach have on service provision, including quality?

"As commercially-based contracting arrangements become more prominent, grants and other traditional ways of funding NFP services are becoming less prevalent.

Price, rather than quality of service provision will become even more important in the contracting of services by government.

A hybrid market economy for the provision of NFP services has emerged where there is greater emphasis on free-market principles and increasing consumer demand, but with funding that is closely tied and restricted to government contracts."

How will NFPs need to change?

NFPs are being required to cooperate and collaborate with each other through consortiums and similar arrangements, while simultaneously operating in an increasingly competitive tendering environment.

There is an even greater imperative for NFPs to expand and diversify their services and their revenue base and sources.

There is also a growing imperative for NFP organisations to consider increased strategic restructuring and alliance-building opportunities."

This is an edited extract of an article that first appeared in Company Director magazine.

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