Budget places NFP directors under more pressure

Last night’s Federal Budget is expected to place the directors of not-for-profits (NFPs), especially charities, under increased pressure.

Anne Robinson, the founder of Prolegis Lawyers, says: “NFP and charity directors will have to roll up their sleeves and step up because they will have a lot of work to do. They will have to work at building private philanthropy because they won’t be able to rely on some government-funded programs, in an environment where there is no reduction of red tape in sight.”

David Gilchrist, a director of Curtin University’s Not-for-profit Initiative, agrees, noting: “Firstly, the Budget directly and indirectly reduces the resources available to the sector and, secondly, it increases demand for the NFP sector’s services as a result of wider effects on those sections of the community that traditionally rely on the services of NFPs.

“In relation to resourcing, the most obvious and immediate issue is the government’s intention to reduce funding to social services organisations by $405 million. The $405 million will be withdrawn from grants and service delivery funding provided to NFPs. Typically, this type of funding reduction hits specialised service delivery, such as in the areas of mental health and youth services. The fine print is yet to be examined.

“However, for many months now a myriad of NFP organisations providing significant services across the community have been awaiting confirmation or otherwise with respect to the future of their funding and now it appears that there will be significant cuts to programs.”

Robinson says the reduction in the overseas aid budget is a broken promise from the government.

“We are already so behind in the OECD so to put a cap on that and reduce that spending by $7.6 billion over the next few years is really embarrassing,” she says.

However, she believes this cut will not affect the NFP sector as much as people think. “The reason for this is that the vast majority – more than 80 per cent – doesn’t go through NFP charities. It goes through for-profit providers. It’s bad for the nation and there have been cuts already.”

Nonetheless, Gilchrist expects the cut to reduce some NFPs' capacity to deliver services. “This is likely to affect the quantum of donations they seek to maintain effective programs, effectively reducing the share of donations available to the remainder of the sector.”

He adds the $7 Medicare co-payment and increases in fuel levies will hit NFPs and recipients of their services significantly. “Service delivery NFPs, such as disability service providers and especially those providers involved in caring for the profoundly disabled, will be affected by these measures as they struggle to maintain their recipients' health and meet transport and other costs in the face of decreasing real funding across the board.”

Gilchrist says the budget repair levy, reduced welfare payments and rising cost of living are also likely to lead to a drop in disposable incomes, which could decrease donations provided to NFPs, thus reducing their income streams and the resources available during a period of likely higher demand.

Robinson says some welfare agencies will be very concerned about the Budget’s push for young people to earn, learn or "work for the dole". “This is because it is the vulnerable young people that will be affected – those with mental illness problems or that have very dysfunctional families.”

Similarly, Gilchrist says: “The treatment of young unemployed people, effectively reducing their income to nil for the first six months of their job search, will increase the demand for a number of social services ranging from suicide prevention to employment services as government has determined to discontinue apprentice support as well.”

He adds: “Pension decreases over time via removal of the wage indexation arrangements will see the pension level fall below the poverty line over time and so the demand on services will increase markedly. There is also little doubt that the requirement for people to work longer will also have the effect over time of reducing the pool of volunteers, thus reducing the resource base of many NFPs that will, in turn, critically reduce their capacity to address significant need within the community.”

 While no change in the government’s four year funding for the Australian Charities and Not-for-profits Commission (ACNC) was announced, Robinson says it is clear that the government still plans to dismantle it, which will put more pressure on the Australian Taxation Office.

“That’s really disappointing. The vast majority of directors of NFPs and charities, with very few exceptions, see the ACNC as a very important strategic regulation to enable the reduction of red tape across the board. It’s doesn’t cost much to run, but it’s the best chance we have of reducing red tape across the sector, particularly in the states. Hockey’s speech last night made a great deal about reducing federal and state duplication. That’s fine, but in fact the states are all different and are where the duplication of red tape occurs. The best chance of reducing this is to have the Feds step in to replace it.”

“Overall, the Budget is one that will place an already stretched sector under increasing strain as the various measures both reduce resources available to the sector and increase the demand placed on it for services as a result of the major budget elements reducing the incomes and increasing the expenses of the most vulnerable within our community,” says Gilchrist.