NFPs need diversified investment

Australian not-for-profit (NFP) organisations are missing out on potential investment income by allocating large proportions of their capital in cash and deposits, despite the low interest rate environment, according to a new report.

The 2015 Koda Capital Non- Profit Sector Review found that NFP organisations' investment income had fallen by 10.2 per cent as a result of their focus on cash and deposit investments.

Some of the recommendations of the report include:

• NFPs should be diversifying their income streams and taking steps to reduce their overall dependence on external funding.

• Australian NFPs need to build, protect and commercialise intellectual property like never before. They need to think about the commercial and social value of their products and services in a global as well as local context

• If charities want to attract significant philanthropic support, they should be helping wealthy Australians to structure their philanthropy and showing them how much they can get from giving.

• NFPs should be looking to take advantage of Australia's highly trained, highly educated workforce and Australia’s volunteer culture to build strong networks of skilled volunteers who are prepared to lend their talents as well as their time.

Koda Capital partner and head of philanthropy and social capital, David Knowles, said the sector was "a key driver of the Australian economy", but stressed the need to look to non-government revenue sources.

"With an ageing population and a continued reliance on the NFP sector to deliver critical services, NFPs must continue to explore new ways to generate income and capital to solve social issues," he said.

Knowles added that with government funding under significant pressure, many organisations will find themselves in a challenging financial position. This means many should be examining their business models closely and assessing the strength of their organisation's balance sheet and ensuring there are no lazy assets.

"They need to focus on diversifying their income streams and looking for opportunities to derive self-generated revenue,” Knowles said.

The report can be found here.