NFPs report strong financial performance despite COVID challenges
23 November 2021 at 8:00 am
But NFPs have been warned not to become complacent as the pandemic continues to linger
The not-for-profit sector has fared better than expected financially amid the pandemic but 40 per cent of organisations still believe it will take at least two years to fully recover from the crisis, new research shows.
The Australian Institute of Company Directors’ (AICD) 2021 not-for-profit governance and performance study examined the state of the sector in a year again shaped by COVID-19.
Last year’s AICD report said targeted assistance was needed for parts of the sector, with the 2020 study finding some NFPs faced very large drops in revenue and had to place their organisations into an effective ‘hibernation’.
But while just 48 per cent of NFPs reported making a profit in last year’s study, 84 per cent of respondent organisations this year said they made a profit or broke even in the 2020/21 financial year.
AICD managing director and CEO, Angus Armour, told Pro Bono News that while government stimulus support – like JobKeeper – certainly helped with this, it wasn’t entirely the cause for the strong performance.
He said he was pleased the NFP community in general “survived better than we had feared”.
“I think there was certainly a positive impact from Commonwealth and state support programs,” Armour said.
“But there was a very considered effort on the part of many NFPs to innovate, to use technology in different ways, and engage with the people who need their services and support.
“And I think generally the staff and directors in NFPs hunkered down to make it work.”
Despite the strong overall figures, two in five (40 per cent) of the 1,978 survey respondents said it would take their organisations at least two years to fully recover from the impacts of the pandemic.
More than four in five (81 per cent) NFP directors also said they were worried about the strength of the Australian economy.
Armour said NFPs cannot afford to be complacent and assume the world will emerge from the past year in a linear, consistently upward direction.
“Particularly with international borders open, that will be a challenge for us given the fourth wave running through Europe at the moment,” he said.
“But [the previous year] has made us more adaptive and more thoughtful about how we operate in the community. That could be useful in the coming 12 months.”
Mergers put on the backburner
Another key finding from the study revolved around NFP mergers.
The report said merger activity was at a ten-year low, with just 18 per cent of NFPs reporting they would be discussing a merger in the next 12 months.
This compares to 21 per cent of organisations in 2020 and 38 per cent in 2017.
Armour said this was an unexpected finding, given the events the sector has gone through recently.
“I think we’ll need to investigate this a bit further, because the economic reasons for merger activity continue to exist. Perhaps that tailwind that we got through stimulus spending has given people a bit more time to decide what to do,” he said.
“But I’d be very surprised if the medium to long term doesn’t involve some resumption of merger activity.”
Looking ahead, Armour said the focus for NFPs over the next 12 months should start with leaders developing a clear insight into how staff feel at the end of this year.
He said so much of the sector’s success and resilience over the past 12 months has been built on the efforts of staff to work through difficult conditions.
“So we need to check in and make sure that they’re getting adequate support and adequate rest before the next year starts off. That’s very important,” he said.
“I think the pandemic has also probably helped directors to better understand their own [operational areas] where they have vulnerabilities, and they shouldn’t wait too long before they start putting plans in place to address those issues.
“These vulnerabilities we’ve uncovered need to be addressed because there’s certainly no guarantee it won’t be equally challenging in the coming 12 months.”
You can see the full report here.