Impact on not-for-profit operations
2.1 Overview
Not-for-profit organisations that were consulted for this project noted increased demand for services (particularly those that operate in emergency accommodation, family services, unemployment support and other welfare areas), and significant falls in funding as a result of the economic downturn.
Many are facing budgetary constraints and focusing on cost cutting, expanding fundraising activities or looking at more innovative fundraising initiatives to make up the short-fall. There have been redundancies in the sector, and some of the work undertaken by full-time practitioners has shifted to part-time or volunteer staff. There continues to be pressure on NFP organisations to provide volunteer opportunities for the community, and some are looking at different ways they can take advantage of the increase in available volunteers.
Overall, NFP organisations appear to be maintaining a focus on their core mission and reviewing services and activities where cuts can be made. Many not-for-profit organisations report that they already have very lean budgets, so finding areas in which to cut funding has been difficult.
Not-for-profit organisations are drawing down on reserve funds as well as reviewing non-essential areas and programs that can be cut or deferred. As a result of the downturn, there appears to be more collaboration in the sector as NFP organisations look for new ways to deliver their services.
These findings are consistent with research (see
Box 2.3 on page 28) conducted by the Victorian Department of Planning and Community Development (2009a).
2.2 Funding of not-for-profit organisations
For many not-for-profit organisations, the economic downturn has had a severe impact on their funding.
Overall, it appears that investment incomes have fallen, funding from companies and major donors has been cut and regular giving and fundraising has been harder to attract.
The following comments from NFP practitioners illustrate this:
All parties (government and private) have withdrawn support for the charitable sector to a large degree.
Withdrawal of major and minor sponsorships has put severe restraints on our operation.
Corporate freeze on sponsorships for the next fiscal period has a big impact. We are appealing to individuals and small community groups instead, to try to meet our targets and maintain operational funding.
There are some exceptions to this. For example, some not-for-profit organisations have been beneficiaries of disaster relief funding, including those affected by the recent Victorian bushfires and Queensland floods.
Also, some organisations have been beneficiaries of additional funding that has been provided to assist meet specific surges in demand for services. Others report that they have experienced favourable publicity and increased awareness during these difficult times, which has improved their support base and therefore donations to their organisation.
These appear to be specific exceptions however. On the whole, many not-for-profit organisations are stretched to meet demand for services in an environment where funding has been significantly reduced.
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In relation to corporate funding, the impact has been varied according to sectors and the nature of relationships with NFP organisations. Multi-year corporate partnerships (and their associated funding) appear to be stable, although some acknowledge that these may still be tested in the year ahead.
Many not-for-profit organisations report that larger companies in particular are taking a long-term approach and are renewing their partnership and funding commitments.
In an open-ended question in our survey, some not-for-profits highlighted the likelihood of reduced business funding:
The financial downturn has meant less likelihood of corporate sponsorship.
We rely on the generosity of corporate sponsors and this is rapidly evaporating.
Not-for-profit organisations in Western Australia in particular note that they have enjoyed the benefits of a resources boom and associated increased community investment funding from many mining and resources companies over the past few years, and that this is likely to now change. As one NFP commented:
In WA, mining companies are closing down - the bust is upon us.
Some not-for-profit organisations also report that arts and sports programs and activities are areas in which companies appear to be cutting back.
A survey of 39 companies conduced by Australia Business Arts Foundation (2009) in May 2009 found that arts sponsorships are expected to see a sharp decline this year, particularly towards the end of 2009 and beginning of 2010. It expects that companies that provide more than $500,000 in funding and those that provide less than $50,000 are more likely to decrease their sponsorship.
Companies report that they want more value from their relationships. Half of companies surveyed say they are likely to substitute cash support with provision of in-kind product or pro bono services. As stated in the survey findings:
...partnerships are more vulnerable to being reduced or cut when they are based not on long-term strategic alignment (including CSR), brand or staff objectives but on short-term tactical considerations, especially where motivating factors include hospitality benefits and personal interests of management. (AbaF 2009).
Another area of expected decline in corporate funding is in matched giving, with some NFP organisations reporting that companies are putting caps on matched giving or reducing their existing caps.
While payroll giving itself appears to be maintained (or at least we were not aware of specific instances of major declines in this area), the amount contributed by some companies to NFP organisations has declined due to the matched funding component.
Global philanthropic foundations - more so than Australian foundations - are reviewing their relationships and reducing commitments, adding to funding pressures.
Social enterprises are also under pressure and falling contributions lead to reduced incomes for some NFP organisations.
And finally, some government funding is coming to an end, or expected to be under threat, though it is not clear to what extent this is attributable to the downturn. This is illustrated by the following comments from NFPs:
All of our current State and Federal Government funding is one off for specific projects and programs. Local Government provides a small amount of ongoing funding. This funding could be under threat as the economic downturn bites in the area due to job losses in the region.
Government funding is insecure with budget cuts.
While some NFP organisations have received increased funding for disaster relief, other organisations report that funding allocated to emergency disaster relief has resulted in a redirection of funds away from supporting their activities. Some NFP organisations attending our focus groups indicated their corporate supporters had less community funding available because of increased contributions to diaster relief in the first half of 2009.
Research undertaken with Victorian NFP organisations also found that there was some redirection of funding - see
Box 2.3 (Department of State and Community Development, 2009b). It is difficult to assess the exact redirection of funds.
There was mixed feedback on the impact of the downturn on general philanthropic giving. Some have experienced significant decreases, while others have maintained regular giving and donations. On balance it appears that community giving has remained robust through the downturn to date.
Some NFP organisations indicated they are looking to governments to assist, and have applied for additional emergency funding. In our survey, 11 respondents said they had applied for additional funding, mostly from the Temporary Financial Assistance Funding as part of the Jobs Fund (applications were due in late-May 2009).
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Current impact on funding
According to our survey results, the biggest falls in not-for-profit organisation income appear to be from investment incomes, corporate funding and funding from major donors, philanthropic trusts and foundations (see
Figure 2.1).
As a result, reserve funds have decreased as organisations run down reserves to cover funding shortfalls. Borrowings have remained largely unchanged. Ninety per cent of survey respondents reporting no change in this current financial year, compared to last year.
Figure 2.1: Current Impact of the Economic downturn on Not-for-Profit Financial Operations 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. Comparison of this financial year (2008/09) with last financial year (2007/08). N=70.
Figure 2.2 shows the proportion of increase or decrease for the 2008/09 financial year and the 2009/10 financial year.
Figure 2.2: Proportion of Increase or Decrease 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
As a result of reduced funding, many NFP organisations are anticipating a deficit in the 2008-2009 financial year (ending 30 June 2009). Forty per cent of survey respondents expect a deficit in the current financial year, while 11 per cent say they are expecting a deficit but that this is a normal result, not related to the economic downturn.
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Of those that expect an operating deficit, the vast majority surveyed indicated they would be running down reserves in order to finance the deficit and enable them to continue to deliver services and pay staff. Others are considering reducing staff costs, reducing or deferring services, reducing overheads and cutting expenditure. Some of the comments from NFP practitioners include:
[We are] cutting services and selling assets.
We will have to run down reserve funds unless current funding levels are increased.
We are a small organisation depending on very small government grants and memberships. If we lose either of these - we may have to close.
[We are] running on reserve funds unless alternate funding can be found. Possible complete shutdown of [our] service, leading to increased youth anti-social behaviour, crime, etc.
We don't have high levels of [reserve funds, assets etc] which are negotiable. We will save wherever possible and try to gain more in-kind or pro bono goods and services to make up the deficit.
Services will be decreased to not incur a deficit. Staff will be made redundant.
Expectations of funding in the year ahead
Over the next financial year, many NFP practitioners expect that funding will continue to be a challenge. Significant decreases are expected in investment incomes, reserve funds, funding from companies and funding from major donors and philanthropic trusts. Nearly 40 per cent expect an increase in government funding, and a third expect income from other forms of fundraising to increase in 2009-2010.
Figure 2.3: Expectations for the Next Financial Year (2009-2010) 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
Figure 2.2 indicates the proportion of increase or decrease expected over the next financial year.
In another question about expectations for the next financial year, 40 per cent of survey respondents anticipated a deficit as a result of the economic downturn.
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Shift from funding support to in-kind support
Not-for-profit organisations report that there has been a significant shift from cash support to in-kind support, particularly from companies that have food and clothing product.
In response to our survey, 41 per cent of NFP organisations report that there has been an increase in in-kind support for their organisation. Thirty-three per cent expect an increase in in-kind support over the next financial year.
One NFP described it thus:
There appears to be a shift toward in-kind giving. One of our major sponsors will not be continuing with their financial support of the foundation next year but they have offered ongoing support in other ways - for example, financial literacy training for young people - this is very valuable so we are glad this is still on the table.
While a reduction in monetary support places pressure on budgets, NFP organisations in consultations expressed the view that they were generally grateful for any support and most importantly, appreciative of the continuation of relationships.
2.3 Management of not-for-profit operations
Not-for-profit organisations appear to be maintaining focus on their core mission and priorities and the economic downturn has had no significant impact on this. There are some changes in the nature of fundraising activities and NFP organisations report that they need to be more innovative in the way that they fundraise during this tougher economic environment.
During consultations, one large NFP commented that it had significant success in the 2008-2009 financial year by focusing on internet-based fundraising rather than traditional mail-outs. Through this, it had managed to access a 'new generation' of giver. Others are seeking ways to expand their donor bases to access new sources of funding.
When asked whether priorities have changed as a result of the downturn, survey respondents' views were mixed.
Some NFP organisations were reducing costs, reducing services and putting expansion plans on hold. Others were more focused on looking at new ways to raise revenue, through for example, more fee-for-service work or through greater marketing and advocacy.
One NFP practitioner mentioned their organisation was considering consultancy work and alternative sources for project work. Another NFP practitioner said they that had examined other possibilities, including developing a business plan for a social enterprise and considering amalgamation with another organisation.
A large number, however, reported they were focusing on core business, and were attempting to streamline and focus activities. The following comments from NFP practitioners reinforce these views:
We will stick to core business - and we will be able to offer much less on current funding levels.
[We have a] greater focus on service delivery, core functions and the option of charging for some services that are additional to generate revenue.
We are sticking to the basics and what has historically worked for the most part, with one major pilot initiative which we will test on a very small scale before deciding to go large. Events will also become more simple and affordable by the majority, with more in-kind and donated elements.
Increased demand, especially from remote communities has opened up opportunities for [our organisation] to further increase the range of services provided to assist those in need within the community.
As
Figure 2.4 illustrates, 83 per cent of organisations surveyed report that they are focusing on core business aligned with their mission. Only seven per cent disagree with this statement.
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Figure 2.4: Core Business 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=71.
As highlighted Section 2.2, NFP organisations are concerned about managing the financial impact of the downturn on their operations. In many instances, this means an emphasis on further reduction of costs and in some instances, running down of reserves to cover operating expenses. Sixty-seven per cent of survey respondents said they were concerned about managing their financial situation - illustrated in
Figure 2.5.
Not-for-profit organisations are seeking to cut expenses and are reviewing costs associated with programs and activities. Seventy-seven per cent of survey respondents say they are reducing costs as a result of the economic downturn. Eighty-four per cent say that competition for available funds has increased.
About 40 per cent of NFP organisations surveyed say they are reviewing their investment policies, following falls in investment income. As well as the impact of lower asset values and dividend income on investment income, we understand that some NFP organisations are looking to tighten their investment policies and reassessing risk levels following adverse effects of higher risk investments over the past year.
Not only are NFP organisations facing less funding, but they also report delays in receiving funding - 62 per cent of organisations surveyed say they are facing increased delays. This appears to be a result of major donors, companies, philanthropic trusts and foundations undertaking reviews of their funding commitments as a result of the economic downturn. We also understand that some companies that have three-year agreements are looking to phase the funding commitments towards the end of the agreement period, which is also resulting in delays in funding for some organisations.
Figure 2.5: Actions Taken during Economic Downturns 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
Not-for-profit organisations are cutting costs in a variety of ways, in particular by reducing staff costs either by reducing staff hours, making staff redundant, or not replacing staff that leave. Some NFP organisations are also curtailing training and professional development opportunities for their staff. This is discussed further in Section 2.5.
Cost-cutting is also taking place in areas such as administration, outsourcing (more is being done in-house) and travel. One NFP practitioner commented: 'We are paying greater attention to use of technology to minimise costs.' Another NFP said it was cutting costs such as the annual report and other 'nice to have' areas.
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A number of NFPs commented that they already operate with very lean budgets and with minimal staff expenses, so it was difficult to find areas to reduce costs.
NFP organisations are seeking to do 'more with less' and note that they are spending more time in managing relationships (66 per cent of NFP organisations agree) and working with their Board to manage uncertainties (84 per cent of NFP organisations agree).
Figure 2.6 also illustrates that NFP organisations are spending more time marketing, and looking to increase fundraising campaigns because of the economic downturn.
Figure 2.6: Impact of the Economic Downtun on Management of NFP Operations 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
Collaboration with peer organisations
There appears to be more collaboration underway in the NFP sector, particularly since survey research for the Centre's previous report
Relationship Matters: not-for-profit community organisations and corporate community investment (October 2008).
While not-for-profit organisations report an increase in collaboration as a result of the economic downturn, there are also other mergers and collaboration in discussion, and some were underway before the advent of the global financial crisis.
Fifteen per cent of NFPs surveyed say that they are merging or considering a merger as a result of the economic downturn (see
Figure 2.7).
The Centre understands that in a faith-based charitable umbrella group, up to five of the 30 organisations are in merger discussions as a result of resource pressures exacerbated by the economic downturn.
Undertaking a merger will require management time and additional funding. Peter de Courcy Hero of Melbourne Community Foundation suggests that an economic downturn is not the ideal time to undertake a merger, and that requires NFP organisations to invest in their capacity to manage this change, something that not many donors are likely to fund (Lea 2009).
In undertaking research for this report, we are aware of one corporate foundation providing funding to support a merger between not-for-profit organisations.
It is more likely that NFP organisations are collaborating or rationalising with other peer organisations to provide services. Nearly half of NFP organisations surveyed agree they are collaborating to provide services. Companies in particular, are likely to be encouraged by an increase in collaboration, as a common criticism has been that the NFP sector has 'too many organisations focused on the same areas'.
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It is less likely that NFP organisations will be outsourcing during the downturn (as noted previously). Nor are they likely to be relying on intermediaries and broking organisations to assist find new opportunities. One quarter of NFP organisations surveyed said they are seeking the support of peak NFP organisations. These are more likely to be smaller NFP organisations that rely on brokers and peak bodies for expertise, and are more likely to 'outsource' due to their own capacity constraints.
A recent survey of 18 Victorian NFP organisations also illustrated this collaborative trend. Sixty-five per cent report that they were considering collaborative approaches with other peer organisations (Department of Planning and Community Development 2009a). [Note, see
Box 2.3 for a summary of this research].
Figure 2.7: Collaboration 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
2.4 Demand for services
One of the major impacts of the downturn on not-for-profit organisations is their capacity to meet the substantial increase in demand for services, while managing funding constraints. Sixty-five per cent of respondents to our survey say their organisation has experienced an increased in demand for services as a result of the economic downturn. As one NFP commented:
With the economic downturn we have seen a sharp rise in demand for our services, yet we have no new resources to cope with this.
Eighty-three per cent expect the increase in demand for services to continue in the next financial year.
When asked to quantify the increase, a third of respondents say the increase has been up to 15 per cent, a third say the increase has been between 15 and 20 per cent, and just under a third say the increase in demand for services as been in the range of 20 to 50 per cent. One respondent said the increase has been more than 50 per cent.
These increases suggest quite substantial changes in the demand for NFP services.
Figure 2.8 illustrates the proportion of increase or decrease in demand for services in the current financial year and the next financial year.
Figure 2.8: Proportion of Increase of Decrease in Services 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
A report prepared for Anglicare Australia, Catholic Social Services Australia, The Salvation Army and UnitingCare (Access Economics 2008) found that the global financial crisis would put community service organisations under even greater strain than currently predicted based on demographic trends.
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In particular, the impact of the global financial crisis on the Australian economy is predicted to have an acute impact on some of the most disadvantaged people in the community - pushing increasing numbers of low and middle income earners to seek the services of welfare agencies. This in turn will put an even greater strain on what are already overstretched social services.
The greatest increases in demand will most likely be for:
- employment services - assisting the unemployed find jobs;
- housing services - assisting those who can no longer afford to pay rent, or those who cannot afford to pay their mortgage to find alternative accommodation;
- financial counselling services - providing financial advice to those who, for example, may have incurred large debts;
- emergency relief services - short-term assistance through the allocation of food parcels, food and other vouchers; and
- counselling services - helping people deal with long-standing or sudden problems or changes in circumstances (Access Economics 2008).
Recent reports from organisations such as The Salvation Army and VicRelief Foodbank also illustrate the increase in individuals and families seeking crisis support. A summary of these findings is included in
Box 2.1.
The recently released
Australian Community Sector Survey 2009 (ACOSS 2009) illustrates further that demand for support and services in areas such as housing, crisis accommodation, mental health, drug and alcohol services, income support, aged and disability services, and education, employment and training programs have increased over the last financial year.
This survey found that some community services organisations are at 'breaking point' and having to turn away people.
While this survey was conducted prior to the global financial crisis, ACOSS (2009, p.2) reports that 'With organisations already reporting stretched resources and increasingly unmet demand for services, increased unemployment alone is likely to see organisations' capacity to meet this demand significantly compromised.'
Our consultations found that not-for-profit organisations that provide services in particular areas such as financial assistance, housing, counselling and relationship support are seeing an increase in demand for these services.
The demand for food distribution, especially in regional areas has also seen a sharp increase. While some areas such as food distribution and school breakfast programs appear to be well positioned to attract additional funding to support the increase in demand, there are many other areas that were already under pressure, including counselling, where NFP organisations are finding it difficult to cope with the rapid increase in demand for services.
As one mental health care practitioner stated:
The recession is adding greater strain to the already alarming and frightening youth suicide, depression, anxiety and wellbeing statistics.
Other NFP practitioners noted:
The major impact the downturn is having on [our organisation] is the lack of opportunity to provide services to Indigenous people requesting our services. We know these people are in dire need...but we have little or no funding for these areas.
Because we provide services to disadvantaged including the unemployed, our services are increasing.
Despite the challenges in managing the demand for services, most NFP organisations are not reducing their services (58 per cent) but are finding ways to still deliver their core services. It is still significant that 35 per cent of NFP organisations say they are reducing services as a result of the economic downturn (see
Figure 2.9).
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Where the impact is mainly being seen is in terms of delivery of new services. Nearly 60 per cent of those surveyed state that they are holding off on new services. Twenty-eight per cent are diversifying and tendering for services that are outside of core business.
Figure 2.9: Impact on Services 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=71.
An earlier research report also highlights this increase in demand for services. In October 2008, the Allen Consulting Group undertook a survey on behalf of the Victorian Council of Social Services (VCOSS) on funding and service requirements.
Survey participants were asked whether they thought demand for their services was likely to increase in the next year or two. The vast majority of respondents said they believed that it would, even though the full force of the crisis had not yet been experienced. Sixty-three per cent strongly agreed with this statement, 31 per cent agreed, 5 per cent were neutral and 1 per cent disagreed (see
Figure 2.10).
Figure 2.10: Do you agree with the following statement? 'More people will be needing my organisation's services in the next year or two' 
Source: VCOSS/Allen Consulting Group survey 2008.
Most organisations participating in the 2008 survey attributed the growing demand for services to the growing complexity of clients' needs. Stakeholders said employees were dealing with more complex issues than before, and the increasing pressure was being exacerbated by insufficient funding.
Growing complexity was seen to be a product of the ageing population and increases in mental health issues and drug and alcohol abuse.
As NFP organisations had trimmed administration personnel, managers were spending more time doing administrative work and thus had less time to participate in strategic activity, even though this is what the increasingly complex environment required.
While there are other factors influencing the demand for services, it is clear that the worsening economic environment will further exacerbate the demand for services over the next year or two.
Our research for this report also indicates that NFP organisations expect demand to increase even further in the year ahead. According to our survey results, eighty-three per cent of respondent organisations expect demand for services to increase over the next financial year (2009-2010).
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Box 2.1
Summary of Recent Reports from Not-for-Profit Organisations about Demand for Services Demand for services was already high before the economic downturn. As the following two examples show, the global financial crisis has resulted in further strain on not-for-profit organisations and the demand for services.
The Salvation Army expects that the economic downturn and resulting unemployment will mean more people in poverty, who in turn, will seek crisis services offered by organisations such as theirs. The Salvation Army currently assists over one million Australians who are in crisis each year. It anticipates more Australians in crisis over the next 18 months and is seeing some business people, who were previously donors, now needing their services and feeling 'overwhelmed by their debt levels'.
Research released in May 2009, that included a survey of 1,500 people who attend one of the Salvation Army's 40 centres, showed that many are worse off as a result of the economic downturn and pessimistic about the outlook for the next year. About half of those surveyed were unemployed.
Key findings include:
- 60 per cent of those surveyed believe they are 'worse off' or 'a lot worse off' as a result of the economic downturn;
- more than 40 per cent are 'pessimistic' or 'very pessimistic' about the year ahead;
- 22 per cent say they have experienced new family conflict as a result of their worsening financial situations;
- 54 per cent feel stressed or depressed about their situation; and
- 53 per cent have cut down on basic necessities and 58 per cent say they have cut down on luxuries.
VicRelief Foodbank released a report on 'Pushing the boundaries of hunger in Victoria' in December 2008, based on data relating to the 620 emergency relief agencies that it supports. It shows that demand for emergency food relief in Victoria has been growing over recent years due to factors including the drought and stress on related communities. In 2007/08, demand for emergency food support grew 30 per cent from the previous year. A survey of emergency relief agencies conducted in July to October 2008, showed that there is a wide variety of people seeking assistance, from those who are financially disadvantaged, unemployed, youth, homeless and with substance abuse.
VicRelief Foodbank reports that anecdotal evidence from some of its Melbourne-based agencies shows that there are a number of people who would be described as financially disadvantaged and seeking services as a result of credit debt. VicRelief Foodbank says 'this is a previously unknown cohort of people...- one which has presented increasingly over the past 12 months.'
Source: The Salvation Army 2009; VicRelief Foodbank 2009.
2.5 Staff and volunteers
Not-for-profit organisations, for the most part, are not making significant changes to staffing levels. NFP organisations appear to be absorbing staff cuts and looking to do 'more with less' or focusing on use of more part-time staff.
There are a number that have reported redundancies as a result of the economic downturn. As an example, Red Cross has made changes to its fundraising strategy and had to cut and realign staff positions, and Starlight Children's Foundation Australia has had to cut staff due to significant falls in funding (see
Box 2.2).
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Box 2.2
Examples of Staff Reductions in the No-for-Profit Sector An example of some recent announcements by NFP organisations include the following:
- The Red Cross announced it will cut 20 jobs as part of an overhaul of its fundraising and communications, that currently employs around 110 staff. Changes to its fundraising strategy have resulted in the organisation looking to realign its staffing levels. A further 50 jobs are expected to be cut with staff needing to reapply for the new positions. (Klan 2009)
- Starlight Children's Foundation Australia has reportedly cut 20 staff, out of 150 positions and looking to make significant cuts to services due to falls in corporate and event fundraising. In an emergency appeal letter, the Foundation's CEO said the organisation was 'facing an unprecedented financial crisis' and facing significant cuts to services. The organisation has forecast a drop of $2 million in revenue this financial year. (Klan2009; Starlight Children's Foundation 2009)
Source: Klan 2009; Starlight Children's Foundation 2009;
In response to our survey, over half to two-thirds of respondents report no change in full-time, part-time or volunteering staff. A quarter of respondents have seen a decrease in full-time employees and 18 per cent have seen an increase. Only a few have seen any significant increases or decreases.
The survey results of paid employees in administrative, field and head office areas are varied. While 22 per cent report a decrease in paid administrative staff, the results are mixed for paid field employees (15 per cent report an increase and 15 per cent report a decrease) and for paid staff employed at head office (21 per cent report an increase and 20 per cent report a decrease).
In terms of part-time employees, 22 per cent of NFP organisations report an increase in the 2008-2009 financial year. When analysing these results further, there does not appear to be any obvious trends. While some not-for-profit practitioners who participated in focus groups indicated a shift from full-time to part-time staff, this was not evident from the survey results.
While 63 per cent report no change in volunteer numbers, a further 28 per cent have experienced an increase. There may be some shift to further reliance on volunteers. However, this also reflects the view that there are more people volunteering, either as a result of changes to employee volunteer programs (companies encouraging staff to utilise downturn for volunteer purposes), or an increase in availability of volunteers because of company redundancies and unemployment.
Figure 2.9 illustrates changes to staffing levels as a result of the economic downturn, as well as expectations for the next financial year.
Figure 2.11: Impact of the Economic Downturn on Staff Current Impact 
Expectations for Next Financial year (2009-2010) 
Source: Centre for Corporate Public Affairs, Survey of NFP organisations 2009. N=70.
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NFP organisations report that demands on their employees have increased as a result of the economic downturn. For example, one NFP reported that staff now need to spend more time completing grant applications to meet the increase in service demand.
There is also more pressure from corporate partners and major donors to provide further justification of the partnerships and explanation of benefits. And NFP organisations report that they are spending more time meeting with donors in order to discuss the challenges facing their organisations. According to one NFP:
We are making sure our senior management team, board members and so on, are sitting down with major donors one day a month. So we are increasing face time.
Many NFP organisations expect no staff change for the year ahead (see
Figure 2.11). However, 27 per cent are anticipating a decrease in full-time staff. And 35 per cent expect an increase in volunteers.
This suggests that as NFP organisations continue to reduce costs for their organisations, full-time staffing costs will continue to be under review. A reliance on more volunteers to deliver services appears to be a more cost-effective measure during difficult economic times. This will put further strain on many NFP organisations.
Salaries of NFP staff have increased in recent times. We expect this is partly explained as a lag effect on budgets, as NFP organisations reported that they have had to increase salaries in recent years to attract staff to the sector. Just over half of NFPs surveyed say there has been no change, however, 43 per cent report an increase in staff salaries. For the year ahead, 58 per cent of NFPs expect no change. Twenty-seven per cent expect an increase in employee salaries, while 11 per cent anticipate a decrease.
In a separate survey question about training, 43 per cent of NFP organisations agree or strongly agree that in reaction to economic downturn, they have reduced training and professional development. A quarter reported a neutral response (i.e. no change) and 32 per cent disagreed that there has been any reduction.
Volunteers
As noted earlier, there has been an increase in the numbers of volunteers wanting to assist NFP organisations as a result of the economic downturn. NFPs attending focus groups report continued strong demand for volunteering opportunities. Not-for-profit organisations feel that they need to gear up for volunteers and create better volunteering opportunities. Corporate volunteer programs continue to place demands on not-for-profit organisation resources.
Some NFP organisations report that they are less able to support volunteer opportunities, a finding consistent with research into Victorian NFP organisations (Department of Planning and Community Development 2009a).
Volunteering centres are seeing a pick-up in demand from 'first-timers' who are volunteering and looking to complete volunteer courses. Some NFP organisations report they maintain waiting lists of volunteers. The Centre for Volunteering NSW reports it has been overwhelmed by volunteers - from people who are newly unemployed, to university graduates who are keen to contribute to the community and keep their skills relevant during the economic downturn (Horin 2009).
Twenty-eight per cent of NFP respondents to our survey report an increase in volunteer demand, and 35 per cent expect this to continue in the next financial year.
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Box 2.3
Snapshot Of Victorian Not-For-Profit Organisations And Their Capacity To Manage The Impact Of The Economic Downturn In 2009, the Office of the Community Sector in the Department of Planning and Community Development (Victoria) commissioned research on Victorian NFPs and their capacity to manage the impact of the economic downturn. Two short surveys were conducted with the same group of 18 not-for-profit community organisations, across a broad range of sectors. Following is a summary of the main findings.
January 2009 survey findings:
- 72 per cent report an increase in demand for services, mainly due to rising unemployment and increased financial stress in Victorian communities. Some of the other reasons included 'increased family violence', 'increased family breakdown' and 'reduced services from other organisations'. One respondent indicated an increase in referrals from other NFPs and government agencies such as Centrelink.
- 67 per cent report a decrease in funding, mainly due to falls in investment portfolios and donations.
- Strategies for managing the downturn include reviewing financial positions, evaluating programs and activities to assess what can be cut or deferred, collaborating with other NFP organisations, and having open dialogues with stakeholders and funders about the impact of the downturn. Victorian NFPs say they are also implementing strategies to ensure sustainability and considering collaborating with other NFPs.
- Half report that staff levels were unchanged, 16 per cent report a decrease and 33 per cent report an increase over the previous year. Others report a reduction in hours and freezing of positions. Volunteer participation appears to be stable.
April 2009 survey findings: The findings of the April 2009 survey illustrate that the impact of the economic downturn has intensified for Victorian NFPs. Note that the Victorian bushfires also occurred and put further pressure on some NFPs. For some organisations it has resulted in an increase in demand for their services, while for others there appears to have been some diversion of funds to support those affected by the bushfires.
Since the January 2009 survey:
- 65 per cent of NFPs surveyed report a change in their financial situation since the three month period. Of those, the majority reported a decline due to the economic downturn. Again, declines in investment portfolios (reported by 90 per cent of NFPs) and donations were contributing to their overall declines in income. Half of NFPs surveyed said that corporate sponsorships and philanthropic grants had also fallen over the January to April period.
- Most NFPs also reported an increase in demand for services, again due to increased financial stress in Victorian communities, increased unemployment and less services provided by other organisations. Financial pressure and anxiety was also a factor in increased demand for services. One respondent commented that homelessness was increasing among aged and unemployed which was creating additional demand.
- There were mixed results on staffing numbers, as some NFP organisations had made cuts, and others had increased staffing levels to cope with increased demand. Some Victorian NFPs report an increase in volunteers.
- Strategies to manage the impact of the economic downturn remained similar. However, there was an increase in NFPs that were implementing strategies to maintain sustainability, as well as considering other opportunities that might be available for their organisation. NFP organisations may have been more concerned in January as there appears to be much lower responses to many areas that were being cut in that month, including existing programs and new programs, as well as staff training and hours.
Source: Office for the Community Sector, Victorian Department of Planning and Community Development 2009a and 2009b.
2.6 Other influences or changes that are currently affecting not-for-profit operations
While this report focused on research on the impact of the economic downturn on NFP operations, we also assessed whether there were other significant influences or changes that were affecting NFP operations.
Following are some of the responses to an open-ended survey question about these other influences or changes:
- increases in demand for services over past years, but core funding from government has remained unchanged;
- burnout of highly skilled employees continues to be an issue for the sector;
- diversion of funds to Victorian bushfires and other disaster relief;
- loss of government tenders and contracts has impacted on ability to provide community services as profits generated were used to support these services;
- decrease in capability to access available philanthropic funds;
- increased borrowings for existing projects;
- withdrawal of government funding;
- high rents for commercial space; and
- complexity and bureaucracy in dealing with government-required governance.