Charities may struggle in wake of COVID-19 leading to job losses, closures

A new report launched by Social Ventures Australia (SVA) and the Centre for Social Impact (CSI) forecasts that more than 200,000 jobs in the charity sector could be lost as a result of the COVID-19 crisis if financial supports, such as JobKeeper and lease and loan deferrals, come to an end in October.

The report, Will Australian charities be COVID-19 casualties or partners in recovery? A Financial Health Check, models the potential impact on the financial health of Australia’s 16,000 registered charities with employees (excluding those run purely by volunteers) to better understand the effects and identify systemic solutions.

The authors of the report describe charities as strengthening the fabric and functioning of Australia’s society and economy with wide-spread benefits to education, health care, sports and recreation, aged care, religion, arts and culture, animal protection, and environmental protection.

“As a community, we especially rely on charities during crisis. Charities also employ 1 in 10 of our workforce. Stronger charities will be well positioned to support the community, accelerating our collective recovery. But weakened charities, forced to cut jobs and services, will compound the collective challenges we face.” the authors said upon the release of their research.

Their modelling of 20% revenue cuts to the charity sector found that 88 per cent of charities would immediately be making an operating loss, and 17 per cent would be at high risk of becoming no longer viable and closing their doors within six months, even when taking their reserves into account.

The cost-cutting and organisational closures in this scenario would result in more than 200,000 jobs lost as a result of the crisis, as well as reducing the ability of charities to provide services that Australians depend on.

Calls for greater focus on COVID-19’s effect on charities

SVA chief executive officer Suzie Riddell has called for their to be greater focus on how the COVID-19 outbreak will affect charity organisations in the long term.

“Our financial analysis shows that thousands of charities are at risk of closing and more than 200,000 jobs lost at a time when we should be pump-priming charities to aid the recovery”.

“Charities provide services that people, communities and government rely on. They are the social glue in our communities. Without thriving charities, our productivity and wellbeing is at risk,” Riddell said.

“They deliver vital services on behalf of governments and taxpayers. As a community, we also rely on charities during a crisis and to support a recovery – we’ve seen this over the past months, confronted by bushfires, a health pandemic and financial turmoil. That’s why almost half of our charities identify the general community in Australia as their main beneficiary.”

“SVA works with hundreds of charities every year to help them increase their social impact, structure their organisation to make them more effective and ensure their financial viability. They are going to need ongoing support not just to ensure their survival but to maximise the impact of their contribution to our recovery.”

The end of Job Keeper could signal the end of some charities

CSI chief executive Professor Kristy Muir said that most charities already run with very tight margins and have little in reserve to fall back on in a crisis, which is why we need sustainable financial models to support the sector and continue delivering essential services to Australian communities.

“For Australia to thrive, charities need financially viable business models (not just revenue growth) in the recovery phase and into the future. Stronger charities will be well positioned to provide the services needed to support the community and assist to accelerate our collective recovery.

“This impending crisis of an ‘October cliff’ could disrupt the provision of services to some of Australia’s most vulnerable, including those directly affected by the COVID crisis.”

Chair of Community Council for Australia Reverend T­im Costello said the government needed to look not only at the loss of jobs within the charity sector but also at the more significant effect of the loss of their output.

“While this report highlights how many jobs are at risk, we are urgently asking government to understand that this is bigger than jobs alone. The charities sector is essential to create stronger communities. They advocate and support the needs of Australians. If the role of charities is diminished, it will heavily impact our communities.

There is also a big personal dimension to the job losses in the charities sector. Not only does it mean someone with skills is no longer employed supporting their community, it means there will be less capacity to offer support to the many people who sit on the outside of the lines of eligibility for support drawn by governments,” Reverend Costello said.

Suggestions for government action to help charities sector

Some of the suggestion actions needed to help the charities sector is an extension of the Job Keeper program based on charities individual needs, so they do not have to take drastic action when the program ends. The authors argue the government needs to put forward a “ramp” rather than a “cliff” when it comes to ending the program.

The report also suggests the creation of a one-off “transformation fund” to encourage charities to adapt to changing circumstances and new operating conditions, while also reviewing the amount of government funding provided for services which are facing unprecedented demand.

Continuing higher payments for those who unemployed is also recommended, the authors also say reducing payments for unemployment to the Newstart amount will have a great impact on many services with the charity sector.

Encouraging philanthropy and simplifying laws around large donations, and providing pathways that encourage more philanthropy is also one of the key recommendations.

CEO of the Australian Council of Social Service Cassandra Goldie echoed the need for ongoing support saying Australia’s road to recovery would be a long one and charity organisations were needed now more than ever.

“The community sector is vital at all times but especially in crisis. Community sector charities must have the resources required to meet the increased demand for their important services, including domestic violence and homelessness services.  While the JobKeeper payment has been welcome, the road to recovery will be long and we must ensure those reaching out for the support of community service charities get the help they need to rebuild their lives.”

“The COVID-19 pandemic, which presents both a health and economic crisis, has had a twofold effect on many community sector charities. The pandemic has increased the need for some services delivered by charities, such as food relief and mental health services. Other services have had to adapt to new virtual modes of operation. At the same time, the crisis has reduced the revenue and capacity of many organisations, with decreased donations and fewer people being able to volunteer,” Goldie said.

OIP Staff

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