Financial sustainability key issue across the NFP sector

The Australian Institute of Company Directors (AICD) has just released its 6th national NFP Governance and Performance Study outlining what is happening in the community and health services segment of the NFP sector.

Financial sustainability remains the key issue across the NFP sector. This specifically relates to maintaining or building their income, diversifying and increasing income sources and managing costs.

This year for the first time they asked directors to rate the efficiency of their organisation and the sector in general. There is a very large disconnect between how directors view their own organisation as opposed to the sector. 69% believe their own organisation is either mostly or highly efficient, however only 38% believe the same is true of the sector generally. The authors observed that government policies are influenced by this perception and appear to have made the assumption that opening markets to competition will improve service and reduce costs. If this assumption is not correct, there could be significant consequences for both services users and government budgets. (p9)

The survey again looked at mergers and based on the experience of a number of directors’ whose organisations are going through the process of merging or have completed the process: Mergers are complex, costly and time consuming and not guaranteed to succeed......increased discussion of mergers is making them “trendy” or creating the impression they are a “panacea”. (p16)

They have also drawn together 13 practical tips for a successful merger – not the ones commonly found in the textbooks. These are based on observations from directors who have been through the experience in the last 12 months.

The research also suggests that how the sector perceives its relationship with Government has changed little since the 2010 Productivity Report Contribution of the Not-for-Profit Sector was released. The AICD Study found that director’s scored the Commonwealth Government at 4.6 out of 10 for understanding of the Sector concluding that:

A more mature and constructive relationship is required between the sector and the Commonwealth Government (p20)

The research also highlights the continued improvement in the Sector’s governance.  There is a strong belief (84% of directors) that governance across the sector has improved over the past 3 years, their concerns directed around strategy development and implementation.  It also shows that we are leading board diversity on all levels, although there is more work to be done.

Whilst this is a national study focussing on the Sector’s relationship with the Commonwealth Government the observations apply equally to the NSW Government and interestingly, support the relevance of several of the recommendations in the NCOSS Fair Deal for Community Services campaign.

The report can be found at 2015 NFP Governance and Performance Study