Study takes pulse of not-for-profits’ financial health

The ICDA Spotlight Report: Not-for-profit Finances reveals 54% of organisations are in good financial shape, whereas of the “battlers”, 31% are “just breaking even” and 15% are struggling.

The Institute of Community Directors Australia’s latest Spotlight Report – based on a national survey of 1878 senior community leaders – examines the state of the finances of not-for-profits and reveals distinct trends about which groups are faring well.

Key findings include:

• Groups whose board members have a solid knowledge of the finances are more likely to be in better shape
• Sports and recreation groups have better financial health, while arts and culture groups are the most likely to be battling
• Organisations with annual revenue less than $50,000 are more likely to struggle than those with a bigger turnover
• 40% of leaders say their board doesn’t have an adequate understanding of the finances
• One in three organisations is now collaborating to cut their admin costs

The report also found that many groups are involved in IT overhauls. About 20% had conducted a major IT project in the past year, while the same proportion planned one in the coming year.

The study shows significant variation between sub-sectors of the not-for-profit sector too.

For instance, community development organisations are more likely to have collaborated to cut costs, while bigger organisations are much more likely to launch IT revamps or lay off staff – including the CEO.

And our analysis found that groups struggling financially are more likely to have replaced the CEO and other staff.

The Spotlight Report series analyses the views of not-for-profit leaders who responded to ICDA’s national Not-for-profit Governance Survey 2019. The resulting studies are produced by Our Community’s Innovation Lab. Past Spotlight Reports have addressed fraud and cybercrime, board and CEO performance, the role of the chair, and not-for-profit impact and data.

ICDA is releasing insights in stages, with the full release of all data late this year.