Governance and resilience in the wake of the COVID-19 pandemic has been challenging for Australian not-for-profit organisations, including adult and community education (ACE) providers. “The COVID-19 pandemic had an immediate and profound effect on the social sector. Funding and resources dried up, with 50% of charities reporting a loss of revenue and volunteer hours dropping by two-thirds. Many organisations had to make a sudden operational shift to a remote service delivery model…. Social purpose organisations were caught in a challenging dynamic, needing to deliver more services, in a fundamentally different way, with less financial support,” says upcoming report from Social Ventures Australia (SVA).
The report notes that long-term structural challenges had already weakened the for-purpose sector, with most “already in a precarious financial position before the pandemic. Research in mid-2020 by SVA and the Centre for Social Impact (CSI) estimated that one in seven NFPs were at risk of becoming unviable due to the pandemic.
Themes
The Paul Ramsay Foundation supported the establishment of a taskforce to understand the immediate financial and operational impacts of COVID-19. Three key themes emerged:
Disruption to work – organisations delivering on-the-ground services were often forced to change their approach or found themselves unable to deliver what they had promised. Examples included a randomised controlled trial evaluating the effects of an intervention in schools having to scrap their data collection and start over, and several social enterprises had their entire business disappear almost overnight when tourism stopped and cafes were closed.
Financial uncertainty – the funding landscape underwent a sudden upheaval, and organisations were no longer certain about their ability to find support for their work (especially from new funders) or in the case of social enterprises, a market for their offering. For example, a small organisation that relied on philanthropic funding suddenly found all of its proposed partners drawing back from their conversations and faced a sudden funding cliff.
Strategic opportunities – the pandemic caused unprecedented shifts in the social and political landscape. For several partners, this created once-in-a-generation opportunities to further their mission and create social change.
Key Lessons
The research undertaken illustrates the importance of resilience and vulnerability for the social sector in the face of disruption. They identify six lessons – all of which have direct and deep applicability to Australia’s not-for-profit adult and community education providers
Vulnerability
1. Funding mix is a key predictor of vulnerability: “SVA’s Partners in Recovery: Financial Health Check identified that many Australian charities have low reserves, significant funding constraints, rising costs, and a lack of discretionary funding to invest in organisational capability. Government funding was relatively stable through the pandemic, especially for organisations that were part way through a multi-year funding agreement. However some organisations faced significant challenges with delayed renewals or funding negotiations. There is also ongoing uncertainty about how this will play out over successive federal and state government budgets as the pressure to reduce COVID-related debt increases.”
2. Regular analysis helps to understand the vulnerabilities: “It is rare in the social sector for organisations to deeply investigate or analyse their finances and operations to understand their own vulnerability, or for funders to do this with grantees…. Robust due diligence (a review of finances and operations) can be of great value to provide real insight into how vulnerable organisations are to a crisis. Vulnerability is not just … being forced to close. It is also the risk of … having to substantially reduce impact, serving less people or providing fewer services.”
3. Grant funding can create unique vulnerabilities: While “having a significant proportion of funding secured with grants can be a real strength, managing the grant and the funder relationship presents challenges for organisations in terms of ongoing financial sustainability, exacerbated by the COVID-19 pandemic…. The ability to properly fund its indirect costs and invest in back-office support is especially important in times of crisis.”
Resilience
4. Agility is a protective factor: “One of the common elements that separated organisations that thrived from those that didn’t was their agility and the ability of their leadership to act decisively. Being able to respond quickly protected organisations from the worst of the effects of COVID-19 by allowing them to swiftly reduce costs, shift focus, or search for additional funding. It also made them more likely to take advantage of opportunities that presented themselves. Many leaders had to make tough choices about retaining staff, continuing to provide services, or investing into digital delivery. An agile organisation necessarily requires strong and decisive leadership. The pandemic was a crucible for leaders who were forced to make swift decisions to protect their teams and their impact.”
5. A crisis creates opportunities: “The pandemic upended society and led to dramatic changes in the Australian social and political landscape. While this has led to many trials for the social sector, it also presents opportunities for organisations with the resources and/or will and expertise to grasp them…. Changes to the way governments engaged through the pandemic has allowed organisations to have unprecedented access and opportunities for influence…. Many industries were changed by the pandemic, and it took fast thinking by organisations to identify and pursue new opportunities for growth. Digital opportunities were identified but often as a stopgap to replace in-person services, while changing attitudes to cleanliness, health and exercise, and transport created more subtle chances for increased impact.”
6. Organisational capability needs to be strengthened: “Some critical capability needs … have been exacerbated by COVID-19.” These include strengthening leadership capabilities, “investment in leadership development, specifically in change management, technological capability, advocacy, and stakeholder management”; improving business model sustainability – with almost half of NFPs “carrying less than six months of operating reserves and organisations experiencing greater operational and financial constraints than before the pandemic, there is an increasing need to clarify strategic priorities, explore diverse financing options, build internal capabilities and consider partnerships/mergers.” Essential components included shifting to online delivery, supporting workforce wellbeing, and better enabling collaboration and partnerships.
More information
Read the full article in SVA Quarterly. A full report with recommendations will be released later this month (April); click here to order a copy.
