Many of the country's not-for-profits will soon be at breaking point, as they grapple with legislative changes, competition for staff, and stiffening economic headwinds.
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A new report by consultancy Grant Thornton into the sector, which employs 145,000 people and generates about $21.1 billion in annual revenue, uncovered some major gaps in organisations that would ultimately prevent them from delivering on their purpose.
Its survey shows that financing organisations and attracting and retaining staff were among the top concerns keeping NFPs up at night.
Funding had consistently been the biggest challenge NFPs faced since reporting began in 2003.
But it was issues that NFPs were less concerned about that were causing alarm.
Grant Thornton partner and co-leader of not for profit services Barry Baker said organisations' understanding of a raft of recent legislative changes was "unexpectedly low".
"For example, nearly a quarter of Incorporated Societies surveyed haven't addressed the impacts of the newly passed Incorporated Societies Act 2022 which is intended to clarify the responsibilities and risks to organisations' governance groups, and a third haven't considered the new reporting obligations required."
Non-compliance with the act carries financial penalties, or in the most extreme cases, prison terms, he said.
NFPs were also slow to adapt to changes that were made to the privacy laws in 2020 which requires organisations to have strong policies in place to protect personal information, he said.
"It impacts all NFPs, but well over a third haven't updated their privacy policies, and even more alarming is the 40 percent of entities in breach of the Act by not appointing a privacy officer."
It was surprising to find that NFPs were adding this responsibility to the workloads of office managers and even receptionists, Baker said.
Cyber security was low-down on NFPs' priorities, but Baker said the fallout from a breach was enormous, as it would almost always require significant time and money to rectify the issue for organisations that had not invested time and money into their systems.
"That's why it's surprising to find only 43 percent of NFPs invested in this over the past two years and 27 percent plan to invest in it over the next two to three years."
Staffing issues
The pressure to secure and retain workers was becoming a burgeoning issue for NFPs, with 43 percent saying it was among the most significant challenges they faced.
"The historic environment when passion made up for shortfalls in remuneration to full maker levels is changing," the report said.
But employees were now demanding market salaries, which could see NFPs lose staff to the commercial sector, it said.
Baker said there was no easy for solution for NFPs wanting to hold onto staff.
"Corporates, and even government, are now offering things that NFPs used to differentiate on, things like flexible working hours, working from home, workplace culture, ability to make an impact on life and society.
"What we used to call the 'love factor' that teams work for NFPs for has disappeared."
NFPs would have to become a lot more commercially focused to be able to offer the pay that workers wanted, he said.
The report said many NFPs were considering setting up a trading operation or partnering with a social enterprise to boost funding, but this was not suitable for all organisations.
Baker was concerned rising inflation would result in lower donations, which would prevent NFPs from being able to help people when they needed it most.
Looking ahead, there was no doubt the sector would face troubled water at some stage, but those who had planned and invested in the future would be the NFPs that would be able to continue to do good work, he said.
"They just need to make sure their oxygen mask is fitted before they can help others."
