Four out of five community charities struggled with increased demand throughout the pandemic

A new report by the Centre for Social Impact (CSI) and Social Ventures Australia (SVA) outlines recommendations for sustainable government support of the charity sector - following findings that four out of five community sector charities struggled with increased demand for services during the pandemic, and emergency funding support favoured some kinds of charities over others.

The Partners in Recovery: Moving beyond the crisis? report also found that despite generous government and philanthropic support having a positive effect on charities overall, certain charity services only just held on financially during the worst of the crisis, while others had stronger financial performance from temporary emergency funding.

Aged care and income support charities were identified as the most financially exposed groups – with more than half (54.9%) of aged care charities and 48% of income support charities making a loss or small surplus in 2021.

This is contrasted to charities that were far more likely to make a significant operating surplus (15% or more) in 2021 – leading with 44.2% of charities that focused on religious activities and 41.2% of charities that focused on emergency relief charities.

Overall, charities performed better financially than was feared, thanks to prudent management and government support, with an increase in proportion of the sector making a surplus coinciding with the peak of temporary JobKeeper payments – 76% in 2021 and 77% in 2020 up from 66% in 2019.

The Assistant Minister for Competition, Charities and Treasury, Hon Dr Andrew Leigh MP, said this fifth instalment in the SVA and CSI Partners in Recovery research series is important to understand the unique social and economic contribution charities make to Australian society and how they are affected by service disruption, falling income, rising demand and higher operating costs.

“Australia’s remarkable charities do vital work in our communities – helping the vulnerable, advocating on environmental issues, encouraging the arts, and much more. But recent years have been tough. The Partners in Recovery reports help us understand the challenges and opportunities, and provide a valuable roadmap for building a reconnected Australia.”

CSI Chief Executive Officer, Arminé Nalbandian, said the recent focus on disaster recovery is important but cannot come at the exclusion of funding for other essential services provided by charities and those services that build community connection, cohesion and resilience.

“Financial support for the sector during the pandemic was welcomed but that support has now ended and there are many new headwinds for charities – including high inflation, a significant drop in volunteer numbers, and increased demand for critical programs like homelessness services and food relief as people respond to rising cost of living – we need to invest in charities, now, to meet the needs of today and create the vibrant and resilient communities we want to live in.”

SVA Chief Executive Officer, Suzie Riddell, said as service demand continues to outpace the capacity of many charities, greater charity representation is vital for future policy-making decisions – especially since Australian charities employ more people than the mining and manufacturing sectors combined.

“Charities play a crucial role in our community – helping and employing millions of people in Australia – and they need a seat at the table in any upcoming reforms that impact them and their beneficiaries, especially since the people that charities serve are often those who experience the most vulnerability and exclusion.”

The report outlined concrete steps the government should be taking to ensure charities are sustainable into the future and resilient to cost-of-living pressures so they can deliver high-quality outcomes – taking into consideration the sector’s unique constraints and barriers:

1. Provide full funding for contracted services delivered by charities to meet service demand in the community, covering the full costs including indirect delivery costs
2. Make fundraising and philanthropy simpler to increase giving
3. Build workforce capability and incentivise volunteering and social participation
4. Ensure charities have an active role in policy-making, including in economy-wide settings and major reforms like those currently taking place within aged care and childcare
5. Invest in systems and research to better measure and evaluate charity sector impact
6. Alleviate demand for charity crisis services through targeted investments like increasing the permanent rate for JobSeeker and prioritising prevention and early intervention services