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Funding For 85% Of NZ Not-for-profit Entities Impacted By COVID-19

Results of a recent Institute of Directors poll show that 85% of board members on not-for-profit organisations say COVID-19 has moderately or significantly affected their funding.

The ‘pulse check’ conducted in the first two weeks of July looked to get insights into changes IoD member directors on not-for-profit sector boards have observed so far this year.

Half (51%) our members serve on not-for-profit boards. We asked them how their NFP organisation was doing as a result of COVID-19,” IoD general manager Governance Leadership Centre Felicity Caird said today.

“There are 115,000 not-for-profit organisations in New Zealand – they contributed $12.1 billion in time and skills to our economy in 2018. They are a significant economic force with unique challenges and issues to deal with.

“They are doing social good work for passion or for purpose and often rely on donations, grants, fund-raising, volunteer support, and bequests to stay afloat. During economic uncertainty cash flow can be severely compromised and there is intense competition for limited resources. Governing includes making difficult judgement calls.

“Through our July pulse check it turned out that most (85%) directors who responded said their NFP organisation’s funding had been impacted by the COVID-19 pandemic – only 15% said their funding had not been affected. While funding can be a perennial challenge for many boards in the NFP sector, how this will shape up over time will be top of mind for all board members.

“While funding issues have hit many, 43% of our NFP directors said demand for services had increased; 47% of directors said demand for their NFP services had remained the same. Only 10% of directors said their organisation had experienced a decline in demand.

Ongoing uncertainty

One IoD member with insight into a wide range of philanthropic entities and professional associations, Craig Fisher, said the impacts of COVID-19 had been similar in the not-for-profit charity sector to the commercial sector – variable across different entities and overlaid with a high degree of ongoing uncertainty.

“Some not-for-profit entities will do better in this environment as it may put more focus on their area – for example, charities involved with food and mental health,” said Craig Fisher, an Auckland-based accountant and Chartered Member of the IoD.

“Charities and NFPs continue to be supported by donors but unlike the GFC (Global Financial Crisis) which saw very few NFP charities fail, this economic impact will be greater. Some may not be able to survive this time.

“This period has highlighted the need for not-for-profit boards to be very familiar with their financial position,” .said Wellington-based Chartered Member of the IoD Bruce McGregor. “Good governance, board reporting, and forecasting has never been more important. The need to build reserves should be given a high priority.

‘Skinny budgets’ common in not-for-profit organisations made having a ‘rainy day fund’ even more important in the volunteer sector, according to Otago-Southland IoD member Shelley Chadwick of Dunedin.

“This isn't easy when there is little leeway in budgets. Funding availability is likely to become tighter during the coming year and there will be more demands on trustees and committee members.”

More detailed analysis and comment here: For passion and purpose – pulse check of NFP organisations

*This IoD pulse check was conducted during the first two weeks of July 2020 and had 163 respondents.

About the IoD

The IoD is a NFP and New Zealand’s leading organisation for directors and at the heart of the governance community. We believe in the power of good governance to create a strong, fair and sustainable future powered by best practice governance. Our role is to drive excellence and high standards in governance. We provide governance resources and tools to support and equip our members who lead a range of organisations – listed companies, large private organisations, state and public sector entities, small and medium enterprises, not-for-profit organisations and charities.

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