Issues impacting the not-for-profit sector
Funding the sector
We continue to see rising demand for not-for-profit services across community services, welfare, mental health and domestic violence support. The increasing gap in social and community housing has compounded these challenges for service providers. Aged care, disability and community services are also navigating financial viability pressures as tighter fees for service arrangements and rising costs put a strain on organisational reserves. Combined with increasing interest rates, inflationary pressures, a significant national budget deficit and greater geopolitical risks, the stress on the public purse and private philanthropy will continue to take centre stage and be felt across the sector.
Appropriate financial reporting for stakeholders
The Australian Accounting Standards Board (AASB) has historically issued multiple specific standards to support consistent financial reporting across the not-for-profit sector. Grant Thornton has been heavily involved with the sector, regulators and standard setters to formulate and provide feedback on financial reporting requirements, which aim to provide appropriate level of consistency, clarity and transparency to stakeholders. Not-for-profit financial reporting specialists within our audit team can assist organisations navigate statutory reporting requirements.
Upskilling, rewarding and attracting talent
Competing for human capital while operating under restricted funding and in a crowded philanthropic space is one of the sector’s biggest challenges. Not for profits continue to drive their mission-based values proposition to attract staff, while using critical fringe benefits and salary packaging options to attract and retain talent. Federal and State Governments have initiatives to help address these shortages, including increasing choice and workforce participation for people living with disabilities, investing in physical and mental health avenues, increasing the migration cap, investing into fee-free TAFE courses and university pathways, driving reforms in childcare funding, parental leave and return to work support.
Technology as an enabler
A growing number of Not for Profits are using technology to find operational efficiencies and connect with their clients and stakeholders. By delivering personalised experiences to members, donors, volunteers and corporate sponsors via cloud technology, digital infrastructures and payment methods, these systems have driven loyalty, engagement and advocacy. However, this also means organisations slower to respond can quickly be left behind. The pandemic has been a clear example of that, with an acceleration of change beyond what we could have expected.
Governance for impact
Ongoing assessment of governance obligations and risk management frameworks continue to be a focus for regulators and stakeholders. Expectations are increasing around monitoring and reporting of clinical, employment and service-based risks, related party transactions, conflicts of interest, data security breaches and more. Boards are constantly reviewing the skills and experience mix, including the extent of lived experience, ensuring there’s sufficient accountability and diversity of thought at the Board table. Our risk and audit teams are well versed with helping not-for-profit organisations navigate the intricacies of governance.
Cyber security issues
With recent data breaches highlighting the importance of cyber security and operational resilience, the issue of data protection has never been more prevalent. It should be considered not only from an IP and data confidence perspective, but also from a reputational one, with increased scrutiny and loss of both public and stakeholder confidence often a result of such incidents. Having a strong strategy in place to prevent, minimise and rectify data and cyber breaches is more crucial than ever. To be on the front foot, it’s important to consider two scenarios that could separately or simultaneously occur: loss of service and release of sensitive information.
Managing payroll risks
Payroll and superannuation have a high risk profile, particularly for organisations with a variety of employee agreements. Funds paid are governed by complex and State-specific regulatory requirements. Coupled with legacy payroll systems, this often results in a complicated payroll ecosystem to navigate to ensure your employees are remunerated correctly. Proactively assessing whether you’ve correctly applied industrial relations obligations is key to ensure you identify issues and minimise the risk of Government penalties.
Navigating tax governance and opportunities
Operating under diverse and multi-disciplinary business models, Not for Profits present a high degree of complexity in the application of tax laws. Our industry-leading not-for-profit tax specialists are well versed at navigating income tax exemption reviews, new entrants, FBT, GST, land tax, stamp duty and other taxes at both Federal and State levels.
Increased focus on ESG and sustainability transparency
Environmental, social and governance (ESG) and sustainability considerations are high on the agenda for not-for-profit organisations. As Government, donors, members, and other stakeholders pay greater attention to how organisations conduct their operations, it’s critical to understand the importance of ESG to your stakeholders. This includes managing stakeholder expectations, Board fiduciary duties, risk and operational planning, and managing reporting around regulatory changes. While adoption of ESG specific reporting is currently in progress across different jurisdictions, the key for organisations is to take stock of existing objectives, outcomes, and relevant data points, and consult with key stakeholders.
