NFP Sector Facing Funding Crisis

CCA calculations show that the NFP sector will be facing tough times, as some funding sources will take serious hits from world governments’ responses to the coronavirus outbreak.

The biggest short-term hit is from the closure of gaming machine venues under Level 3 and 4 of the COVID response. Almost $30m are distributed from the profits of those each month, and even after these will be allowed to operate again, gaming machine societies have to claw back their ongoing overheads from the time when there was no revenue. As a conservative estimate there will be $75m missing from funding for the sector in 2020 from these sources alone. Hardest hit by this will be sports clubs.

The former Community Trusts (Rata Foundation, Foundation North, Wellington Community Trust etc) are affected by a sudden reduction in their investment assets, estimated to be at least 15%. This will affect distributions from these Trusts from next year onwards and creates a one-off budget hole of more than $8m for these Trusts. In a low-interest environment, investment returns will dwindle further, resulting in an additional estimated $7.5m annual loss in distributions to community groups from these sources.

Organisations not accessing funding from these sources will nevertheless be affected, as there will be increased competition for the remaining funds.

Income from general donations for NZ-based causes is also expected to be much reduced, as households will have less disposable income, and investment returns of privately run charitable trusts decline. The larger charities are already advertising for donations to help mitigate the effect of COVID 19 in poorer countries, and it is expected that a larger share of donations than usual will go overseas or to frontline relief such as food parcels.

Not-for-profits should review their budgets and assess how these trends are likely to affect them. They should not assume that they can fill funding gaps by simply applying for more from a different funder.

 

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