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The majority of Australian Not for Profit Board Directors do not have the financial literacy skills to meet the changing challenges of the future according to the findings of the Grant Thornton Financial Literacy Survey.

imagesMJSNTCRQThe Financial Literacy Survey  in collaboration with Pro Bono Australia set out to understand the ability of NFP senior managers and Board Directors to manage the financial demands and remain sustainable under the NDIS.

“The results of the survey clearly indicate that there is a need to improve the financial literacy of Not for Profit Boards, particularly to deal with the challenges of the future,” Simon Hancox said.

Furthermore 60 percent of boards did not respond with a belief that they have the skills to handle future financial challenges, with only 20 percent committed to investing in governance training.

It’s a ‘we know it works, but we still won’t do it… we’d rather risk our organisation.’

Future Sustainability of NFP in a Consumer Driven Market

In addition to this lack of financial literacy many NFP’s are structurally top heavy and have significant infrastructure investment reliant on ongoing funding that will cease to exist under the NDIS.

Disability service providers who don’t adapt from a ‘funding’ model to a consumer driven business model face oblivion, warned leading Brisbane NFP legal specialist Paul Paxton-Hall Lawyers.

Those who have not already adapted are susceptible to demise unless they ‘rapidly scale up, merge or find another way to survive’, they caution.

The NDIS will be a consumer driven market that typical businesses are modelled on, but for many NFP organisations accustomed to reliable contracted block funding, a shift to a consumer pays model could spell dire cash-flow and financial sustainability consequences.

shopping-street-579079_640The Department of Communities have advised that under the NDIS service providers will no longer be contracted by the Queensland Government, instead they will operate in a ‘competitive market environment’ where consumers will buy supports directly from providers they choose for themselves in the same way they make other consumer choices.

‘In this open, competitive market, providers will need to be responsive to the needs of consumers and offer high quality services that people with disability will want to purchase.’

Control in service delivery will be held directly by consumers and will no longer be dictated by the constraints of departmental contract arrangements with pre-selected organisations.

Not-For-Profit Financial Flexibility and Service Quality

Peak body chief executive Ken Baker of Nation Disability Services believes that some NFP’s may struggle to afford to deliver quality supports and services under NDIS.

Some organisations have already identified that they will not be able to afford to provide direct support under the NDIS pricing model and have begun partnership discussions with experienced organisations that can, without compromising on the quality of supports delivered to consumers.

Paxton-Hall outlines the UK example of NFP’s future sustainability. “Before their new system was implemented, 95 per cent of the services providers were Not for Profit whereas now it’s completely flipped and 95 per cent of providers are for-profit businesses,” he said.

Businesses generally have to compete and deliver the best value for money to their customers regardless of industry, while not having the luxury of tax benefits or relying of donations or additional funding to prop-up front office, top heavy management and marketing expenses.  This makes astute with investing in core areas, future planning and focusing on services and the people who pay for them. 

Whatever the future of disability services in Australia, the survey highlights the need for NFP’s to improve their financial and business accruement if they are to continue in our modern day customer driven service transformation.  


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Source documents

July 16, 2015

NFP Boards Lack Financial Literacy Skills required for the NDIS

The majority of Australian Not for Profit Board Directors do not have the financial literacy skills to meet the changing challenges of the future according to the […]