Analysis of the financial data of selected Queensland not-for-profit organisations for the financial years 2019, 2020 and 2021 show that Queensland’s not-for-profit sector is likely suffering from significant financial pressure. This pressure is a result of increasing costs of inputs – 19% of total cost increases – in the context of an economic and funding framework that places considerable pressure on service supply and, therefore, on income.
Indeed, many not-for-profit social service organisations are challenged in terms of sustainability by what might be termed a malevolent cycle, where poor job quality impacts staffing, in turn impacting service capacity, thereby reducing income while, at the same time, infrastructure and other elements must continue to be paid for.
Any increase in costs without a commensurate increase in income will place the sector under considerably more financial strain at times when its profitability is already compromised. For instance, in 2021 43% of Queensland’s human services charities returned a profit of less than Health CPI, while 37% made a loss.
Key findings related to costs impacting the cohort during this period include:
- Once adjusted for service growth, superannuation and the portable long service leave (PLSL) levy changes impose significant unfunded cost increases. In some cases, labour on-costs outpaced both direct labour and service income growth. For this cohort, total labour costs increased by 30% between 2019 and 2021.
- Staffing vacancies and low employee retention have exacerbated costs relating to staff deployment, with training increasing by 49% and recruitment costs increasing by 15%. This raises concern around the sector’s capacity to continue to deliver critical services within the current funding rationing regime.
- Vacancies and retention issues have seen a 32% increase in the engagement of agency staff across the cohort to ensure continuity of services. Another component of staffing issues explored was the significant reduction in volunteering capacity across providers.
- Other key cost increases include:
- Quality control (increase by 21%)
- ICT costs (increase by 29%).
This study was funded by the Queensland Council of Social Service (QCOSS). It was undertaken by Professor David Gilchrist and Ben Perks of the Not-for-profits UWA Research Team at the University of Western Australia.
The Not-for-profits UWA Research Team is a multi-disciplinary academic group focusing on developing research outcomes that are intended to meet the needs of Australia’s Not-for-profit and charitable organisations, policy makers, governments and commentators. These research outcomes are intended to be industry-ready – that is, they are tools and commentary that are based on high quality research while being focused on implementation and practical supports.