Australian non-profits facilitated over $220 million in community grants, yet most lack financial reserves.
What’s happening: New research from the Australian Communities Foundation reveals that just one in four Australian not-for-profit organisations feel financially stable with adequate reserves to sustain them long-term.
Why this matters: Without financial resilience, NFPs struggle to plan strategically, respond to community needs, and deliver services consistently despite growing demand.
Australia’s not-for-profit sector is grappling with a significant financial stability challenge, with new research revealing that only one in four organisations feel secure about their long-term future.
The NFP Resilience Report, conducted by the Australian Communities Foundation, surveyed 240 organisations across Australia to understand how they manage financial sustainability whilst meeting growing demand for services.
The findings paint a picture of a sector stretched thin, with high dependency on short-term grants creating ongoing pressure on NFP leaders.
Variable income creates pressure
The research found that 60 per cent of organisations rely primarily on short-term project-based funding, requiring constant reapplication cycles that divert resources from core mission work.
“So many of these organisations rely heavily on project-based income and face increasing competition for philanthropic dollars,” says Andrew Binns, CEO of the Australian Communities Foundation, which conducted the research. “With 25% of respondents reporting highly variable income year to year, it’s clear we need better financial models to support them.”
Additionally, 25 per cent of respondents reported highly fluctuating revenue year to year, making long-term planning difficult and creating uncertainty around operational capacity.
One survey respondent captured the sector’s exhaustion: “We’re in a reasonably healthy financial position, but this is largely because we endlessly apply for, and manage, short-term grants. The whole process is exhausting.”
Reserves offer limited growth
When organisations do accumulate surplus funds, many lack strategies to maximise their potential. The research found that 40 per cent keep reserves in low-yield bank accounts, whilst 23 per cent use term deposits and 16 per cent work with external investment advisers.
Whilst these options offer security, they provide limited growth potential. Managing reserves independently can also divert staff time from mission-critical activities, creating additional administrative burdens for already stretched teams.
The challenge extends beyond returns. Without professional investment management, organisations may miss opportunities to align their reserves with their mission values or optimise growth potential.
Diversifying beyond grant dependency
Whilst there is no one-size-fits-all solution, research and sector trends suggest several practical steps for not-for-profits seeking long-term financial stability.
Establishing financial reserves remains a critical first step. Organisations should aim to maintain a reserve covering at least three to six months of operating costs. Even modest savings can reduce pressure during funding gaps and provide breathing room for strategic planning.
Diversifying income streams can reduce dependency on short-term grants. This includes exploring donations, recurring contributions, service fees, partnerships and social enterprises. Blending revenue sources mitigates risk from any single funding stream and creates more predictable cash flow.
Considering long-term investments or endowments represents another approach. Structuring funds in a responsibly managed portfolio can allow reserves to grow whilst remaining accessible for operations. Organisations should assess risk tolerance, liquidity needs and mission alignment when choosing financial instruments.
The majority of Australian businesses, 93 per cent, recognise that environmental, social and governance performance is relevant to the enterprise value of organisations, with customer retention, market competition, customer attraction and employee expectations among the key drivers for adopting sustainability measures. This broader trend towards mission-aligned investment creates opportunities for not-for-profits to structure reserves that reflect their values.
Leveraging sector partnerships can provide access to professional investment management and reduce administrative burdens. Collaboration with foundations, philanthropic networks or pooled funds enables smaller organisations to access expertise they couldn’t afford independently.
Bernie Shakeshaft, founder of BackTrack, a non-profit helping at-risk youth, says his organisation partnered with a foundation to structure a long-term fund. “Knowing our fund is growing provides a sense of security and empowers BackTrack to keep dreaming big to deliver for vulnerable young people now and into the future,” he says.
Strategic planning builds resilience
Beyond specific financial instruments, the research highlights the importance of integrating financial strategy into governance structures. Financial planning should be part of board discussions and strategic planning, ensuring long-term sustainability is embedded in organisational decision-making rather than treated as a separate operational concern.
“There has never been a greater need for non-profits to support Australians – and now is the time to strengthen the sector for the long haul,” says Binns. “With the right financial tools and strategies, we can help organisations not just survive, but thrive.”
Financial resilience isn’t only about surviving, it’s about enabling growth, impact and innovation. Organisations that actively manage their financial health rather than relying solely on project-based income can strengthen their ability to deliver services, respond to community needs and achieve their missions well into the future.
The wider investment landscape shows continued activity in impact-focused sectors. Australia raised a total of $4.0 billion across 414 deals in 2024, an 11 per cent increase from 2023, representing the third-biggest funding year on record. However, not-for-profit organisations operate under fundamentally different financial models, requiring dedicated approaches beyond traditional venture capital.
With thoughtful planning, diversified income and strategic use of reserves, Australian not-for-profits can strengthen their ability to deliver services and respond to community needs for generations.
Financial stability in Australia’s not-for-profit sector represents a pressing challenge, but it is not insurmountable. Organisations that combine sound financial planning, diversified income and strategic use of reserves can not only survive funding fluctuations but thrive and grow their impact long term.
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