Social Funding at Risk

As a result of the evolving Covid-19 crisis, on top of arguably the worst bushfire season in recent times, the Australian Government has been forced to inject an immediate $3Bn of stimulus funding into the economy, with a further $12Bn available to business operators over the next four years. This is money the Federal Treasurer certainly didn’t expect to drag out of his already slim, projected budget surplus.

Add to this reduced Goods & Services Tax take from falling retail sales, and commercial business, the result will likely be pressure upon the 2020 budget.

The Government should be applauded for seeking to stimulate spending in the community, it that is what actually occurs. Those recipients of the financial stimulus package will be happy, while those, many, that do not qualify will be less than happy. If recipients actually spend their slight windfall and avoid stashing it in a can under their beds, those that have not benefitted from the package, may benefit from the reduced risk to their employment or a faster economic rebound post Covid-19.

The downside is that at some point the Treasurer will look to snag some, if not all of this money back to help balance the books, despite limp assurances by Finance Minister Pallas to the contrary. When this happens, the low hanging fruit may be taxes on petrol, alcohol and tobacco. The price of food can also be expected to rise as producers and supermarkets seek to regain some of their current losses. This will likely see 15-20% of the stimulus package return to Government coffers in the form of taxes.

Then as is often the case, the Government will look at other areas for cost reduction. Excluding the NDIS, the next target may be the community and social services sector. NDIS providers shouldn’t get too relaxed either. They know there are many ways to slow down spending on this program without appearing to provide less funding.

This is why it is important the Boards and management teams of social service agencies take a long term perspective in reviewing their financial position. Post Covid-19 may be as close as the first quarter of the next financial year.

It is important the management team have a high level understanding of the status of each and every program, who is the funder, how much is funded, timeframe for the program, expiry date and actual cost of operating the program. This can easily be mapped on a spreadsheet and displayed on a graph for all to view.

Doing this enables the management team to identify program and funding risk. Knowing which programs are due to end within the next year, identifies the risk of funding not being renewed or being reduced. The ‘what if’ scenario of cash flow projections then enables the potential financial impact to be understood.

While large providers have financial management teams for this purpose, it is important to move beyond financial projections to providing information to the management team and program managers in a way that empowers them to make informed decisions.

Smaller service providers may benefit from external oversight. If you need help call John on 0424 103 971 or email. I offer an affordable, cost effective contract management service that provides you with the experience you lack, at the time you need it. You can also download our Covid-19 readiness checklist here.

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