“From the very outset of establishing an organisation or program, a plan to achieve financial independence should be part of your overall business plan. This does not mean you have to be financially independent in order to start, however, by starting with this goal in mind, all your decisions and actions moving forward should help you avoid becoming dependent on funding.
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“Investing in Aboriginal community controlled health makes economic $ense”
Justin Mohamed chair of NACCHO launching the NACCHO Healthy Futures Summit Melbourne Convention Centre June 24-26
If you follow the media on Indigenous issues you likely know that since our change of Government in September 2013, funding for a number of Indigenous programs and organisations has been reduced, and in some instances withdrawn altogether.
For the purposes of this discussion, the term Indigenous is used when referring to Aboriginal and Torres Strait Islander peoples of Australia, collectively)
A most recent example of this is the cessation of funding for the National Congress of Australia’s First Peoples, an independent organisation representing and advocating for Indigenous peoples in Australia. The previously agreed $15M over three years was intended to allow Congress to consolidate its autonomous operations and to develop independent capital.
Without it, Congress now faces significant downsizing in an attempt to stay afloat as it desperately attempts to find the funds required to continue its mission.
While the for-and-against of funding cuts to Indigenous programs and organisations continues to be debated in both print and social media, there is an underlying issue that is receiving little attention, yet in my view is critical for us to consider when looking at the future of Indigenous business, particularly the not-for-profit sector.
The issue is this: has Indigenous business become over-reliant on funding, and if so, what are we doing to correct this?
Let me say straight away that the funding that has been provided to many Indigenous programs and organisations has, in many cases, been critical to establish and continue very necessary services which have benefited a great many people and made an enormous difference in the lives of Indigenous peoples.
Funding has been very enabling for Indigenous business, and there is sound argument to say that Government, in particular, has an obligation to fund certain services and programs – that is, after all, what we pay taxes for. But there are pitfalls associated with funding – particularly recurrent funding – that, like the water in the well, don’t tend to be thought of until it dries up.
One of these pitfalls has become very apparent in the last six months: funding is not forever. This is no secret; it’s in the back of the minds of all those involved in putting together funding submissions, and more than likely all those within a funded organisation when awaiting ‘the decision’.
The problem is that’s where it usually sits – in the back of the mind, and usually doesn’t come to the fore until funds are reduced, or refused.
This is particularly true with recurrent funding. With each successful funding cycle, there is an increased risk for organisations to believe that as long as they keep doing what they’re doing, they will continue to be funded ad infinitum. And if nothing ever changed in the world, it’s possible that would be the case.
However, as we’ve seen of late, change can and does happen, and if you are not prepared for it, it can have potentially catastrophic results. No doubt many of you reading this can call to mind a service or program that was reduced or even cut altogether through lack of funding.
Take a moment to ask yourself: what was the impact on those it was provided to? What was the impact on those providing it? What was the impact on the broader community?
Another, less-discussed pitfall of funding is the illusion of control.
The need, desire, and importance of community-control within Indigenous organisations and programs is well documented and, generally, well supported, and in many instances has been proven to have greater benefit to Indigenous communities.
However, for all the self-governance, self-management, and self-determination that exists within an organsiation, if funding makes up your primary or sole means of income, it is the funding body that controls what you do, not you. This should be apparent from the very first time you make a submission for funding.
In order to procure funding in the first place, you need to justify to the potential funder: what you want the funds for, and why; where and how the funds are going to be spent; what accountability measures you have in place; and why it is in the best interests of the funder to provide you with the funds to do so. In the event that the funder agrees to fund you, you will most often be required to sign a funding agreement saying, which essentially is a statement that the funder provide you with the funds you want as long as you spend them in an agreed fashion.
At this point, you may think you have control. After all, you’re the one with the funds, right? You can spend them however you want. Well, this is where that accountability comes in. Most funders will require you to report back to them on how you’re spending your funds, and what you’re achieving as a result.
This is particularly true for recurrent funding, or funding that is provided in installments, and often continued funding is dependent on you meeting the requirements set out in your agreement.
Still feel like you have control? What about if you need to do something outside the agreement – if an opportunity presents itself, or something unforeseen happens? Most funders will have a mechanism for applying for a variation to a funding agreement, however, the allowance of that variation is at the discretion of the funder. Still feel in control?
Again, this is not to say that funding is a bad thing, or should be shunned or avoided. Funding has a very real and very practical use. My concern is that, in the same way many Indigenous academics and advocates have concerns about the effect welfare dependency has on Indigenous peoples, we need to consider the effects funding dependency may have on Indigenous programs and services, particularly in the long-term. We cannot afford to become complacent in this area, or we will see the inevitable reduction and loss of valuable services that improve the well-being of our peoples.
So what’s the answer? Well, like most things there likely is no easy answer.
However I would like to offer four suggestions that might reduce the risk of funding dependency.
1. Plan for Financial Independence
From the very outset of establishing an organisation or program, a plan to achieve financial independence should be part of your overall business plan. This does not mean you have to be financially independent in order to start, however, by starting with this goal in mind, all your decisions and actions moving forward should help you avoid becoming dependent on funding.
2. Understand the Range of Funding Options Available
In my experience, Indigenous organisations tend to turn to Government to source funding, mostly because Government is known to fund certain programs and initiatives. However, there are alternative sources of funding available. The private sector, angel investors and philanthropy are all viable alternate sources of funding, especially if the funds required are for ‘one-off’ requests. There are still rules and conditions that need to be abided by, however in many instances these alternatives can provide a quicker and easier way to obtain funds, as well as offer a greater degree of control over how the funds are used. Recurrent, long-term funding is seldom available this way, however if you’ve followed the first suggestion, this won’t be of any concern.
3. Derive Income from Multiple Sources
A sound way of minimising funding dependency is to avoid making funding your primary or sole source of income. I have worked for a number of non-profit organisations, many of which derive income through multiple avenues, including Government funding. In my experience, those organisations who successfully minimise the impact a change in funding allowance has on their business are the ones who derive their income from multiple sources, and can use this to avoid the deficits reduced funding creates. Examples include: fee-for-service or co-payment arrangements, fundraising and donations, philanthropic contributions, and investment strategies (see below).
4. Make Money Work for You
It’s easy to spend money, however something all organisations should consider more is ways of making money. One way that is often overlooked is having a sound investment strategy as part of your financial plan.
This is not always a straightforward thing to do and my recommendation would be to seek professional assistance from an accountant/financial advisor for ways to achieve this, however, if you can allocate part of your income towards generating more income passively, you will reduce the effects that a reduction or loss of one of your other income streams – like funding – will have on your business.
I worked for a charitable organisation providing home-based health care that had exceptional investment strategies, which allowed it to continue operations, and in fact grow, without pause even when funding from other sectors was drastically reduced.
What do you think of funding of Indigenous organisations and programs? Are we becoming dependant on funding? How can we ensure the continuation of programs and services that make a great positive impact in the lives of Indigenous peoples? Please feel free to share your thoughts in the comments section below.