Inflation hits community organizations hard
Inflation and the effects of Covid are hitting community organizations and charities hard, according to research by SociaLink, the umbrella organization for social agencies in Western Bay.
SociaLink surveyed organizations about the impact of rising inflation on CBOs and communities to better understand pressure points and provide insights to funders. He gathered relevant research and interviewed local nonprofit organizations to see the impact of inflation at the local level.
The survey asked about the implications of the pandemic and inflation, including organizational costs, revenue and demand for services. It has also drawn up suggestions for the sector to tackle inflation and recommendations for lenders, chief executive Liz Davies said.
Annual inflation hit a three-decade high of 5.9% from the December 2020 quarter to the December 2021 quarter, the biggest move since an annual increase of 7.6% in the year to quarter. of June 1990.
“The main drivers are housing and household utilities, transport, with an increase in the prices of gasoline and used cars, and gasoline prices which have increased by 30% over the past year. year to the December quarter of 2021.
“Unemployment fell to a record low of 3.2% while wage inflation hit its highest level in a decade,” she said.
“The Covid 19 pandemic has already had a significant impact on community and social sector groups, and the communities they serve, and inflation is making this worse.
“Containments and alert levels have brought all or part of the activities of the social sector to a standstill. The hospices received no commercial income from their stores – a major source of income.
“Most charities don’t have significant resources to fall back on and rely on continuous streams of income. They rely on donations, grants and other fundraising, fees and subscriptions, trading income, interest and dividends.
She said income from the gaming trust had fallen as pubs and bars closed or operated under restrictions. Philanthropic organizations have cut income with less to pass on to charities, people have tightened their belts and donations are likely to decline. Many fundraising events cannot take place, op shops and cultural and artistic events have been closed or are operating under restrictions.
Investment returns have taken a hit, which may be temporary, and other equity-type investments have been buffeted by volatile equity market swings.
“Organizations operate on tight margins, which leaves little room to improve overall resilience and explore innovation.”
The hardest hit sectors, with a 50% loss of revenue, were events sectors like sport and recreation and arts, culture and heritage, as well as social services working with the most vulnerable. Government wage subsidies have helped some, but not uniformly.
“Overall, the industry is ‘doing even more for less’, with already thin operating margins and only modest reserves to draw on to meet any covid-triggered operating shortfalls.”
Other effects of Covid include burnout and burnout in certain sectors including child protection, mental health and other direct services where demand has soared, straining the already overworked staff. The budgets of the poorest households, already under great pressure, will be the most affected by inflation and will lead to a strong demand for the services provided by charities.
She said that for the average renter family, the cost of living has increased by about $50 a week over the past year, while income has increased by about $25 a week. With strained income earmarked for rent or mortgage repayment, there is little flexibility to cut costs.
“Price increases for food, transport and housing are particularly harmful for low-income households, leading to an increased need for food banks.”
This week’s increase in benefits will likely be absorbed by higher prices and could mean a decline in the real value of benefits. This will push more people into deeper poverty and should increase demand for services, she said.
“It will also affect community groups in the arts and entertainment sector, as inflation means less disposable income to buy tickets or spend on entertainment and leisure experiences.”
Suggestions from a collective of charities, nonprofits and community groups to the government for how it could help include an emergency stabilization fund, special low-interest loans and tax breaks to incentivize donations.
The Institute of Administrators suggested applying for the wage subsidy program, considering options for using emergency funds and virtual fundraising using an online fundraising plan.
The SociaLink survey found that staff wages/salaries and travel/vehicle costs are the areas where rising costs are expected to hit the hardest.
For some, payroll costs are an essential expense and they find it difficult to increase salaries or even reduce hours due to lower incomes. Rising costs have had a significant impact on financial stress in communities and, to a lesser extent, on demand for food and housing.
Mental health stress and anxiety is a key impact for individuals and families as they deal with current Covid issues, rising costs and reduced access to healthcare due to covid.
Suggestions for funders included revising multi-year grant agreements to ensure they accurately reflect inflation, particularly in staffing and transportation costs and asking applicants if they anticipate an increase demand for their services due to rising inflation.
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