New Zealand Charitable Sector is Growing, but is it Sustainable?

New Zealand Charitable Sector is Growing, but is it Sustainable?

number of charities in new zealand per 1,000 people

Wayne McKenzie, Senior Fundraising Consultant in New Zealand at AskRIGHT, comments on the recent New Zealand Cause Report prepared by JB Were and John McLeod.

 

Research and analysis of the charity sector are particularly lean in New Zealand. So, the New Zealand Cause Report adds valuable insights to others like “Giving NZ Reports”, prepared by BERL for Philanthropy New Zealand. Each one helps to make sense of some of the data collected by Charity Services, which unfortunately has been less than adequate for serious research, and with recent changes will be even less helpful in the future.

 

In its analysis of the individual charity sectors, the New Zealand Cause Report identifies a number of strengths, areas of growth or high dependence. Some of the highlights include:

  • Strong philanthropic income: Animals, Arts, Community Development, International and Religious.
  • High growth in charity numbers: Animals, Arts, Community Development, Environment, International, Sport.
  • Strong profit margins: Accommodation, Animals, Arts, Community Development.
  • High proportion of volunteers: Animals, Community Development, Emergency, Environment, International, Religious.
  • Large asset base: Accommodation, Economic Development, Religious.

 

The Report highlights a concern about growth and sustainability; and for me raises more questions than answers.

 

The growth of the charitable sector in New Zealand

While there have been some large changes in growth rates between different charity sectors over time, there hasn’t been much change in the names of the large organisations dominating the sector suggesting the ability for new and smaller organisations to innovate and grow is limited. Almost 80% of the 40 largest New Zealand charities have existed for over 20 years. This is in contrast to the for-profit sector where dramatic change in ranking order is common, availability of risk capital is higher and the financial rewards for success are greater.”

– New Zealand Cause Report, JB Were

 

Is this a good or bad thing? Does it indicate that the sector is stable, rather than volatile, and the largest organisations are not being knocked off the top spots?

In this regard, New Zealand is not too different from America, where 90% of their top 40 charities are more than 20 years old, and 70% were founded more than 40 years ago. I would suggest that the important measures are not age, but whether or not they are being effective, efficient and ethical.

It would be an interesting study to look at the “new and smaller organisations”. Are they dealing with such issues that we should expect them to grow to the size of others? Are they the kind that depend substantially on philanthropy for their income and have little opportunity for other income streams? Do they attract philanthropic income easily, or are they ‘black sheep’ organisations, dealing with issues that are more difficult to attract donors?

It’s a good observation, but is it appropriate to compare new charities with new business start-ups, particularly those in the new areas of industry and technology? I wonder how long some of the new businesses will stay at the top. It would have a more profound and detrimental effect on vulnerable people if new charities collapsed at the rate of businesses.

How should we as a sector address these issues? What is the forum to do so? Who has the inclination and will commit the time to participate?

 

The number of charities in New Zealand

The number of charities has grown substantially over time with New Zealand now having one organisation for every 170 people … Considering the governance requirements from Board members and the number of them required, this may also create a burden on an increasing number of supporters. Since 2010 there have been 2.5 new charities commence each business day.”

 

Is the high number of charities in New Zealand per capita, compared to other nations, a problem?

number of charities in new zealand per 1,000 people

From the above, it shows we have many more charities per capita, but does New Zealand have a problem, and are we comparing apples with apples when listing number of charities? Frankly, I don’t know.

In New Zealand, many of the listed charities are very small in financial terms. More than half (57%) have a total gross income of less than $10,000, so what are we considering and comparing?

fundraising in new zealand

Only 2,050 of the 27,700 registered charities in New Zealand raise more than $100,000 pa through philanthropy and sponsorships, and 76% raise less than $10,000 pa.

This does highlight the comment in the New Zealand Cause Report about the huge number of people and the energy required to manage and govern so many organisations.

The real issue with charity numbers is the potential duplication of energies, ideas, incomes and assets and the lack of shared knowledge and public confusion and then inaction. It is a discussion worth continuing.”

 

Is the growth in the New Zealand charitable sector sustainable?

 

John McLeod’s findings raise many more issues that pertain to sustainability:

85% of assets controlled by the largest 15% of organisations… 45% of the sector’s assets are in property.”

A bald statement like this needs examination. Does it mean without large assets, an organisation is not sustainable? What sectors within the industry do these organisations belong to? If they are Universities and Hospitals, it is understandable. If they are welfare organisations, perhaps questions could be raised about how to better utilise those assets to benefit the cause. International Aid organisations would have greater difficulty attracting funds for a crisis if they were sitting on a large nest egg in the bank.

 

Government funding is growing faster than philanthropy.

A significant part of this change has been a result of Government outsourcing to NFP organisations which can then have a limiting effect on profit margins.”

One cannot dispute the fact of this growth, but has anyone analysed it and asked why? How much is simply a result of the government pulling back from directly providing those services, and “passing the buck” to charities, who may do it better, or cheaper? The risk for charities is to take responsibility for providing the service, and have the plug pulled by a change of policy or a new government, as happened in 2008 with international aid and development. What assurances do charities need before taking on the risk?

 

Since 2010 there have been 2.5 new charities commence each business day.”

Do we need mergers and/or birth control to control new charities? Might it be helpful to have a check list for people embarking on founding another new charity? This might include questions about ethical fundraising and sustainability.

 

Across the ditch the Australian Charities and Not-for-profits Commission (ACNC) provides a good checklist for people thinking of starting a new charity, and the state of Western Australia requires that you prove the need is not already being met before you can register a new charity. Would this be an acceptable requirement in New Zealand?

 

So, who will be brave enough to convene and to participate in the discussion? I would be delighted if you would add your comments: join us on LinkedIn!

 

Wayne McKenzie

Wayne McKenzie

Senior Fundraising Consultant at AskRIGHT
Wayne McKenzie is an esteemed and award winning fundraising professional with more than 25 year experience working with charities in New Zealand.

To find out how Wayne can help your organisation, contact w.mckenzie@AskRIGHT.com.
Wayne McKenzie