The recent collapse of Australian anti-domestic violence charity White Ribbon has put the financial management of the not-for-profit sector under the microscope.
White Ribbon was one of Australia’s most high profile not-for-profit (NFP) organizations and was widely admired for its work in the community. Yet underneath the organization was a financial mess.
Despite funding from the Government, the organization had a deficit of almost AUD 850,000 by the end of 2018, with liabilities of AUD 2.5 million.
White Ribbon went into the red from being almost AUD 300,000 in the black a year earlier as high rents and spiraling employee costs – which went from AUD 2.9 million to AUD 4 million a year later – drove the organization towards insolvency.
The White Ribbons debacle stands as an extreme example of one of the big problems plaguing the NFP sector -- rigorous financial management.
Because they are small organizations and are focused on core social missions, which are anything but financial, many NFP organizations suffer from sub-standard financial systems and inadequate compliance.
They labor with a patchwork of legacy systems cobbled together over the years, which fail to create the overarching ICT framework which any organization, in any sector, needs to optimize its performance in the modern world.
White Ribbon is but one example. The Australian NFP scene is littered with organizations with high ideals that stand accused of squandering donor funds on administration, with only a small percentage used for intended purposes.
This not only undermines their effectiveness but can dissuade donors and philanthropists from opening their wallets because they can’t see their generosity is being put to good use.
One company which is seeking to address this problem is accounting practice Giuntabell, which uses cloud-based technology and – where possible – a modern accounting software package. The aim is to deliver best-of-breed financial management to small NFP organizations.
Guintabell chief Nunzio Giunta said that the cloud enables his practice to distribute accounting software more efficiently. It also helps small organizations, many without chief financial officers, to comply with their obligations and improve their performance.
"The NFP landscape is littered with stories about charities with bad financial management," said Giunta.
"It is not easy. You have sophisticated donors who want accountability, you have Governments who make grants and want reporting, and you have a public that wants results. All of this from small organizations which are essentially charities, where there might only be 10 staff.”
In many of these organizations, the actual role of a CFO might only be equivalent to an FTE of 0.2, which means there is no immediate business case to hire one – until things go wrong.
Giuntabel’s solution is an outsourced CFO model that complements the cloud-based Sage Intacct accounting system and keeps the organization on track.
“The small end systems don’t satisfy reporting requirements, so we leverage the technology to provide that detailed reporting to stakeholders,” said Giunta.
"It provides one source of truth but also delivers data which can be extracted and published seamlessly in the right form to comply with Government, for example, or for the board. I’ve so many resources wasted on small teams taking data and manipulating it when it can all be done in one central place, and then delivered accurately and on time.”
The system upgrades itself in the cloud and connects with clients through APIs. All this is in contrast to organizations that maintain an on-premises system.
"We had one client who insisted on setting up their system on-premises," said Giunta.
"We spent a month working with them on integration so we could extract data, and then their in-house IT people changed some settings, and it wouldn't function properly."
Finance is not the only area where NFP organizations are upgrading their technology, but the common theme is virtualization and to leverage scale from the cloud.
Australia is rolling out a hugely complicated National Disability Insurance Scheme with an edifice of compliance rules. Major players, such as KPMG and Deloitte, are creating cloud-based platforms for service providers.
One organization which embraced the idea of a broader transformation was the Victorian Aboriginal Community Controlled Health Organisation (VACCHO), the peak health body representing aboriginal people in the state of Victoria.
In this case, the transformation extended from the core to the work practices of staff in the field, giving them secure and reliable access to the data and apps they needed to do their jobs.
"An aging infrastructure running unsupported versions of software not only lowered staff productivity, but it also made us more susceptible to rising modern threats like ransomware," said Eddie Gibbons, the director of business services.
A managed services environment extended the life of some older infrastructure, while also enhancing its functionality, all without the cost of buying and then managing new equipment.
All of which makes sense for organizations operating in an environment where funds are tight, and where the funds need to be spent on delivering services, and not on IT.