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Is it possible that dark days are ahead for the third sector of society?

Sadly, it seems likely.Although some of us believed that non-for-profit (NFP) organisations would never be in financial trouble, the 2015 Australian Charities Report shows that 42% of charities experienceda reduction in income since2014. There are two possible causes: decreases ingrantsand membership reduction.

Let's look at an example of the former case. Recently, NDIS (National Disability Insurance Scheme) has been implemented, meaning that organisations working with vulnerable people are no longer eligible for grant money. This is a significant change-previously organisations were solely responsible for disability care and thus given sizable funding. The NDIS may be good news for some, but such changes cause problems for the charities themselves.

Low membership has also caused stagnation in NFP growth. According to GrowthZone, more than half of charitable associations did not grow their membership size over the past year. This may be due to several reasons. Firstly, globalization has meant we have access to resources from anywhere in the world. With more choice, people trend towards larger NFPs, meaning smaller organizations suffer. Secondly, current generations have much higher expectations. To purchase membership in a fee-charging organisation, younger members require incentives that NFPs cannot always provide. To remaining competitive in the market, membership fees are kept as low as possible, whilst fewer people are joining NFPs in the first place.

The verdict is grim. We believe that associations are facing (if they have not already faced) a loss of income. It is a good time for associations to adapt both their financial and business plans in light of the new climate. It may even be time for NFPs to start modelling their behaviour onprivate firms.