We’ve been reflecting on key themes as we wrap up the budget season for our June financial year-end clients, and the reforecast process for December year-end clients.
Across client budgets we saw some tightening in philanthropic giving and greater uncertainty in government grant programs, with these income constraints pitted against rising operational costs from high inflation and Award wage indexation.
The practical takeaway this year is that budget planning should remain conservative. Where funding is uncertain and demand for services is increasing, Boards and leadership teams need to be explicit about the assumptions underpinning their budgets, and the trade-offs those assumptions require.
While the core budget should be based on conservative assumptions, non-profits should also prepare contingency plans for more favourable scenarios. Having these plans ready enables organisations to respond quickly, and make effective use of additional funding (or other positive developments if they arise).
Considering direct funding to the NFP sector - the May Federal Budget was broadly net negative. While it included additional funding in several areas, these commitments were more than offset by the proposed reductions to NDIS funding.
Sector commentary also pointed to crisis-response services being overlooked in the federal budget, including emergency relief, food relief, homelessness, community legal services and alcohol and other drug services. Exacerbating the cost of higher service demand are the economy-wide increases in wages, rent, insurance and technology costs.
We’ll continue to work closely with clients to help you budget and forecast through these headwinds, and maintain financial sustainability in the year ahead.
