KEY POINTS:
Communities need even more support during tough times and the $9.8 billion not-for-profit sector in New Zealand is battening down the hatches as the credit crunch leaves it uncertain about next year's funding.
The Bay of Plenty's BayTrust said last week it was suspending much of its grants programme for next year as the global capital crisis caused its investment yields to plummet.
Other community trusts are in a similarly volatile position but have not yet announced a seize on funding.
Giving New Zealand research shows $1.6b in philanthropic donations is handed over to the not-for-profit sector annually, and over a buoyant few years the sector has been able to meet many requests from the community.
But Robyn Scott, executive director of Philanthropy New Zealand, says growth seen over the past five years is unlikely to continue.
As much as 40 per cent of philanthropic funding for the country's 97,000 not-for-profit organisations comes from 12 regional community trusts such as the ASB Community Trust, Trust Waikato and BayTrust which raise their funds through global investments.
Scott says any decrease in funding from philanthropic donations is worrying for the not-for-profit sector.
"[The organisations] are such an intrinsic part of the community," Scott says. "It's a sector we cannot afford to do without."
She says the Government should be looking at its response to a drop in funding, which would effectively cut important services to communities.
The new minister of the community and voluntary sector, Tariana Turia, says the shock of funding shortfalls is severe and will affect many areas. "Local sources tell me the backing of the [BayTrust] has been an invaluable mechanism for building and maintaining community cohesion, and the decision to pull the funding will create pressures across the wider Bay of Plenty."
Turia will be keeping a close eye on community effects when considering any proposals for transitional relief.
The BayTrust decision will affect the major grant round planned for early next month as well as the planned February grant considerations - about 45 applications.
Paula Thompson, BayTrust's chairwoman, says the suspension is regrettable but it would be irresponsible to place a fund, built up over 20 years for the long-term benefit of communities at risk. "We are no more immune than any other organisation which relies on investment funds."
The trust has maintained a grants programme exceeding $4 million a year. Thompson says it aims to maintain the real inflation adjusted capital of the fund as far as possible, so "we can resume a full programme of grants when the situation improves".
David Richards, project and strategy manager of the Tindall Foundation, which draws on its shares in The Warehouse to fund hundreds of organisations in New Zealand, says it is worrying to watch shares fluctuate but the foundation ensures it has enough money to make payments.
He says the foundation has seen a slight increase in funding applications over the past three to six months.
It anticipates more applications and greater need as unemployment rises.
Bev Gatenby, chief executive of Trust Waikato, says the organisation's funding has been affected but it has long-term strategies and has been through recessions before.
She says it is looking at tightening up donations and hoping to prioritise the grants for organisations whose needs are the greatest.
It will continue with its donations for this year and will keep monitoring the markets.
The ASB Community Trust's investment portfolio has also been hit hard, says chief executive Jennifer Gill.
She says it's impossible to tell what will happen to the 12,000 to 15,000 grants it gives out each year at the moment, but the trust will be prioritising its applications according to need.
As many not-for-profit organisations receive funding from a range of sources, all of which may pull back on donations, some will scale back projects, Gill says.
"I think we will see less innovation and more funds going towards operating costs."
Manukau East Council of Social Services manager Alison Dyson says the credit crunch highlights a huge funding issue in the sector.
Like businesses, the organisations need to use budgeting and forward planning, and this is difficult when funding is inconsistent.
"It's not just a question of losing funds, it's the social issues that arise," she says. "We don't know what will happen, but we know that services are going to be more in demand. And funding will be in more of a mess."
Funding is already so short that Manukau East, which has one of the fastest growing and diverse populations in New Zealand, has just one social worker for 20 hours a week and another organisation has another worker doing 25 hours a week.
Between 30 and 40 per cent of Manukau East's not-for-profit sector's funding comes from large philanthropic trusts such as the Tindall Foundation and ASB Community Trust. But Dyson says a lot of funding comes from lotteries which traditionally don't feel the crunch.
CASE STUDY
Chris Davidson, chief executive of Man Alive, is preparing for a cut in funding next year.
The organisation, New Zealand's largest men's centre helping 1000 Auckland men and boys, runs non-violence programmes in West Auckland, East Manukau and Glen Innes.
Its core work is largely funded through Ministry of Social Development contracts but up to 20 per cent of funding comes from philanthropic donations.
These help Man Alive develop innovative community programmes and a reduction to funding will also cut those programmes.
"We see these community operations as vital and they would be unfortunate to lose," Davidson says.
A big part of Man Alive's work is around family violence and Davidson says there is a link between social pressures and violence, so the organisation may see a greater demand on less resources.
"At this stage I don't know what the impact in money terms is going to be on the [not-for-profit] sector.
"But what I do know is what we have is a sector that is under-resourced already.
"Any cut of funding is going to be detrimental."
A MASSIVE INDUSTRY
New Zealand's not-for-profit funding is a $9.8 billion industry:
It employs more than 200,000 full-time equivalent paid staff and volunteers, which represents 9.6 per cent of the economically active population.
It employs more people than the construction, transport and utilities industries combined, and more than 90 per cent of the number employed in the manufacturing sector.
Source: The New Zealand Non-Profit Sector in Com- parative Perspective, August 2008.
