An Examination of Governance Factors Affecting Small Not-For-Profit Sustainability

Greg Martin

Small not-for-profit (NFP) organisations commonly provide government-funded social services to niche communities overlooked by larger NFPs. Since the 1980s, the public welfare system has been commercialised through a shift from government-provided to government-funded delivery. This shift has transformed the NFP sector from collaborative to competitive, as organisations focus on securing grants, rather than service outcomes. To ensure accountability, governments have implemented increasingly complex funding conditions, prompting NFPs to implement corresponding governance processes. These changes, alongside growing competition, contribute to the closure of numerous NFPs each year. Australian Charities and Not-for-profit Commission (ACNC) records demonstrate that more than 900 small NFPs ceased operating in Australia between July 2022 and June 2023. This research examined how internal governance influences financial and human resource sustainability of small NFPs within this context of increased competition and complexity. Three small Western Australian NFPs providing similar communities services were explored through semi-structured interviews with board members and senior managers involved in grant application and administration. Reflexive thematic analysis then identified governance trends affecting organisational sustainability. The findings indicate the presence of two new theoretical constructs – the community-funded shadow state, and the burnout cycle. The former being a representation of how communities, through donations and volunteering, supplement government funding for delivery of social services dictated and controlled by the state. The latter represents the vicious cycle of burnout suffered by small NFP leaders under stress from complex and demanding roles, often exacerbated by a deficit of professional skills. This construct illustrates how when one such leader leaves, the pressures shift to others within the group, and the cycle repeats. In an environment when such skilled individuals are difficult to recruit, this cycle can be detrimental to the organisation’s survival. The study’s findings address a knowledge-gap regarding the impact of governance on small NFP sustainability. It offers practical recommendations for NFP practice, and advocates for policy reform to help to strengthen the sector by restructuring grant processes.

An Examination of Governance Factors Affecting Small Not-For-Profit Sustainability

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