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Coronavirus and the rise of "zombie charities"

Jul 30, 2020 • 14m 20s

With volunteers staying at home due to Covid and donations drying up, there are serious concerns about the viability of Australia’s charity sector. Today, Mike Seccombe on the challenges charities are facing, and what we might lose if they collapse.

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Coronavirus and the rise of "zombie charities"

276 • Jul 30, 2020

Coronavirus and the rise of "zombie charities"

[Phone rings]

RUBY:

Hello, Oma. It's Ruby.

OMA

Hi. How are you?

RUBY:

I'm good. How are you going?

OMA

Oh, fine. We don't have a virus.

RUBY:

Yeah. Yeah. You guys are going well.

OMA

Yes. It’s very bad there, eh?

RUBY:

It's not good. We're all wearing masks everyday now. But the numbers, the numbers aren't good.

OMA

Yeah.

RUBY:

Hey Oma, do you mind if I ask you some questions about the knitting and the Beanie Club to maybe use on my podcast, if I record? Is that okay?

OMA

Oh, yes. Yes. Okay. If I know something, yeah.

RUBY:

So tell me a little bit about the Beanie Club and how it started.

OMA

Um somebody said ‘oh the Children Hospital, well, they lack the little teddies and all the very tiny beanies for the babies they are born too early...

RUBY:

The premature babies?

OMA

Yeah, they're for them. And then somebody asked for the Red Cross, an ambulance asked for small teddies, that call them trauma teddies. They take them in the ambulance if there is some accident, and when the little baby or little kid has an operation.

RUBY:

Mhm. How long has it been going on then?

OMA

Nearly 15 years.

RUBY:

Fifteen years!

OMA

Yeah. And we meet every Monday morning, it's such a nice little group. Nobody has any pretense or, you know, nothing. They're all very nice, normal people. So and yeah, we chat a bit, knit a bit, laugh a bit and have a coffee and go home again. But we're not having the Beanie club on the moment because they're all elderly. And so everybody's a bit scared.

RUBY:

And that's because of coronavirus?

OMA

Yes, yes, yes, yes. Yep.

[Music starts]

RUBY:

From Schwartz Media I’m Ruby Jones, this is 7am.

That was my grandmother, she’s a volunteer who’s staying at home because of the pandemic.

Covid is having a big impact on Australia’s charity sector. Two thirds of all volunteers are gone, donations are drying up and thousands of charities risk reaching a point where they can no longer offer services.

Today, Mike Seccombe on the challenges charities are facing, and what we might lose if they collapse.

[Music ends]

RUBY:

Mike, you've been writing about charities during the pandemic. How is coronavirus affecting the sector?

MIKE

Well, it's affecting it in all sorts of negative ways. To start with, they've lost a huge number of their volunteers. About two thirds of people, 65 percent have stopped volunteering because of the pandemic, because, you know, many of these volunteers are older. They're often retired people who are naturally concerned about their health at this time. And so without them, there are op shops closed down all over the country and what have you. So, so that's part one of the crisis.

RUBY:

Mike Seccombe is The Saturday Paper’s national correspondent.

MIKE

The other thing is, of course, that COVID-19 is also robbed the charities have a sizable chunk of their revenue because it's made fundraising difficult. So all those charity bike rides and gala balls and sausage sizzles outside Bunnings and all of those face-to-face type fundraising opportunities have essentially been closed down. So that's a big hit to them, too. You know, about 20 percent of the total sector funding comes from donations. And so that's two things. And on top of that, there's mounting evidence that donors are increasingly tapped out. You know, they gave during the bushfire crisis to the firies and now they're, you know, less willing to open their wallets because, you know, there's only a certain quantity of charitable dollars to go around.

RUBY:

And are there particular charities that are susceptible at the moment? Or is this something that is an issue across the sector?

MIKE

Well, it's patchy. A lot of the frontline sort of people who feed the homeless and that sort of thing are still getting reasonable donations. And a lot of charities that provide government services are continuing on. But the more reliant they are on donors, you know, the more reliant they are on to that face-to-face kind of interaction to get money from people, the worst affected they are.

RUBY:

And do we know how big this decline will be and what it will mean for charities?

MIKE

Well, we have a fair idea of what happens in circumstances like this based on recent history. I spoke with David Crosbie, who's the chief executive of the Community Council for Australia, which is sort of the umbrella group. And he said that during the global financial crisis, the average amount given to charities by Australians fell by about 20 percent and then stayed down for about 3 years. So, you know, it looks like it's going to be much worse this time because, in fact, the economic circumstances are much worse this time.

Archival tape -- David Crosbie:

“There's a history in Australia of us being quite generous when an unfortunate natural disaster or event happened. And we saw that during the bushfires and we've seen that during Covid. But there's a relatively small number of charities that benefit from that when there is an economic downturn.”

MIKE

So he was saying that at the beginning of the year, know after the fires, before the pandemic, many charities that were already saying that they were reporting their worst start to the year and they were hoping that it would pick up before the end of the financial year because, of course, a lot of people give to charity just before tax time so they can get their deductions. And that hasn't happened.

Archival tape -- David Crosbie:

“We weren't seeing a good start to the year except for bushfire charities. We were hoping that we'd have a big sort of May/June end of financial year. That hasn't really eventuated. And in some cases, charities are significantly down on their fundraising.”

MIKE

It's pretty dire. Crosby told me he's had to counsel some charities out of selling down their assets. You know, not that they have a lot of assets, but selling down their assets at the bottom of the market in order to keep meeting their operating expenses and providing their support services. So his concern is that, that many organizations will be transformed into what he calls zombie charities within a year or two.

RUBY:

What's a zombie charity?

MIKE

Well, they exist, but they're no longer able to do their work. He says that they will start with cutting staff, cutting infrastructure and then going on from there to cutting their programs. He calls it the starvation cycle and many charities are already in it.

RUBY:

We'll be back in a moment.

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RUBY:

Mike, how big is the charitable sector in Australia? What's actually at risk here?

MIKE

Well, the charitable sector is huge in Australia. Tim Costello tells me this dates back sort of to the postwar years and the Menzies government, were instead of going down the same route as Britain, where the state provided everything directly in Australia by delivering services through charities, you know, government direct funding of charity and also tax breaks for people giving to charity. We became much more dependent on the sector. And it's absolutely huge. It is involved in the provision of health, education, aged care, childcare, the environment, arts and culture. You know, even our pets, you know, through the RSPCA. So they're very important nation's social fabric, but they're also a big part of the economy. You know, about eight per cent of Australian GDP is through charities and collectively they employ about 1.3 million paid staff. So that's about 10 per cent of the workforce. It's bigger than construction sector. It's bigger than all of manufacturing.

RUBY:

That's a lot of people, a lot of jobs.

MIKE

That is, I mean, we depend on them. You know, we most obviously depend on them in times of crisis, you know, and they step in to provide basic services and care. The volunteer firies of last summer, the food banks that even now are feeding hundreds of thousands of people who can't afford to put food on the table. But it's not only in times of crisis, as Tim Costello told me, much of what we think of as the social safety net that the government provides is actually dependent on charities’ delivery mechanism.

Archival tape -- Tim Costello:

“Perhaps this has been a wake up call for many Australians to realize how much of what we think the safety net the government provides is actually dependent on charities to be arms and legs, to be the vehicle of that safety net.

RUBY:

And so, Mike, our reliance on charity is increasing, but the funds for charities have been declining over time. Is that right?

MIKE

That is right, broadly. I mean, the sector's always been countercyclical in hard times, economic hard times. They're less likely to receive donations. But, also, that's when the demand for their services is greatest. So it's always tricky for them in tough times when we need them the most. But even before the recent crises, charities were doing it tough. I spoke to Myles MacGregor Lounds, who's a Professor Emeritus in Law and Public Policy at the Queensland University of Technology and the founding director of the Australian Center for Philanthropy and Nonprofit Studies. And he says fewer Australians appear to be giving. Between 2016 and 2018, there was a very sizable drop in the number of taxpayers who claimed a donation on their tax returns, was down about 100,000 people which is a fairly significant number. And he said that's a trend that's been going on for a few years now. Fewer people are giving. So as to why this could be the case, he thinks most likely it's a reflection of the weak economy because wage growth has been low and cost of living pressures have been mounting. Those things were a burden on donors well before the current crisis.

RUBY:

So, Mike, if we're in this starvation cycle where charities are becoming less viable and we know that charities have less money, but more people need their help. What happens?

MIKE

Well, there will be more hungry people and more homeless people. As the recession - depression I think people are starting to call it now - goes on and so much more demand on those frontline charities. The good news is, so far at least, the food banks and the accommodation services, although they're stretched, are at least still getting donations at this stage. The thing is, though, it's taking money from other parts of the charitable sector. Charities that support the arts, the environment, sporting clubs who provide things like childcare, you know, all those other services the charities provide which are important to society but are not necessarily seen as urgent in a time like this.

They will, in many cases, just have to cut their services, and reduce their advocacy work, which is another very important thing that charities do. In 12 or 24 months from now, there's going to be a lot of these charities. We can't be sure exactly how many, but there will be a lot of these charities that are sort of charitable concerns in name only, having gone through the starvation cycle, unable to deliver their services, probably hanging on with just a few volunteers and hoping that things get better. And so taken in total, what we'll see is just a hollowing out of civil society. As Tim Costello said, “charities are the threads that hold the social fabric together”. So it's very concerning that those threads might be starting to break.

RUBY:

Mike, thank you so much for your time today.

MIKE

Thank you very much for speaking with me.

--

RUBY:

So does everyone miss the Beanie Club?

OMA

Yes oh yes! We ring each other every couple of weeks, that one rings that and then I say, I’ll ring that one and you ring that one. Yes. And they're all doing still fine.

RUBY:

And you think you'll probably be able to get back to the Beanie Club?

OMA

Oh, yes. Oh, yes, Soon, when it's over, we back there every Monday. We we. Yes. Do it by ear. You see. I said, once the church is open for everybody and everybody can sit somewhere everywhere again, then I go back to church and then we go back to the Beanie Club, too. If there is not a second wave coming or maybe in the next month or so, we would go back again. Yeah. That's. Yeah. So. Yeah. Well, years ago. Well you're not taping this anymore....

RUBY:

You want me to stop taping, I can stop taping.

OMA

Yeah. Well...

[Both laugh]

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RUBY:

Also in the news…

Queensland Premier Annastacia Palaszczuk has announced that anyone from the greater Sydney area will be prohibited from entering the state.

The decision comes after two people in Queensland tested positive to Covid after travelling from Melbourne, via Sydney.

A criminal investigation has also been launched, looking into whether the two individuals had misled authorities when entering the state.

Meanwhile in New South Wales another 19 cases of Covid have been reported, with a new cluster emerging in Sydney’s east.

Victoria reported 295 new cases yesterday.

I’m Ruby Jones, this is 7am, see ya tomorrow.

With two-thirds of volunteers staying at home due to Covid and donations drying up, there are serious concerns about the viability of Australia’s charity sector. Experts are worried about the impact the funding drought will have on the provision of key services. Today, Mike Seccombe on the challenges charities are facing, and what we might lose if they collapse.

Guest: National correspondent for The Saturday Paper Mike Seccombe.

Background reading:

The end of charity: Sector at risk of collapse in The Saturday Paper

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem.

Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas.

Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief.
Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

New episodes of 7am are released every weekday morning. Subscribe in your favourite podcast app, to make sure you don’t miss out.

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276: Coronavirus and the rise of "zombie charities"