Social enterprises ring warning bells for Not for Profit sector

Doing good and doing it well?

Not for Profit organisations are being warned to think carefully before becoming involved in trading organisations to generate income, with a new survey finding many are doing so with insufficient preparation or due diligence.

The survey by Grant Thornton covered 416 Not for Profit organisations in Australia and New Zealand. It is one of the most comprehensive undertaken in the sector for the Trans-Tasman region.

In its report ‘Doing good and doing it well?’ Grant Thornton says funding issues are encouraging Not for Profits to seek out new revenue streams via the establishment of their own social enterprises.

Grant Thornton Australia’s Head of Non Profit, Simon Hancox says while this type of trading organisation promises one solution to the funding squeeze; social enterprises can be easily mishandled and pose significant risks to organisations that lack the appropriate business and governance expertise.

“Our survey result suggests that many of the Not for Profits that are considering establishing or buying social enterprises are doing so with insufficient preparation or due diligence,” Hancox says.

“We asked respondents how they went about setting up the trading operation. Thirty eight percent had taken independent advice and just under one third (30%) gained sign-off from their governance body to change the risk profile of their investment.

“This should sound a warning bell. It also points to the increasing need for Not for Profits to appoint boards with ample commercial and governance experience that is not likely to mirror the Not for Profit’s primary Board,” Hancox says.

The Grant Thornton report reveals that three quarters (75%) of the organisations surveyed in Australia and New Zealand were considering alternative revenue sources, such as social enterprises and fundraising.

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 For more information or to speak with Simon Hancox, please contact:

Helina Lilley
National Public Relations Manager
T  +61 2 8297 2421
M  0437 725 520
E helina.lilley@au.gt.com

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