It was sad to learn about the loss of yet another wonderful Aussie charity.

Canberra-based OzHelp has provided mental health services for the past 23 years. In the 2022-23 financial year alone, OzHelp’s 28 staff connected 280,000 individuals across the country with their services, information tools and awareness campaigns.

On Friday, 26 July, OzHelp made its nine remaining staff redundant and closed down the foundation’s counselling and wellbeing services and programs. A few days later, the board appointed RSM Australia Partners as administrators.

So what went wrong? Why did the charity run of of money?

In a statement OzHelp said administration was the only responsible option in the face of the Foundation’s “long-term deteriorating financial position.” The decision was made after, “a number of measures in recent months to increase revenue and reduce costs by scaling back services and offering redundancy packages.”

Foundation board chair Leanne Wells blamed ‘mission creep’ (taking on work beyond its original scope), COVID-19, a costly service delivery model and increased competition for government support as reasons for OzHelp’s deteriorating financial position.

“It’s a very challenging economic environment, and unfortunately we are seeing more entities, including not-for-profits, seeking expert assistance to help them navigate both legacy and short-term financial challenges,” RSM Partner Jonathon Colbran said.

RSM’s review of OzHelp’s financial statements and records showed less than 15 creditors were owed approximately $1 million, with the majority of money owed to the Commonwealth and ACT Governments in relation to grant funds received but not acquitted. OzHelp’s 2023 financials show over $1m in total liabilities comprising primarily of trade creditors, employee liabilities, bank loans ($273k) and unspent grants (only $82k).

Note: the black line is the sector average for large charities under $3m total revenue 

OzHelp’s financial statements show revenue grew to $3.5m in 2023, but years of trading deficits (including a restructure in 2019) eroded net assets and liquidity (ability to repay debt) over time. Of course, we really don’t know what happened at OzHelp until RSM has combed through the books.

More broadly, a strategy, financing plan and case for support are the fundamentals for growing sustainable income. And a cash reserve will help to protect charities in the event of unexpected income losses or cost increases. But challenging and controlling nonprofit costs, and planning for contingencies, is also important. This includes:

• legacy or ‘pet’ projects which lose money
• failing to fully recover both direct (project) and indirect (non project) costs (possibly, a culture of over delivery)
• high fixed costs (incl employees) and lumpy revenue
• organisational complexity and inefficiency
• taking on non-mission aligned projects (mission creep) to retain staff, or chase money

Visually mapping and understanding program impacts, costs and profitability is a great way to start a healthy evidence-based conversation. It can create a ‘light bulb’ moment. Several charities I’ve worked with made tough decisions on previously “untouchable” projects, which released resources for higher impact, mission-aligned programs.

If you’d like to start a conversation about your charity’s strategy, financing, costs and impact please reach out for a free ‘no strings’ consultation.