Australian charity funds hit in global financial crisis

Australian charity funds hit in global financial crisis

31 January 2010

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Australia — FAILED investments during the global financial crisis, increased spending and a donation squeeze pushed big Australian charities into the red last year.

The Wesley Mission, the Brotherhood of St Laurence, the Smith Family, the Benevolent Society, Cancer Council NSW and the Red Cross posted losses.

This news comes as the Federal Government prepares to receive a Productivity Commission report recommending greater financial transparency in the not-for-profit sector.

An analysis by Sydney financial expert Sven Restel, from Wise Owl, found several charities took serious hits on investments in share and property markets that slumped during the GFC.

The Cancer Council’s investments declined by $5.8 million, or 13 per cent, causing a loss of $5.34 million compared with a $3.2 million profit in 2008.

The Brotherhood of St Laurence had a net $1.4 million loss after equity investments declined by eight per cent in 2009.The Benevolent Society posted a net loss of $2.1 million, almost twice as much as in 2008, after a drop of nearly $2 million in investment income.

Falling revenue caused the Smith Family to post a net loss of $2.75 million against a profit of $715,000 in 2008.

The Wesley Mission finished $11.6 million in the red after a $1.7 million profit the previous year, mainly because of a rise in expenditure.

In contrast, the Red Cross had a big lift in revenue because of the Victorian bushfires but still posted a $7.4 million loss, almost twice as big as in 2008.

“It appears charities that had funds invested lost money on these funds and this had to be reported as an accounting loss, thus dragging down net profit,” Mr Restel said.

“Some, such as the Benevolent Society and the Brotherhood

of St Laurence, have quite large investment funds and thus have greater exposure to interest-rate changes, currency moves and changes in equity markets.”

Charities said the investment losses were now being recouped as the financial markets recovered.

A spokeswoman for Cancer Council NSW said that in the past six months, all of the 2009 losses had been recouped and further gains made.

“We also feel it’s important to look at investments as a long-term strategy, not just as single-year outcomes in isolation,” she said.

Wesley Mission’s Andrew Watson said the charity faced significant challenges during the global financial crisis.

“Despite this, our capital value was not affected. This is reflected in the fact our cash position grew by approximately $2.3 million to a balance of $43 million.”

Paul Henderson, from the Smith Family, said the charity had anticipated 2009 would be a tough year.

“Although we did report a deficit of $2.75 million for the year to June, 2009, this reflected a strategy of investing in our programs at a time when there was great need,” Mr Henderson said.

“It was effectively an application of reserve funds that had been built up over the past four years.”

A spokesman for the Benevolent Society said client services had not been affected by the unrealised losses.

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