For Aussie aid cut casualties, diversify and roll with the punches

Australian notes and coins. How can development organizations cope with funding cuts in the Australian aid budget? Photo by: Theen Moy / CC BY-NC-SA

When Tony Abbott announced shortly after he assumed office as Australia’s prime minister in September 2013 that cutting Canberra’s aid budget would form part of the austerity measures he will be implementing, the Mandala Foundation found itself hanging by a thread.

The only “specialist service” organization focused on providing psychological support to aid workers deployed around the world, Mandala had to find new sources of funding as it became one of the first groups to lose government support. This came not only as a result of massive cuts to the aid budget, but also due to the amalgamation of the country’s aid agency with the Department of Foreign Affairs and Trade — a move that had a significant impact on the funding structure of the Australian aid program.

Before the aid cuts were announced, Mandala was “encouraged to put in a large funding submission,” Michael Sexton, the foundation’s former president and current member of the board, said. But within a matter of months, the organization went from believing it could get more funding to being told transitional funding is being prepared to assist with the structural changes, to completely losing 500,000 Australian dollars ($387,000) in its annual government funding.

“There was a period of time when the factors indicate that we’re getting more funding but the message changed a little. It gradually looked [like] we will be getting less funding,” he told Devex. “But at the time, we were also told that we will be assisted with transitional funding to help the organization adapt to the new format and continue … work in a slightly modified form.”

In the end, Sexton shared, “we didn’t receive any transitional funding [and] the funding was completely cut off in December [2013].”

Mandala survived the loss in government funding and has been able to maintain its operations — albeit scaled down — more than a year after the cuts were announced. How?

Know what to sacrifice

One of the most obvious effects of the loss in funding, according to Sexton, is that the foundation had to streamline its operations.

“The long-term goals are there but [we] have to be more realistic,” he said. “We should also give significance to the short-term goals which is to keep the organization alive.”

A key part of the process is being able to identify which areas can be cut without sacrificing the quality of the foundation’s programs and services. This resulted in a scaling down of nearly all aspects of the organization’s operations and the loss of its advocacy programs, which before the funding cuts were considered “essential in terms of trying to change and improve the level of support in the humanitarian sector in general.”

The employment status of about seven of the foundation’s team members was changed from full-time staff to contract-based as well.

But the main structural adjustment, Sexton shared, was reducing overhead costs “enormously.” These included compensation portfolios and other business costs like rent — a move that essentially pushed the organization to rethink its business model.

“We couldn’t [focus] on some of the advocacy issues, only for those that bring profit,” he said. “It’s really remodeling our business structure … greatly reducing our expenses and [retaining] much of the income as we possibly can.”

Now, Mandala is focusing on its core operations, which are to provide psychological training, and consultancy and counseling services.

Diversify

But streamlining can only do so much to stretch a thin budget. Mandala still had to find additional sources of funding to stay afloat.

Sexton said that one of the things that they did was to diversify their income and funding portfolio. Apart from focusing on programs that bring profit, it also forged agreements with different client organizations.

“We’re continuing to try and develop other avenues of funding. We’ve had fantastic support from our other client organizations in the humanitarian sector so we’re very grateful,” he said, adding that the foundation is still hopeful the government will reconsider and renew its support for the organization.

Corporate donors and philanthropists can be a lifeline as well, although Sexton admitted that “this is easier said than done.” The key is to fully know and understand your organization’s values and core business to make it easier to convince these new donors to provide funding.

“We just can’t wait that funding will get reinstated so we need to diversify,” he concluded, adding that getting buy-in from all stakeholders and partners — from the organization’s board to on-the-ground staff — is essential to ensuring the success of these structural and funding changes.

Has your organization managed to sustain operations despite a significant loss of funding? How were you able to stay afloat? Share your experience by leaving a comment below.

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About the author

  • Lean 2

    Lean Alfred Santos

    Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.