Non-profit organisations typically have both paid and volunteer staff. The quality of the volunteer workforce that an organisation can attract, and the willingness of its paid staff to work under less favourable conditions than in the commercial sector, combine to allow the non-profit organisation to operate in areas which are considered not commercially viable by for-profit firms.

A volunteer workforce brings with it a number of risk management challenges. These include:

• issues about insurance and liability
• availability and rostering
• the balance between qualified and non-qualified volunteers
• the emerging issue which is the potential for skill set gaps which can affect the organisation's ability to obtain and/or retain government funding under the new commercial arrangements that are being applied in the non-profit sector

Areas where a volunteer workforce may lack the necessary skills to thrive in the new funding environment include:

• financial management and reporting
• tendering and contract management skills.

These risks are greater given the increasing reliance by government (a major source of funding) on the more commercial methods of funding service provision.

The diagram below represents the range of funding models used by governments when dealing with the non-profit sector.

Under traditional block grant and tied grant funding arrangements, non-profit organisations were required to do relatively little by way of formal application processes, acquittal of funds and reporting.

As the government approach has moved along the continuum towards more commercial arrangements, non-profit organisations have been expected to comply with more rigorous and sophisticated application, acquittal and reporting processes.

For many organisations, this change in Government expectation has been a major source of risk. The volunteer workforce, and frequently the committee of management or board, do not always have skill and experience (or even interest) in making formal applications, preparing tender submissions, managing more complex financial reporting arrangements and providing detailed milestone reporting.

Sometimes Government has realised that it must take an assistance and education role with these non-profit providers, or else it runs a very real risk that there will be no provider available to deliver the services. This is particularly true in regional, rural and remote areas, and for services which the regular commercial market place does wish to provide.

An example of good practice in government and non-profit organisation working together to minimise the impact of this risk can be found in the Australian National Audit Office Performance Audit No 18 1998-99 Accounting for Aid – The Management of Funding to Non-Government Organisations – Follow Up Audit.

AUSAid has provided training to non-profit organisation staff in order to assist them to comply with Government expectations and to minimise the risks associated with untrained and/or inexperienced staff making decisions about the expenditure of large sums of money. This approach has had positive risk management consequences.

Whenever a provider market is limited, under-developed and/or unsophisticated, any resources invested in improving the standard of the providers can make a major contribution to the reduction of risk for both the purchaser and provider of the service.

The use of AUSAid funds to provide training for non-profit organisation staff also recognises that, from the Government perspective, substantial risk management benefits can be achieved. These include:

• having a more sophisticated field of providers submitting high quality proposals
• having providers able to manage funds according to higher standards of financial record keeping
• probity and improved likelihood of receiving clear, detailed and timely reporting from the provider

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