In the ever-evolving sphere of charitable giving, the decisions made by key international players can have far-reaching consequences. One of the most significant and widely discussed recent developments has been the reduction of foreign aid by the United States. While you may think the immediate effects of this are limited to the United States, the repercussions are being experienced much further afield, including by Australian charities. This article explores the multifaceted impact of funding cuts by the United States Agency for International Development (USAID) on Australian charities, examines both the immediate and anticipated longer-term implications, and considers how the sector is responding to these challenges.
USAID cuts in perspective
The United States has long been a key player in the sphere of international aid, spending an average of $51.4 billion each year on foreign aid between 1946 and 2023 according to the US Council of Foreign Relations. These funds have been used to support a wide range of causes, from disaster relief and health initiatives to education and poverty alleviation. This financial support is often delivered through a combination of direct assistance from government to government, grants provided to international organisations and funding administered to NGOs and charities.
However, in recent times, there has been a significant shift in US foreign aid policy. The Trump administration’s decisions to pause, reduce and in some cases halt foreign aid spending has had far-reaching consequences. These funding cuts have impacted not only the immediate recipients of USAID but have also created ripple effects throughout the entire international development sector. Australian charities, which often rely on collaborative projects and shared funding streams, have felt the strain as the overall pool of available resources has diminished, making it more challenging to deliver vital programmes and support to communities in need.
How USAID cuts impact Australian charities
Australian charities, particularly those engaged in international humanitarian work, are deeply embedded in an international network of partnerships and funding streams. The pool of funding supporting these charities is often varied and diverse, relying on a mix of government grants, private donations and funding from international partners, including US-based entities and organisations which receive significant US contributions.
As part of a global charitable network, the reduction in USAID has led to a series of interconnected consequences for Australian charities. For example:
Many international development projects are co-funded by multiple donors. When the US reduces its contributions, the overall pool of available funds diminishes. This often forces charities to scale back their programmes, delay the launch of new projects, or, in some cases, cancel activities altogether.
With less money available globally, Australian charities will find themselves in more intense competition for funding.
The unpredictability of international aid flows has led to delays and disruptions in program delivery. Charities working in sectors such as health, education and emergency response have reported difficulties in maintaining continuity of services, particularly in regions where USAID was a significant component of funding.
Early evidence of impact
While the full impact of USAID cuts is still unfolding, there is already evidence Australian charities are feeling the strain.
The Australian Council for International Development reported, following the 90 day freeze in aid funding on 20 January, “Australian NGOs and their partners have had to reduce operations and staff with dire consequences to local communities that are now no longer receiving essential healthcare, education, food or other assistance”. The report later detailed “[a]t least 20 partner organisations and/or country offices of Australian NGOs have closed. Some local organisations have also had to close their doors permanently.”
According to the Lowy Institute, organisations working in the Pacific and Southeast Asia (regions which have historically benefited from substantial USAID) have reported a significant reduction in available grants for areas such as health and education.
International organisations with a presence in Australia have also been impacted. For example, recent US recission packages have resulted in a $142 million reduction in funding to UNICEF, further compounding the challenges faced by those working to support vulnerable communities.
Legal and regulatory considerations
For Australian charities operating overseas, the legal and regulatory environment is a critical consideration. The ACNC External Conduct Standards set out key requirements for registered charities operating outside Australia. These standards are designed to help ensure Australian charities remain accountable, transparent and responsible in their overseas activities, particularly in relation to the use of funds, the protection of vulnerable individuals and the management of risks such as fraud and terrorism financing.
While currently the ACNC estimates 6% of Australia’s registered charities operate overseas, some may look to ramp up their fundraising activities or seek new international partnerships as charities adapt to the challenges posed by USAID cuts. In doing so, it is important to remain mindful of obligations under the ACNC External Conduct Standards. More information is available in our article ‘New standards now apply to charities operating overseas (or working with others operating overseas) - Are you compliant?’.
Charities seeking to increase their fundraising activities must also be aware of the legal requirements which apply, including state and territory fundraising laws, as well as the need to ensure all fundraising communications are accurate, transparent and not misleading. Charities should ensure their fundraising practices are compliant with all relevant laws and best practice guidelines.
Broader sector implications
The impact of USAID cuts extends beyond individual organisations and projects. It has broader implications for the Australian charitable sector as a whole:
As international funding becomes more uncertain, Australian charities are increasingly turning to domestic sources of support, including government grants, corporate partnerships and individual donors. This may lead to greater competition within the sector, with more organisations competing for a limited pool of resources.
The challenges posed by declining international aid may also encourage Australian charities to explore new models of collaboration, such as joint ventures or mergers, to pool resources and expertise.
Recognising the broader implications of international aid cuts, many Australian charities are stepping up their advocacy efforts, both domestically and internationally. There is a growing pressure put on the Australian government to increase its own aid commitments and to play a more active role in supporting global development initiatives.
Looking ahead
The reduction in USAID is part of a broader trend of uncertainty in the global aid landscape. Other major contributors, including the United Kingdom and European Union, have also reduced aid budgets in recent years. This has created a more challenging environment for charities operating internationally, with greater volatility and less predictability in funding sources.
To navigate these uncertain times, we recommend Australian charities prioritise adaptability and resilience, focusing on strategies such as:
Reducing reliance on any single donor or funding stream. This may include exploring new partnerships with the private sector, other charities and local governments in the countries where they operate.
Investing in the skills and capabilities of local partners and communities to improve the internal sustainability of programmes despite fluctuations in international aid funding.
Demonstrating the effectiveness and impact of their work, which may be increasingly relevant as donors seek to maximise the value of their contributions.
Exploring opportunities to work together to share resources, knowledge and advocacy efforts, increasing their collective impact.
The ripple effects of USAID cuts are being felt acutely by the international community, including charities based in Australia. While the challenges are significant, they also present an opportunity for the sector to innovate, collaborate and build greater resilience. By adapting to the changing global aid environment, Australian charities can continue to play a vital role in supporting vulnerable communities, both at home and in the international sphere. The coming years will require careful planning, creativity and resilience to prioritise the provision of aid to those who need it most, regardless of how international policies may shift.