While Australian governments generally acknowledge that First Nations organisations (FNOs) have better reach into First Nations communities than mainstream not‐for‐profit (NFP) organisations and governments, as we document in this paper, a survey of community‐controlled FNOs in significant urban areas in New South Wales (NSW) suggests that funding and administrative arrangements in the era of New Public Management (NPM) are at odds, and in some instances, actually undermine the effectiveness of FNOs. To explore and gain an explicit insight into the potential tensions in, contradictions with and constraints of NPM on governments supporting and realising the full potential of FNOs in achieving community outcomes, this paper turns its attention to the results of a survey designed by senior position holders from six community‐controlled FNOs in the Greater Sydney region and three academics. The survey was designed to examine the relationship of the ability of FNOs to act in the interests of their community members with the normalisation of NPM as policy discourse and practice across all layers of government (Federal, State and Local). Urban areas within the state of NSW as its focus, the core findings from the survey suggest that in the NPM era, urban FNOs face numerous difficulties in realising their community mandates and simultaneously guaranteeing their sustainability for the future. The findings suggest that rather than extending the capacity of FNOs and their reach into their communities, NPM policy structures and mandates create increased administrative burdens, precarity and fragility, as well as decreased organisational autonomy and self‐determination.