Inyathelo in the Headlines

Creating sustainable NPOs through a mixed funding model - 01 Sept 2013 - Corporate Social Review

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While there is surely a funding crisis in the NPO sector in South Africa, the problem is not only about the lack of funds, but the sector's inability to attract resources and ensure diverse funding sources.

Most organisations in South Africa raise funds through proposal writing. I nyathelo's experience has shown that unless this is paired with a relationship of trust with a potential donor, it is unlikely to be successful. Attracting financial support involves a more holistic view of what an organisation needs to have in place to attract funds. This includes good governance; an outward-facing leadership that is aware of the need to build committed relationships with supporters; excellent financial management with the capacity to plan for the longer term and to provide financial reports as required; as well as effective communications and marketing so that the public and potential donors understand what the organisation does and what it stands for. This has to be coupled with basic fundraising skills such as undertaking useful research into potential donors; project and programme development based on the organisation's plans and objectives; clear proposal writing that is donor specific; and the capacity to ensure that the donor experience with the organisation is trouble free.

A key area of non-profit funding that is a major weakness that of operational costs. Many donors refuse to fund overheads and this is something that simply has to change. As a result of this position by many donors, organisational budgets are often cut to the bone and are therefore unrealistic in terms of what can be achieved. At the same time there is a view in the corporate sector that business methodology should be used by non-profits to enhance their sustainability. With this refrain in mind, it becomes difficult to explain why corporates and some philanthropic entities limit their support to direct project costs only — there is no business that does not have funds for personnel, marketing and communications, for research and development, for staff development, for good governance, for maintenance and for computers. Yet, there is the expectation that this is where nonprofits do not require support. Even more confusing is the fact that corporate donors expect the highest professional service from non-profits with tough narrative and financial reporting, logic frameworks, theories of change, evaluation reports, social impact surveys etc. How can this be achieved without any overhead support? How can an organisation envisage its future, take risk, be innovative when the building blocks are prohibited? A sustainable organisation should ensure that every project pays its way in the organisation. This means that the concept of overheads should actually disappears these costs should all be fully absorbed in any project.

Diversity of funding is a critical component in creating sustainable NPOs. Besides a diversity of donor funding from philanthropic foundations and trusts, corporate investment and individual giving, NPOs should be exploring fee generating activities through the provision of services or consultancies (as long as this does not lead to mission drift); the growth of reserves or endowments through such income generating activities and careful money management that would ensure the best interest rates are earned on available funds. A mixed funding model with diverse support, coupled with good financial management and engagement with donors regarding overheads, will go a long way to ensuring sustainable organisations.

Shelagh Gastrow
Executive Director
Inyathelo: The South African Institute for Advancement