Recent media reports suggest renewed interest in the fact that South African NPOs are under pressure from both funders and the government. By some calculations as many as 25% all of South African organisations within the last year alone have been forced to close their doors.
However, raw numbers don’t tell the whole story, says Shelagh Gastrow, Executive Director of Inyathelo. "The reason for the closures could be multiple. Many organisations are single-issue campaigns and close once the problem has been dealt with; others are focused on a single leader who perhaps has moved on; while many are not funding-based at all, but work on membership and volunteers and have become defunct over time.“
In this political climate, government officials feel the need to be seen as “cracking down on corruption” and making sure NPOs distribute their funds as advertised, especially if these funds come from government grants. However, increased government scrutiny is somewhat of a prickly pear in the sector, as many point out the necessity of maintaining an independent civil society that can serve the function of governmental oversight and fight for issues not necessarily on the government’s political agenda.
Increasing governmental pressure on NPOs to be compliant with regulations has often been cited as one of the reasons for these large numbers of closures. Complicated procedures, and compliance with rules more appropriate for businesses rather than NPOs, places great burdens on small, understaffed, and cash strapped organisations.
The fact that many small organisations are dependent on a single funding source, such as Lottery monies, only compounds the problem. Simply put, dependence on a single funding source is never good idea.
Says Gastrow, “The issue of the financial resourcing of non-profit organisations is a strategic issue that has to be considered by their leadership and their boards. The basic principles of budgeting for sustainability are: a diversity of funders based on the building of good relationships with potential supporters; making savings to provide for unexpected demands or long-term sustainability; and generating income either through fees or services.”
“There are many NPOs that do not undertake the basic fundraising steps: research into potential donors to ensure that there is a match between the donor's interests and the activities of the organisation; creating awareness of who the NPO is and what it does through marketing efforts and social media where possible; building genuine relationships with possible supporters; and ensuring that any donations received are carefully managed and reported on in order to build further trust and commitment on the part of the donor.”
Even the act of looking for funders must be approached strategically. “Sending out large numbers of proposals to donors who have no knowledge of the organisation is a waste of time and energy -- slow but sure fundraising practice based on building relationships is the only sustainable option in the long term," says Gastrow.
In the increasingly competitive NPO environment, it is vital to build trust. This is done through transparency and full disclosure as to how monies are spent. It’s done through cultivating a brand for your organisation with of a consistent message and a media presence. And by cultivating relationships with like-minded organisations and donors – past, present, and future.