The issue of income generation as a mechanism for non-profit financial sustainability has been hotly debated, and opinions have been expresses across the range of for- and against- arguments.  Besides the questions all organisations are asking themselves about how they can generate income to sustain their activities, many other questions are being discussed amongst non-profits.  In a recent article the issue of “attractiveness” is raised, related to whether organisations that generate their own income are more attractive to donors and other funders. Read more…

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It seems that individual giving contributes a very small percentage of most organisations’ income. This is an area of giving with real potential for growth in South Africa.  GreaterGood SA’s Sophie Hobbs spoke to one cause that is getting it right with individuals and shares top tips on raising money from compassionate people.  Read more…

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Article from: Greater Good SA

Non profits beware: there are a number of scams doing the rounds preying on a vulnerable and increasingly desperate sector. From unscrupulous fundraisers to fake call for proposal emails, you need to keep your wits about you and a sceptical attitude to prevent falling for these smooth operators.

It’s hard to believe that someone could be wicked enough to scam a non profit organisation. But, sadly, there are many scams doing the rounds at the moment specifically preying on a vulnerable sector.

Bill & Melinda Gates Foundation email

There have been reports of emails recently that look like they come from the Bill & Melinda Gates Foundation, inviting the recipient to submit a proposal or concept paper for a fee. No matter how legitimate these appear, they are scams. The Bill & Melinda Gates Foundation confirms:

“The foundation does not solicit donations or request any type of administrative or handling charges for its grant applications. If you get a request that appears to be from the foundation for any type of payment, or if you receive an email or communication seemingly from the foundation that you feel is suspicious, please disregard that communication.

To be clear, Bill & Melinda Gates Foundation, Bill Gates, or any foundation employees:

• Do not sponsor lotteries of any kind.
• Do not require/request grantees to pay insurance, handling, deposits, or delivery fees for grant funds.
• Do not offer investment opportunities.
• Do not request conference fees”

No legitimate funder would ever ask a non profit to pay to submit a proposal.

Commission-based fundraising

Some causes have been approached by a fundraiser who says they will raise funds on a commission-only basis. While this is not illegal or fraudulent, it should be treated with extreme caution. It is widely considered unethical to raise funds for charity on commission. Some of the big corporates specifically state that they will not consider approaches from fundraisers like this.

The SA Institute for Fundraising argues: “Commissioned fundraisers will be prepared to say anything about your organisation and your work just to gain favour with donors. What are they saying about you? What is this doing to your hard-earned image? Will this ensure a long-term partnership with the donor – the essence of sustainable and reliable funding.”

This person will be fundraising on behalf of your organisation and will be chasing the money, rather than the relationships that will sustain you. You will be left managing the relationships and living with the conditions set by the funder while the fundraiser walks off with their commission.

The refund scam

A donor contacts you saying they made a donation to your organisation – they will provide false proof of payment – and that they made it in error, can you please refund part or all of it into their bank account. There are a number of variations on this theme, including a fake SARS refund email. Some of them are pure theft scams and some of them are phishing attempts – the scammers are trying to get your banking or other details so they can steal from you.

Nedbank warns: “There is a high incidence of deposit and refund scams taking place; the basis of both is the same.” And according to SARS, “There is a steady increase in email scams and phishing attacks in which the SARS brand is being abused. Members of the public are randomly emailed with false spoofed emails made to look as if these emails were sent from SARS, but are in fact fraudulent emails aimed at enticing unsuspecting tax payers to part with personal information such as bank account details.”

How to stay safe

To avoid falling victim, follow this simple rule: if it sounds too good to be true, it probably is. Be sceptical about any request for money or your banking or personal details. Here are some more tips for staying safe:

• Be extra careful of unsolicited emails that ask for personal or financial information
• Avoid filling out forms in email messages
• Go to official websites rather than clicking on links in an email
• Google the subject of the email – usually it will be listed as a scam on one of the many fraud-busting websites (Hoax Slayer, for example)
• Contact the organisation that is supposedly sending the email to verify if it is genuine
• Read the email carefully, scam emails are often badly phrased. Bad spelling and grammar are red flags.

No matter how desperate you are for funding, remember that your organisation’s good reputation is priceless.

Article from: Greater Good SA

How can my organisation generate an income to make it less reliant on grant-funding? Are investors more attracted to organisations that can generate their own income? Are there some organisations that will never be able to generate an income? Do I need enough income to cover all my expenses? GreaterCapital’s Laurie Scholtz examines these questions in the run-up to our second Knowledge Session: From fundraising to income generation.

Income generation is the latest buzz word that is causing more questions than it answers for non-profit organisations.

Income generators and welfare organisations

There are really two types of organisations within the social development realm. Firstly, you get the income generators, otherwise known as social enterprises, where you have entrepreneurial-minded individuals implementing fully-fledged business models that not only produce sustainable financial returns but also provide solutions to pressing social challenges. Secondly, there are welfare organisations that are also providing solutions to these problems but where income generation is not a part of their core business. This makes them dependent on grant funding to a smaller or greater extent.

Meeting the need

A good example of a social enterprise is the Trust for Urban Housing Finance (TUHF). In South Africa, 7 million households earn less than R3,000 in income per month which means that they can afford bond payments on a house worth about R100,000. Today, there are only 1 million houses that fall within this price range, leaving a defecit of 6 million houses. The need for affordable housing is clear.
TUHF developed a model where they equip emerging construction entrepreneurs with the finances (loan funding) and support to buy inner city buildings in need of regeneration. The entrepreneurs then use the finance to fix the buildings which are then sold or rented to low income households. So not only is TUFH helping to bridge the housing deficit and convert inner-city slums into pleasant living environments but they are also a profitable and growing business.

Business models

The awesome thing about a social enterprise with a good business model is that as the business grows, so does its ability to fund new projects and increase its impact. Contrast this to organisations which rely exclusively on grant funding, which – no matter how successful they are – always eventually spend the money that was allocated to them and must spend considerable time and resources trying to find where the next grant will come from. In my mind, this is what has led to some people believing that all money going into the social development space should be put into income generating models in order to grow that pool of money. In an ideal world this would seem like a good idea.

But we don’t live in an ideal world. South Africa has the highest number of people living with HIV and AIDS in the world. The burden of this disease has resulted in many child-headed households and a large number of orphans. The organisations that work on the ground with these children are doing a phenomenal job in caring for them and helping them to live a better life. To expect this type of organisation to start generating its own income does not make sense.

Focus on core business

When it comes to things like HIV and AIDS, caring for the elderly and enhancing education in rural schools there is often no income to be generated. The organisations working in these areas need to focus on their core business and not on setting up a social enterprise. This is why there will always be a place for welfare and grant funding in South Africa. The social impact that grant-dependant organisations make in the communities in which they work is highly valuable and without them the depth and consequences of South Africa’s social problems would be far greater.

Sustainability

So income generation shouldn’t be a debate. Either the social need you are addressing has the ability to generate income or it does not. Although income generation and sustainability are closely linked, sustainability does not equal income generation. There are many ways to make your organisation more sustainable, without necessarily having to generate an income. Growing a diverse pool of donors, setting aside a small portion of all income in a reserve fund and making sure that you have transparent governance structures and a supportive board are just some of the steps that organisations can take to ensuring their sustainability, whether or not they generate an income.

Sharing knowledge

On Friday, 16 of March 2012 GreaterGood SA will be hosting two online knowledge sessions on income generation and sustainability. The first will be aimed at social enterprises and will give an overview of how to go about setting up a social enterprise, finding funding and other critical success factors. The second session will be for those organisations primarily focused on welfare and will look at the possibilities for income generation but will also focus on other areas of sustainability such as financial reserves and programme development.

These sessions are already full but you can visit The Funding Site for information on future sessions and to download the notes.