On the Question of Non-Profit Sustainability
It is commonly accepted that going for a job interview is a very humbling and stressful thing to do, but how many people think about how stressful and heart-breaking it is to constantly have to beg for money? I am not speaking of standing on the street corner with a tin mug (although it may as well be) but of fundraising…
There are those who love doing fundraising and are very good at it, but they are generally very well paid, and therein lays the rub for a charitable organisation like the Little Fighters Cancer Trust… we cannot afford the services of a full-time fundraiser!
I was referred to a few articles regarding the sustainability or self-sufficiency of Non-Governmental Organisations (NGOs) earlier in the week, and I must say that they made absolute sense and I take my hat off to Vu Le, the author of The Sustainability Question, Why it is So Annoying and Can we all just admit there is no such thing as non-profit sustainability? for putting it all out there…
To summarise the two articles very quickly (but please do read the complete articles), what they say, in a nutshell, is:
“How will you sustain this program or project when funding from the So-and-So Foundation runs out?” is the most hated question asked in virtually every grant application because:
- Sustainability is in large part determined by funders, not by the non-profits, and due to the nature of grants, it usually takes quite a few to run a project every year (the general period of a grant).
- Sustainability depends on the whole organisation being strong, yet funders do not like providing General Operating Funds. General Operating Funds include offices, stationery, the salaries of the people who work there, including that great dedicated fundraiser… With more funding LFCT could afford the extra staff member that is desperately needed so that we can do more where it is really needed – in the lives of our Little Fighters and their families.
- The non-profit model is unique in that success at carrying out our missions leads to increasing costs, not revenues. The more successful a program like LFCT is the more clients it will serve, therefore more staff will be needed and other expenses will also increase, without a proportionate increase in funding support.
- Not every program that literally changes people’s lives for the better can become self-sustaining. The Little Fighters Cancer Trust for instance, supports Children with Cancer and their families, and most of the time those whom we support are the poor and the needy, so there is very little scope for income-generation to create sustainability. There are some ways this can be done, but without the funding to kick off such projects we are sunk before we even begin.
- Funders’ “tough love” stance is inexplicably the thing that prevents sustainability. The restrictions and short-term nature of grants means that non-profits have to continually put things on hold to reapply for funding, which essentially means that vital momentum is lost as they scrabble around for funds to continue doing the amazing jobs that they do. This too is very true at the Little Fighters Cancer Trust as we are constantly getting new requests for help therefore constantly have to scrabble around for more funding instead of just being able to DO!
- The pressure on non-profits to be self-sufficient can often lead to vital time and resources being wasted. NGOs often try to tackle projects they are actually not equipped to undertake in an effort to satisfy the funders’ need for sustainability, thereby wasting two of the most precious resources of all; time and effort, instead of helping people. We are a tiny team ding the impossible and are forever thinking of ways to become “sustainable” but how? Where? With What?
It should be remembered that most non-profits perform functions in society that Business and Government either just ignore or are incapable of performing. This is why funders and donors should see the relationship a more of a symbiotic one instead of a parasitic one; one has the means and the other has the know-how, and it is only by working in unison that society’s deepest needs can be fulfilled.
On the Question of Funding Operating Costs
The non-profit sector faces many challenges globally as the need for human and social services is on the rise, and government funding is in decline in areas from the arts to community and economic development.
In South Africa there is an added disadvantage, as is experienced by the Little Fighters Cancer Trust and that is a political one; we receive no government funding whatsoever because we refuse to turn away any Child with Cancer and their family due to race! This unfortunately makes us ineligible for government funding – go figure! Our response is that the government can keep their funding in that case – how are we expected to tell a family with a child who has just been diagnosed with cancer that we cannot help them because they are white?
Most of the funding for which we apply falls under the banner of “operating costs” because although we have “projects” they are actually not projects under the strict definition of projects (A project is temporary in that it has a defined beginning and end in time, and therefore defined scope and resources) whereas what we do, like our Bags of Hope, Snug as a Bug, and various other “projects” are all ongoing… and many funders, especially local funders, do not like to fund “operating costs” – possibly because they are not really sure what exactly falls under the heading of “operating costs” or just do not understand the concept of funding non-governmental organisations.
Debunking the Myths
|“We shouldn’t be supporting our grantees’ operating costs.”||Like other organizations, non-profits need working capital to succeed. If they under-invest in salaries and other infrastructure costs, they will be less effective.||LFCT serves in excess of 1500 Children with Cancer and their families Nationally with only 3 staff members and desperately need more staff but cannot afford to employ more.|
|“This will only encourage grantees to increase spending on salaries, etc.”||Recent scandals involving non-profit spending have painted a misleading picture. Though in isolated cases non-profit executives have received exorbitant compensation packages, the overwhelming majority of non-profits invest too little in salaries and operating costs. Tom Tierney makes the case that non-profits need to raise executive salaries to meet the looming leadership gap.||Even those working for a non-profit need to earn a living wage, and LFCT is audited TWICE annually.|
|“We’re adequately supporting non-profit infrastructure through the overhead associated with our project grants.”||Grant makers rarely cover all associated direct and indirect costs of funded projects. In some cases, this is because non-profits lack the capacity to account for such costs accurately. More often, it is because the percentages grant makers allow are arbitrary and too low.||As previously stated, LFCT does not really have projects hence we struggle hugely to garner sufficient funding on a large scale because our funding is seen as being “operating costs”|
|“Supporting projects ensures a better fit with our mission.”||The alignment between the grant maker’s goals and strategies and the grantee’s work is a key consideration. But even if a grantee’s work aligns with only one aspect of the grant maker’s mission, general operating support is still a viable option. If the grantee is doing important work that supports one of the foundation’s goals, it may be a candidate for general operating support.||Helping Children with Dread Diseases, especially those without access to medical aids in South Africa (most of the citizenry) should be of paramount concern to funders. This is a Human Rights case; they have no choice in the matter.|
|“By providing general operating support, we are going to reduce our influence and our impact as problem solvers. We can’t help shape programs anymore.”||If a grantee contributes to a grant maker’s mission and goals, increased general operating support can lead to greater impact for both parties. General operating support also can strengthen the relationship, leading to more influence for the grant maker and a more productive partnership. Instead of supporting part of a program, the grant maker is contributing to the organization as a whole.||A company that offers substantial funding would make a HUGE difference to what we could do, and remember, our Little Fighters are YOUR future clients/customers.|
|“General operating support grants are not as accountable as restricted project grants.”||Because project grants are designated for a specific purpose and a specific set of activities, it is easier to track those funds. However, if you are interested in understanding the organisation’s progress or outcomes, there is very little difference in accountability between project and general operating support. In both cases, the grant maker needs to work with the grantee to design evaluation questions that clarify the impact of the grantee’s work.||Our work speaks for itself and we have many references and testimonials as to how much of a difference we make.|
|“General operating support causes grantee dependency and ultimately hurts sustainability.”||General operating support can help non-profits build the fund-raising, planning and other systems they need to diversify their funding sources and sustain their organizations over time. That said, the vast majority of non-profits will always be dependent on grant makers and other donors to support their work. A grant maker’s chief concern should be to ensure that grantees have the support they need to make a difference for the communities they serve.||We need to be able to concentrate on giving aid and support to our Little Fighters and their families and not spending half of our time chasing money to allow us to give this vital support.|
How can grant makers expect non-profits to deliver on their missions when many of them are struggling just to stay afloat? How can grant makers expect non-profits to perform effectively when they don’t have the funds they need to invest in decent salaries, technology and other infrastructure?
“If an organization has resources to create a strong infrastructure and flexibility to build their capacity, they can then ensure that the proper services are being offered to their target audience,” said Catherine Brozowski vice president of programs with the Santa Barbara Foundation
“It has been mind-boggling how much valuable staff time it takes to slice and dice information to fit different funders’ particular formats and requests.” Cynthia Gair, director of portfolio and field Advancement, REDF (formerly the Roberts Enterprise Development Fund)
Pamela David, executive director of the Walter and Elise Haas Fund in San Francisco: “[A]n underlying assumption in many funder/grantee relationships is that the funder can’t trust its non-profit partners to not misuse unrestricted funds. Yet, the result of a steady diet of restricted project-based funding is non-profits hobbled in their ability to strengthen their infrastructures, have flexibility to respond to new or changing conditions, plan for the long-term, invest in staff and technology – all those things that any business needs to do to be successful over the long haul.”
In a recent study, The Center for Effective Philanthropy (CEP) has found that foundation CEOs see general operating support as more likely than other types of support to have a positive impact on grantee organizations. However, nearly half prefer to provide program support, often because they believe it is easier to connect their grants to specific outcomes.
From the CEP study:
“Program support is preferred, as it typically provides more clarity on expectations in terms of performance and impact,” wrote one CEO.
“Unrestricted support is more comfortable to the grantee,” another CEO wrote, “but less demanding…. It is unusual to find a grantee that naturally collects [mission impact] data in a meaningful way.”
Other reasons cited by those who prefer to provide program support include board pressure, fit with foundation mission, lack of familiarity with grantees, and concerns about grantee dependence.
“By definition, grantees are reliant upon our resources, and unless they create a self-generated revenue stream, their dependence on you will just be transferred to another funder.” Paul Shoemaker Executive Director, Social Venture Partners Seattle. Shoemaker believes that providing reliable funding should not be seen as fostering dependence; rather, it reflects the fact that non-profits require working capital to carry out their missions.
In “Core Support,” the Heron Foundation noted that concerns about fostering dependence have led some to suggest that general operating support, if offered at all, should be time-limited in some way, with the goal of helping the non-profit achieve self-sufficiency. Heron’s response is that “very few grantees have achieved this exalted state.”
Posted on 10 August, 2015, in Articles, Blog, Fundraising and tagged funders, fundraising, grants, LFCT, Little Fighters, NGOs, Non-Governmental Organisations, non-profit, self-sufficiency, south africa, sustainability. Bookmark the permalink. 1 Comment.