13 Steps to Develop a NGO Financial Sustainability Strategy

ngos sustainability financial management
Wednesday, 22 August, 2007 - 05:43

Frank Julie, independent development consultant, has compiled a comprehensive guide for developing a NGO financial sustainability strategy which includes the development of research and communication strategies, and the allocation and expenditure of budget for NGOs. 

1. Firstly, determine what your current budget of expenditure is, i.e. start with what you have. Break this down into:

  • core operational expenses;
  • programme/project expenses;
  • capital expenses.

2. Further break down your core operational (or overhead) expenses into what is the biggest (and most important) expense and the smallest (and least important) expense.

3. Develop a minimum budget (what you need to cover to survive) and a maximum budget that will allow you to deliver on all your programme objectives as well as allow you to put away some financial resources into a reserve/sustainability fund.

4. Now make a list of your current external donors and how much they are currently funding and over which period. Please note the commitment of those donors who have pledged to continue funding and over what period.

5. Make a list of your own income activities and how much income is generated per annum. Determine which income activities are financially viable and which are a drain on your financial resources.

6. Determine the percentage of own income in relation to external funding. Set yourself an objective of increasing own income by a certain percentage that is achievable e.g. from 10% of your total core operational budget (excluding programmes) to maybe 30% over 3 years.

7. Now develop plans how this will be achieved over those 3 years e.g. increasing fees for services, increased  marketing to attract more customers, utilizing investments to maximize interest, diversifying services, develop more income generating activities without becoming distracted from your core focus, etc.

8. Ensure that in all your budgets for programme expenses the donors make a sizeable contribution to administration costs, at least 10%-20% and reflect salaries as far as possible as a programme/project implementation/coordination.

9. Develop a cost containment strategy i.e. how to minimize the cost of running your organization, e.g. staff containment, multi-skilled staff members, use of volunteers, negotiating discounts from key service providers, e.g. external auditors, insurance companies, bank, etc.

10. Make a list of your potential external donors and plan when to submit funding proposals to them. Categorize the potential donors in order of high potential and low potential. Focus your energy on the high potential donors.

11. Develop a comprehensive research strategy and communication strategy to cultivate unknown donors. Remember, this is a continuous process and cannot be started when current donors contracts come to an end. Research can include Internet browsing, accessing donor directories, collecting annual reports of organizations operating in your sector, referrals by your strategic partners, scrutinizing relevant newspapers, telephonic enquiries, attending strategic forums, etc.

12. Make a list of your strategic partners and indicate what value they are adding to your organization and its programmes. Try to convert the value into rand and cents so that it can be reflected as a saving in your budget of expenses.

13. Develop a risk management strategy in the event of funding gaps, i.e. how will you respond should promised funding be delayed due to unforeseen circumstances? Will you cut or withhold salaries, apply for a bank overdraft, borrow funds from other programmes/projects or maybe use your reserves?

- Frank Julie is an Independent Development Consultant of Frank Julie & Associates.

- Picture courtesy of Hitchens Watch.  

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