Governance and financial sustainability of NGOs in South Africa (Part One)

Thursday, 18 June, 2020 - 15:35

A study focused on governance and financial sustainability of NGOs in South Africa was conducted as a doctoral thesis at the University of the Western Cape. The primary objective of the study was to evaluate existing governance and financial arrangements of NGOs, CBOs and CSOs with the view to developing alternative approaches to governance and financial arrangements with specific reference to lessons of experiences for South African NGOs.
 
One of the study’s research findings suggests that the long-term sustainability of the non-profit sector is linked to the legislative framework of the country in which the NGO operates. In South Africa, the Non-Profit Organisations Act (Act 71 of 1997), lays out in great detail a framework for the creation and operation of civil society organisations. Literature reveals that local and international funding organisations increasingly demand that funding recipients be registered as non-profit organisations as evidence of compliance with the basic criteria of authenticity as bona fide organisations. It provided an analysis of governance and financial sustainability of NGOs by positing theoretical knowledge against empirical evidence attained.
 
The researcher concludes the following:

In relation to governance, and in particular the legal status of organisations, local and international organisations increasingly demand that funding recipients be registered
as non-profit organisations.

  • The executive management structure of an NGO should be clearly defined where roles, functions and responsibilities are understood by everyone in the organisation.
  • The composition of the NGO board should be centred on the skills and capacity board members bring to the organisation. Board members should add value to an NGO. 
  • There should be a clear distinction between the role of the CEO and the chairperson of the governing board. 
  • Organisational policies should be properly constructed and prove adequate in governing an NGO. When it comes to NGO projects and programmes, these should be evaluated against clearly defined objectives at regularly determined intervals. 

NGOs, in relation to the state, can play a number of very important roles. It is imperative for the state to provide a conducive, legislative environment in which NGOs can function at optimum level. The state can also act as a conduit for NGO funding.
 
With regard to financial sustainability, the researcher concludes that NGOs should have a diverse funding base built on a properly constructed fundraising strategy. NGOs should have a fundraising committee or an assigned fundraiser. Self-financing strategies proved a viable funding solution for NGOs.
 
In relation to NGOs’ income and expenditure endeavours, a sustainable balance should be sourced between the two. Good financial management practices will help NGO’s manage to make effective and efficient use of resources to achieve the organisation’s objectives. Proper financial controls will assist in this regard.
 
This study traces the governance and financial sustainability of NGOs/CBOs/CSOs in general and South African non-governmental organisations in particular, with the intention of developing improved options for the future regarding the sustainability of the NGO sector in South Africa, especially as regards financial management and governance. Accordingly, this chapter aims to develop an appraisal framework for the sustainability of NGOs.
 
A theoretical analysis of existing literature pertaining to governance and financial sustainability of NGOs revealed that a generally agreed upon appraisal framework assessing the long-term sustainability of NGOs did not exist, but was indeed required by a number of NGO stakeholders. Research revealed that in terms of sustainability, it is particularly necessary to assess an NGO’s legal status, its leadership capacity, the roles and responsibilities of the executive management, the role of the NGO board in its governance processes, and the extent to which principles of good governance are practiced within the organisation. These key criteria proved the most important in the governance endeavours of NGOs.

Furthermore, research revealed that sources of NGO funding should be assessed. Self-financing strategies and practices should be appraised. It was evident that fundraising strategies, good practices in financial management and financial control mechanisms should be assessed, as these key aspects were proven to impact on the organisation’s financial sustainability.
 
In context of the above, an appraisal instrument has been developed in this study as a result of the theoretical assessment as well as case experiences. This appraisal instrument, formulated for the South African NGO sector specifically, has been applied to the case studies as presented in Chapter One, Section 1.6. The results of this pilot study are presented in Section 7.4 (Also refer to Annexure B). The purpose for initiating this pilot study was to highlight the strengths, weaknesses and areas for future improvement.
 
By ROZENDA FRANDELINE HENDRICKSE
 
THESIS SUBMITTED IN FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE DOCTOR OF PHILOSOPHY IN THE FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES, SCHOOL OF GOVERNMENT, UNIVERSITY OF THE WESTERN CAPE
 
SUPERVISOR: PROFESSOR CHRISTO DE CONING

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