CAPACITY BUILDING TRAINING FOR U-TENA

BYTIMOTHY OSIRU OKATTA MSW

14/11/14

1. To demystify financial sustainability. (Definition)

2. To explore the history, and justification for financial sustainability

3. To explore different fundraising strategies. 4. Steps to develop a financial sustainability 5. Indicators of financial sustainability 6. The role of program staff and beneficiaries

in financial sustainability7. Case studies

The word sustainability is derived from the Latin sustinere (tenere, to hold; sub, up). Sustain can mean “maintain", "support", or "endure”.

The term can however be used as a concept of endurance, long-term and maintenance of well being of different aspects of life.

Financial sustainability is “the ability to generate resources to meet the needs of the present without compromising the future” Bell and others, 2010

that of the Brundtland Commission of the United Nations on March 20, 1987: “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

FS is aka -Financial health- has been defined as “the likelihood that the…organization might continue to produce…over time” (Ashley and Faulk, 2010, p. 45)

Public Benefits Organizations- Organizations of public good involved in specific activities related to public good as described by the law, and be sufficiently transparent in its activities, governance and finances. poverty reduction,

female emancipation and/or gender equality, environmental sustainability and good governance.

Since creation…. And God blessed them, and God said unto

them, Be fruitful, and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moveth upon the earth. Genesis 1:28

This concept became more visible after the World Commission on Environment and Development was formed aka Brundtland Commission in 1987. its main role was “To rally countries to work and pursue sustainable development together”

Donor funds are never sufficient. To break the donor dependency syndrome

and free orgs from donor dependency trap. To generate more funds to meet the

increasing operational costs due to increased demand for services

To enhance longevity of programs and scale up programs.

To promote self reliance.

Organizing special Events. Fundraising through events is extremely common in the nonprofit world. E.g

Runs and walks where participants pay a certain set amount to enter but also are encouraged to obtain other donations from friends, family, and colleagues

Dinners that might include a speaker, live and silent auctions, and other ways to earn money from the event

Online auctions Holiday-themed events such as New Year’s galas, fall

festivals, Valentine’s Day chocolate-related activities, and many other possibilities

Casino trips, bus tours, etc., are all great fun and can be great publicity, and many can be great fundraisers

Earned income. Earned income refers to fees charged for services you offer or revenue from goods your organization sells. E.g beadwork items, art works, dances and martial arts services etc

Annual appeal. A nonprofit’s annual fund is made up of donations given without any restrictions as to what the donations are used for. The annual fund is raised through a direct appeal to the widest possible audience--from known regular donors to occasional donors to haven’t-yet-donated prospects.

Membership. enrolling membership refers to when the membership renewal is one year from the date of joining. This means that membership income is coming in at almost every month of the year.

Planned giving. Approach planned giving as an opportunity for donors who care about your organization to have a lasting positive impact on your organization.

Capital campaigns. A capital campaign refers to a campaign to generate donations for a specific initiative, such as a new facility to replace your aging one or a new large-scale program. The campaign is typically of a finite time period, designated by either when you collect the targeted sum or a specific time frame. E.g Beyond zero campaign, Mater Heart run, Kenya for Kenyans, Relay for life

Sports tournaments Company contributions through CSR Extravaganzas, music and drama concerts Beauty Pageants Proposal writing for grants Community services activities e.g clean

ups, car wash etc

Endowment An endowment is a pool of money that is invested so that the income can be used to support the nonprofit. Often, donors restrict these funds so that the principal (the amount initially donated) cannot be used to cover day-to-day expenses. E.g building a guest house facility, hostels, buying shares in established companies, bonds, etc

Advantages building a capital base and then living off

the income can stabilize cash inflow and reduce risk of funding shortfalls

having a capital base can reassure donors about organization stability

provides donors alternative for a gift that provides ongoing funding instead of meeting a one-time need

we take advantage of capacity to raise more money

A funding model is a framework for mobilizing resources needed to sustain the organization or program(s). These ten models are; (By William Landes Foster, Peter Kim, & Barbara Christiansen 2009)

1. HEARTFELT CONNECTOR - by focusing on causes that resonate with the existing concerns of large numbers of people at all income levels, and by creating a structured way for these people to connect where none had previously existed. Kenya for Kenyans

2. BENEFICIARY BUILDER - relying on people who have benefited in the past from these services for additional donations. Eg. Universities and hospitals. Starehe Boys Centre Alumni

3. MEMBER MOTIVATOR- rely on individual donations. These individuals (who are members of the nonprofit) donate money because the issue is integral to their everyday life and is something from which they draw a collective benefit.

4. BIG BETTOR - rely on major grants from a few individuals or foundations to fund their operations. Often, the primary donor is also a founder, who wants to tackle an issue that is deeply personal to him or her. Big Bettors are focused either on medical research or on environmental issues. E.g Green belt movement.

5. PUBLIC PROVIDER – collaborates with the government to provide public services e.g housing education etc

6. POLICY INNOVATOR- These nonprofits have developed novel methods to address social issues that are not clearly compatible with existing government funding programs. e.g Eco post limited Kenya

7. BENEFICIARY BROKER- Some nonprofits, compete with one another to provide government-funded or backed services to beneficiaries. What distinguishes these nonprofits from other government-funded programs is that the beneficiaries are free to choose the nonprofit from which they will get the service.

8. RESOURCE RECYCLER - collecting in-kind donations from corporations and individuals, and then distributing these donated goods to needy recipients who could not have purchased them on the market. E.g computers, medicines etc

9. MARKET MAKER- provide a service that straddles an altruistic donor and a pay or motivated by market forces. American Kidney Fund (AKF)

10. LOCAL NATIONALIZER - These organizations focus on issues, such as poor schools or children in need of adult role models, that are important to local communities across the country, where government alone can’t solve the problem. often from individual or corporate donations and special events.

1. Determine what your current budget of expenditure is, i.e. start with what you have. Break this down into:(a) core operational expenses(b) programme/project expenses(c) 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.

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?

An organization is termed to financially stable if;

1. It is solvent: Solvency is defined as “the degree to which near-term assets exceed near-term liabilities as measured on the balance sheet or the statement of financial position”

Solvency focuses solely on the stock, or stored-up amount, of “current assets” and “current liabilities.”

2. Has adequate liquidity level-Liquidity refers to “having enough financial resources to pay obligations without incurring excessive cost,” and includes “the resources stored up (cash and short-term investments), the resources available from the bank (credit line amounts not already drawn down), and incoming cash resources (cash revenues in excess of cash expenses in the forthcoming months)”

3.Financial flexibility answers the question, “To what degree can an organization supplement its future cash flows to cover any unforeseen needs or to take advantage of any unforeseen opportunities? Financial flexibility includes strategic liquidity— the ability to tap liquid funds, including those made available by foundations, grantors, or arranged borrowing, to fund strategic initiatives such as program expansion, geographical expansion, new hires, mergers and acquisitions, social enterprises, and collaborative ventures.”

A recent World Bank review of aid effectiveness listed these two items as the top two requirements for successful aid (of which there were five in total: (1) ownership by the government and participation by the affected people; (2) strong administrative and institutional capacity; (3) sound policies and good public sector management; (4) close coordination by donors; and (5) improvements in aid agencies’ own business practices; World Bank, 1995b)

The Program staff and beneficiaries should have the right expectations from the PBOs.

The program staff and beneficiaries should view the PBO as a partner and not a cash cow.

Program staff should practice due diligence and integrity.

The End.

Thank you for listening and LearninG