This presentation seeks to help program leaders and managers prioritize financial sustainability and also provides ideas on how to achieve financial sustainability of Public Benefit organizations

1. CAPACITY BUILDING TRAINING FOR U-
TENA
BY
TIMOTHY OSIRU OKATTA MSW
14/11/14

2. 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 sustainability
7. Case studies

3.  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

4.  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.”

5.  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.

6.  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

7.  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”

8.  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.

9.  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

10.  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.

11.  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.

12.  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

13.  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

14.  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

15.  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

17.  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

18. 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.

19. 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

20. 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.

21. 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)

22. 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.

23. 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.

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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?

30.  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.”

31. 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)”

32. 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.”

33.  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)

34.  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.

35. The end.
Thank you for lisTening and
learning