The tough economic environment and shifting spending priorities have led to most corporate, individual donors, and foundations reassessing their financial commitments. Many are cutting back on funding to nonprofit organisations (NPOs), while some are guiding and investing in more longer term sustainable practices, for their existing cohort of grantees.
NPOs accordingly find themselves at a critical juncture, which makes it crucial to revisit the core principles of fundraising and the factors that help to ensure long-term sustainability. This is according to Inyathelo, an NPO based in Cape Town with 20 years of experience in helping other NPOs to become more financially secure.
“An organisation needs to fundraise to cover its costs and achieve its aims. This income is not only for current projects, but also to ensure that critical staff have job security and the beneficiaries are confident that you can help them long-term,” says Feryal Domingo, acting Executive Director of Inyathelo.
Fundraising is not begging, says Inyathelo. When you raise money from people who are passionate about what you do, you are actually providing them with the chance to achieve something special and make a difference. When partnering with foundations for funds, both parties benefit from a mutual mandate and respective missions.
“The heart of effective fundraising lies in forging genuine connections with supporters and stakeholders, building confidence and trust in your NPO, your staff, and your ability to deliver. Only then should you solicit for funding,” says Domingo.
Inyathelo recommends a system called Advancement, an approach that spans ten key elements such as good governance, leadership, relationship building and financial management. This system encourages organisations to work in an integrated, holistic way to attract resources for long-term sustainability.
Inyathelo advises that NPOs ask themselves the following questions before actively fundraising:
Are you legally established? It is far easier to raise funds in South Africa if you register your organisation as a legal entity: A nonprofit company (NPC), a voluntary association (VA), or a nonprofit trust. At the moment registration as a formal NPO with an NPO number through the Department of Social Development (DSD) is currently optional for those that do not have cross border funding flows, but registration still adds assurance with donors in terms of accountability. Some donors do require this registration, says Soraya Joonas, Inyathelo Finance Director.
Have your registered with SARS? Having approval as a Public Benefit Organisation (PBO), under Section 30 of the income Tax Act, provides the nonprofit entity with certain income tax exemptions on donations and other income it receives to do public benefit work. PBO status also qualifies the entity for possible municipal rates rebates, zero capital gains tax and interest-free income.
If your activities fall under public benefit activities that qualify for Section 18A approval of the Income Tax Act, you can apply with the Tax Exempt Office at SARS for this.
“With this benefit you are able to issue Section 18A tax certificates to donors for certain gifts, who can then claim a tax deduction. This makes the nonprofit more attractive to donors,” says Joonas.
“One does not need to be formally registered with the DSD with an NPO number to apply to SARS for PBO and Section 18A approval, but you must have legal status as either a nonprofit company, nonprofit trust or voluntary association.”
Do you have a governing board? Donors are unlikely to fund a poorly governed NPO. Donors expect a board to understand and take legal responsibility for the NPO, play a role in ensuring sufficient resources, and to answer to the public and donors for its activities.
What need are you trying to address? You need to be very clear about the core business of your organisation, and that your activities are still relevant and applicable and aligned with your mission.
Do you have a clear work plan? This should show exactly what you want to do, the resources you will need, the potential impact, and what it will cost.
How well-known is your organisation? Donors do not give money to organisations they know nothing about. They need to be confident that the NPO’s leader can manage the NPO and deliver services.
Do you allocate money and resources honestly? Donors will avoid funding you if there isn’t transparency around the appropriate use of funds.
Do you tell donors about your work? Inform donors about your successes via your website, social media, reports and newsletters. Write thank you letters and invite donors to visit your organisation and beneficiary sites. Build relationships with media in order to share your stories.
“Effective fundraising starts with firstly being clear about your aims, completing all the paper work, establishing a strong governing board, and drawing up detailed work plans,” says Domingo. “With this solid foundation in place, it is easier to then attract money and resources, as well as generating income yourselves.”
Inyathelo offers numerous resources, many free, to help NPOs to fundraise and become sustainable. These include publications, Advancement skills training such as one-on-one clinic sessions, workshops and seminars. Its Funding Finder donor database enables grant seekers to access details of about 1000 potential donors.
by Feryal Domingo, Inyathelo Acting Executive Director, and Soraya Joonas, Inyathelo Finance Director
Source: Fundraising basics, pamphlet 2 in the ASKInyathelo Attracting Support Kit for NPOs.