Financial Sustainability 2015 NPW -...
Transcript of Financial Sustainability 2015 NPW -...
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C Masters Development Services
NPO
FINANCIAL SUSTAINABILITY
in 2015
Cathy Masters B.Com (Hons) CA(SA)
NPO
FINANCIAL SUSTAINABILITY
in 2015
Cathy Masters B.Com (Hons) CA(SA)
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Acknowledgments and
copyright
The material contained in this presentation does not necessarily represent the opinion of CMDS or the presenters. The notes do not constitute advice on the topics covered. While reasonable care has been taken to ensure the accuracy of these notes, CMDS expressly disclaims all and any liability to any person, whether or not a participant, relating to anything done or omitted to be done or to the consequences thereof in reliance upon these notes.
© COPYRIGHTCopyright of this material rests with C Masters Development Services CC and the documentation or any part thereof may not be reproduced either electronically, photocopied, scanned, typed, handwritten or in any other means whatsoever without the written permission of C Masters Development Services CC.
We acknowledge MANGO UK and Marcus Coetzee for certain material and ideas used in this presentation.
The material contained in this presentation does not necessarily represent the opinion of CMDS or the presenters. The notes do not constitute advice on the topics covered. While reasonable care has been taken to ensure the accuracy of these notes, CMDS expressly disclaims all and any liability to any person, whether or not a participant, relating to anything done or omitted to be done or to the consequences thereof in reliance upon these notes.
© COPYRIGHTCopyright of this material rests with C Masters Development Services CC and the documentation or any part thereof may not be reproduced either electronically, photocopied, scanned, typed, handwritten or in any other means whatsoever without the written permission of C Masters Development Services CC.
We acknowledge MANGO UK and Marcus Coetzee for certain material and ideas used in this presentation.
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What is an NPO?Page 2
Non Profit Organisation - traditionally….
• “Values led” towards social/development / public benefit objectives,
outcomes, and impact.
• Funds and resources may only be used only in pursuit of these
objectives, outcomes and impact.
• Historically (largely) dependent on donor funds to cover the costs.
• Funds/income is often restricted and must be fully spent only in
pursuit of specific objectives, outcomes and impact.
• No profit? No savings?
• No distribution or sharing of funds amongst members.
• Voluntary independent governing body overseas affairs of the
organisation.
Non Profit Organisation - traditionally….
• “Values led” towards social/development / public benefit objectives,
outcomes, and impact.
• Funds and resources may only be used only in pursuit of these
objectives, outcomes and impact.
• Historically (largely) dependent on donor funds to cover the costs.
• Funds/income is often restricted and must be fully spent only in
pursuit of specific objectives, outcomes and impact.
• No profit? No savings?
• No distribution or sharing of funds amongst members.
• Voluntary independent governing body overseas affairs of the
organisation.
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Strategic financial
management Page 4
The organisation’s governing body carries overall
responsibility for the organisation, including for
financial implications of the
• direction of the organisation;
• ability/capacity to achieve its objectives;
• risks facing the organisation;
• decisions made and actions taken.
The organisation’s governing body carries overall
responsibility for the organisation, including for
financial implications of the
• direction of the organisation;
• ability/capacity to achieve its objectives;
• risks facing the organisation;
• decisions made and actions taken.
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Strategic financial
managementPage 4
Two key areas:
• Financing to meet the objectives
• Reducing the impact of threats to the
organisations resources
NOW & in the FUTURE!!!
Two key areas:
• Financing to meet the objectives
• Reducing the impact of threats to the
organisations resources
NOW & in the FUTURE!!!
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What is sustainability?Page 5
“Development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs.”
Brundtland Report (1987)
“Development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs.”
Brundtland Report (1987)
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SustainabilityPage 5
“Sustainability is the ability of an organisation to
secure and manage sufficient resources to enable
it to fulfil its mission effectively and consistently
over time without excessive dependence on any
single funding source.”
Lisa Cannon - LIFE BEYOND AID
“Sustainability is the ability of an organisation to
secure and manage sufficient resources to enable
it to fulfil its mission effectively and consistently
over time without excessive dependence on any
single funding source.”
Lisa Cannon - LIFE BEYOND AID
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Need for financial
sustainabilityPage 6
• To survive in the face of competition for scarce &
restricted resources
• To cope with income and cash flow fluctuations
• To reduce donor dependency & so reduce risk
• To support growth & innovation – responding to change
• To build a wider local base of support – strength &
credibility
• To finance institutional & operational costs - not just
programme/project costs
• To explore new avenues for income generation/funding
• To survive in the face of competition for scarce &
restricted resources
• To cope with income and cash flow fluctuations
• To reduce donor dependency & so reduce risk
• To support growth & innovation – responding to change
• To build a wider local base of support – strength &
credibility
• To finance institutional & operational costs - not just
programme/project costs
• To explore new avenues for income generation/funding
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New Environment?
New opportunities?
• Global financial crisis, increasing uncertainty, funding cuts & job losses
• “Earned” self-generated income - shift away from “donor dependence”
• Social enterprise/entrepreneurship – the latest buzz!
• Collaborations/partnerships are key - other NPO’s, government, business,
academia.
• Individual giving – wide support - power in numbers!
• Other opportunities: SME funding, SETA’s, B-BBEE scorecards etc.
• In SA - government & civil society uneasy relationship – Amendments to
NPO Act, SARS alert, National Development Plan, DSD grants, tenders &
contracts – a different way of working!
• Global financial crisis, increasing uncertainty, funding cuts & job losses
• “Earned” self-generated income - shift away from “donor dependence”
• Social enterprise/entrepreneurship – the latest buzz!
• Collaborations/partnerships are key - other NPO’s, government, business,
academia.
• Individual giving – wide support - power in numbers!
• Other opportunities: SME funding, SETA’s, B-BBEE scorecards etc.
• In SA - government & civil society uneasy relationship – Amendments to
NPO Act, SARS alert, National Development Plan, DSD grants, tenders &
contracts – a different way of working!
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Donor Dependencypage 12
Dependence on one particular donor
One donor income x 100 = % Dependency
Total donor income
Income continuum
100% donor Now 100% self financingdependent
Donor income x 100 = % Dependency Future
Total income
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Organisational
sustainabilityPage 27 - 28
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Strategies for financial
sustainability Page 7
3 main strategies for financial sustainability:
1. Diversify income sources
2. Build reserves - save
3. Practice financial discipline!
3 main strategies for financial sustainability:
1. Diversify income sources
2. Build reserves - save
3. Practice financial discipline!
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Income sources
90%
International donor
10%Other
sources of
funding
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Diversifying income
sources
International donor15%
Core/funding international
donor30%
Foundations & trusts20%
Corporates10% Community
Chest5%
Individuals5%
Government Grants15%
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Diversify Income
SourcesPage 7
Strategy #1. Diversify Income Sources
• Identify the range of potential available resources
(financial and non-financial)
Strategy #1. Diversify Income Sources
• Identify the range of potential available resources
(financial and non-financial)
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Types of incomePage 7 - 8
Unrestricted income
Income that is not earmarked for any specific purpose – it is
flexible and available to either spend on needs, fill gaps,
invest or save.
Restricted income
Income with conditions attached either for spending or for
specific performance – less flexibility, more obligations.
Funds may need to be returned if not spent or performance
not achieved.
Unrestricted income
Income that is not earmarked for any specific purpose – it is
flexible and available to either spend on needs, fill gaps,
invest or save.
Restricted income
Income with conditions attached either for spending or for
specific performance – less flexibility, more obligations.
Funds may need to be returned if not spent or performance
not achieved.
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Diversify Income
SourcesPage 7
Strategy #1. Diversify Income Sources
• Identify the range of potential available resources
(financial and non-financial)
• Increase unrestricted income
• Expand funding mix
• Reduce “donor” dependence
• Increase self generated and/or “trade” income
Strategy #1. Diversify Income Sources
• Identify the range of potential available resources
(financial and non-financial)
• Increase unrestricted income
• Expand funding mix
• Reduce “donor” dependence
• Increase self generated and/or “trade” income
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Fundraising plansPage 9
Fundraising plans:
Funding strategy and programme strategy are linked
– Role of the board
– Who leads the charge?
– Emerging opportunities
– Networking
– Investment of time and resources
– Targets
– Time: 12 – 18 months lead times
Fundraising plans:
Funding strategy and programme strategy are linked
– Role of the board
– Who leads the charge?
– Emerging opportunities
– Networking
– Investment of time and resources
– Targets
– Time: 12 – 18 months lead times
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CollaborationsPage 10
Collaborations/partnerships/in kind donations:
Clear shared goals and expected outcomes
– Costing and financial implications
– Ethos and processes
– Managing a volunteer/intern programmes
– Sharing infrastructure
– In kind donations of goods/services
Collaborations/partnerships/in kind donations:
Clear shared goals and expected outcomes
– Costing and financial implications
– Ethos and processes
– Managing a volunteer/intern programmes
– Sharing infrastructure
– In kind donations of goods/services
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Individual givingPage 11
Individual giving:
– Legitimacy (ownership of the issues/concerns)
– Power of numbers
– Payroll and matched giving
– IT and social media, giving platforms (Pay Pal, Given Gain)etc.
– High net worth individuals/ private SA foundations
– Bequests
– Database – information gathering (POPI!!)
– Relationship building and retention
– Setting an example!
Individual giving:
– Legitimacy (ownership of the issues/concerns)
– Power of numbers
– Payroll and matched giving
– IT and social media, giving platforms (Pay Pal, Given Gain)etc.
– High net worth individuals/ private SA foundations
– Bequests
– Database – information gathering (POPI!!)
– Relationship building and retention
– Setting an example!
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Self-generated income Page 12
Self-generated income could be generated/earned:
• passively from investments that yield a return – interest
and dividends or
• actively from “trading” – charging fees, selling items and
outcomes, utilising own resources
This income is often unrestricted!
Self-generated income could be generated/earned:
• passively from investments that yield a return – interest
and dividends or
• actively from “trading” – charging fees, selling items and
outcomes, utilising own resources
This income is often unrestricted!
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Self – generated incomePage 13 - 16
Self generated income – more ideas
• Charge fees for services
Existing customers?
New customers?
• Hold fundraising events
• Maximise investment income (interest & dividends)
• Maximise return from existing assets
• Start a business
• Partner with business
Self generated income – more ideas
• Charge fees for services
Existing customers?
New customers?
• Hold fundraising events
• Maximise investment income (interest & dividends)
• Maximise return from existing assets
• Start a business
• Partner with business
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Self – generated incomePage 16
“Earned” or self-generated income/ reduced donor
dependence
– Tenders/contracts for services with
“donors”/government/business/other NPO’s
– More time, effort, skills and risks
– Full costing of services and fair pricing - viability
– Productivity critical
– Ensure all income earned is actually received and
accounted for and not all spent – saving!
– Keeping your eye on the ball (not losing sight of
organisational objectives)
“Earned” or self-generated income/ reduced donor
dependence
– Tenders/contracts for services with
“donors”/government/business/other NPO’s
– More time, effort, skills and risks
– Full costing of services and fair pricing - viability
– Productivity critical
– Ensure all income earned is actually received and
accounted for and not all spent – saving!
– Keeping your eye on the ball (not losing sight of
organisational objectives)
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SA Business?
SA Corporations
• Donation, sponsorship, or contract of service?
• Marketing or CSI?
• Section 18A receipts or invoices?
BBBEE opportunities
Skills Development, Preferential Procurement, Enterprise
Development (all merging)
– Social Economic Development (SED) - giving
aspect
– Exempted Micro Enterprise (EME) – new rules
SA Corporations
• Donation, sponsorship, or contract of service?
• Marketing or CSI?
• Section 18A receipts or invoices?
BBBEE opportunities
Skills Development, Preferential Procurement, Enterprise
Development (all merging)
– Social Economic Development (SED) - giving
aspect
– Exempted Micro Enterprise (EME) – new rules
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Other opportunities?
Other opportunities
SETA’s – training commitments – what can you offer?
Funds for SME’s for enterprise/business (not directly for NPO)
• Department of Trade and Industry (DTI) – various grants and
schemes!!
• Loan or equity funding: repayment and/or ROI
• SISWE/FABCOS, business partners
• RED DOOR FUNDS – Nedbank, Khula, Anglo …
• Small Business Development Fund
• UMSOBOMVU YOUTH FUND – Franchise fund, Micro
Finance, Youth Cooperative,
Other opportunities
SETA’s – training commitments – what can you offer?
Funds for SME’s for enterprise/business (not directly for NPO)
• Department of Trade and Industry (DTI) – various grants and
schemes!!
• Loan or equity funding: repayment and/or ROI
• SISWE/FABCOS, business partners
• RED DOOR FUNDS – Nedbank, Khula, Anglo …
• Small Business Development Fund
• UMSOBOMVU YOUTH FUND – Franchise fund, Micro
Finance, Youth Cooperative,
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Build ReservesPage 16
Strategy #2. Build Reserves (Savings)
• Reserves are built by not spending all the income
received.
• Income must be higher than the expenditure - ie the
organisation must retain and save a “profit” or
“surplus”.
• It is only unrestricted income that can be saved to build
reserves.
Strategy #2. Build Reserves (Savings)
• Reserves are built by not spending all the income
received.
• Income must be higher than the expenditure - ie the
organisation must retain and save a “profit” or
“surplus”.
• It is only unrestricted income that can be saved to build
reserves.
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Building reservesPage 16
Reserves are built up when income is higher than the
expenditure over time and are depleted as expenditure is
higher than income.
Reserves are built up when income is higher than the
expenditure over time and are depleted as expenditure is
higher than income.
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ReservesPage 17
What are reserves?
The balance of unspent resources held which can be used to
fund future expenditure of the organisation or which are
invested for the use of the organisation or for income
generation.
Reserves may be restricted (by others) or designated (by the
organisation) for specific purposes.
What are reserves?
The balance of unspent resources held which can be used to
fund future expenditure of the organisation or which are
invested for the use of the organisation or for income
generation.
Reserves may be restricted (by others) or designated (by the
organisation) for specific purposes.
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ReservesPage 17
Accumulated funds?
General reserves (or funds)/”savings” accumulated from
surpluses, arising when income is higher than the expenditure
over the years, which are assumed not to be specifically set
aside for particular or restricted purposes, but are invested or
held for use or to generate income for meeting the objectives
of the organisation.
Accumulated funds?
General reserves (or funds)/”savings” accumulated from
surpluses, arising when income is higher than the expenditure
over the years, which are assumed not to be specifically set
aside for particular or restricted purposes, but are invested or
held for use or to generate income for meeting the objectives
of the organisation.
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ReservesPage 18
Why are reserves/savings necessary?
• Protection against temporary shortfalls or delays in income
and cash flow fluctuations
• Financing of unexpected or strategic expenditure
• Investment for the future to generate income to reduce
dependency of donor funding
Why are reserves/savings necessary?
• Protection against temporary shortfalls or delays in income
and cash flow fluctuations
• Financing of unexpected or strategic expenditure
• Investment for the future to generate income to reduce
dependency of donor funding
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Building reserves?
Income and Expenditure Statement
IncomeInternational donors 500 000Local corporation 50 000
Total income 550 000
ExpenditurePersonnel costs 150 000Operating costs 100 000Programme costs 300 000
Total expenditure 550 000
Surplus/deficit 0
Income and Expenditure Statement
IncomeInternational donors 500 000Local corporation 50 000
Total income 550 000
ExpenditurePersonnel costs 150 000Operating costs 100 000Programme costs 300 000
Total expenditure 550 000
Surplus/deficit 0
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Building reserves
Balance sheet (Statement of Financial Position)
AssetsProperty, Plant & Equipment 20 000Receivables 5 000Bank account 48 000
Total assets 73 000
Reserves & liabilitiesAccumulated funds 70 000
Prior years 70 000Current year 0
Payables 3 000
Total reserves & liabilities 73 000
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Decrease expenditure
Income and Expenditure Statement
IncomeInternational donors 500 000Local corporation 50 000
Total income 550 000
ExpenditurePersonnel costs 150 000Operating costs 100 000Programme costs 290 000
Total expenditure 540 000
Surplus/deficit 10 000
Income and Expenditure Statement
IncomeInternational donors 500 000Local corporation 50 000
Total income 550 000
ExpenditurePersonnel costs 150 000Operating costs 100 000Programme costs 290 000
Total expenditure 540 000
Surplus/deficit 10 000
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Increase income
Income and Expenditure Statement
IncomeInternational donors 500 000Local corporation 50 000Interest & other income 10 000
Total income 560 000
ExpenditurePersonnel costs 150 000Operating costs 100 000Programme costs 300 000
Total expenditure 550 000
Surplus/deficit 10 000
Income and Expenditure Statement
IncomeInternational donors 500 000Local corporation 50 000Interest & other income 10 000
Total income 560 000
ExpenditurePersonnel costs 150 000Operating costs 100 000Programme costs 300 000
Total expenditure 550 000
Surplus/deficit 10 000
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Building reserves
Balance sheet (Statement of Financial Position)
AssetsProperty, Plant & Equipment 20 000Receivables 5 000Bank account 58 000
Total assets 83 000
Reserves & liabilitiesAccumulated funds & reserves 80 000
Prior years 70 000Current year 10 000
Payables 3 000
Total reserves & liabilities 83 000
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Survival RatioPage 17
How long could the organisation continue if income dried up and the level of activity and expenditure remained the same?
Total general funds* x 12 = No. of months
Total annual expenditure
Ideal is 3 – 6 months
*Unrestricted reserves
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Building reserves
Community Women’s AssociationIncomeInternational funder 800 000Corporate donor 150 000Government department 600 000Total 1 550 000
ExpenditureSupport 330 000Gender Violence 400 000HIV/AIDS 275 000Women’s Rights 325 000Total 1 330 000Surplus 220 000
Community Women’s AssociationIncomeInternational funder 800 000Corporate donor 150 000Government department 600 000Total 1 550 000
ExpenditureSupport 330 000Gender Violence 400 000HIV/AIDS 275 000Women’s Rights 325 000Total 1 330 000Surplus 220 000
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Charges/recovery
Community Women’s Association
Support Gender HIV RightsIncome 185 000 500 000 400 000 465 000 Expenditure (330 000) (400 000) (275 000) (325 000)Surplus/(Deficit) (145 000) 100 000 125 000 140 000
Total Income: 1 550 000Total Expenditure: (1 330 000)Total surplus R 220 000
Restricted surpluses: 100 000 125 000140 000
R365 000
Unrestricted (deficit) (R145 000)
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Charges/recovery
Community Women’s Association
Support Gender HIV RightsIncome 185 000 500 000 400 000 465 000 Expenditure (330 000) (400 000) (275 000) (325 000)Charges/recovery 57 000 (16 000) (23 000) (18 000)Surplus/(Deficit) (88 000) 84 000 102 000 122 000
Total Income: 1 550 000Total Expenditure: (1 330 000)Total surplus R 220 000
Restricted surpluses: 84 000102 000122 000
R308 000
Unrestricted deficit (R88 000)
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Fees/recovery
Community Women’s Association
Support Gender HIV RightsIncome 185 000 500 000 400 000 465 000Expenditure (273 000)(416 000)(298 000)(343 000)Fees /recovery 120 000 (40 000) (40 000) (40 000)Surplus/Deficit 32 000 44 000 62 000 82 000
Total Income: 1 550 000Total Expenditure: (1 330 000)Total surplus 220 000
Restricted surpluses: 44 000 62 00082 000
R188 000
Unrestricted surplus R32 000!
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Charges and fees
Gender ViolenceIncome 500 000 Expenditure 416 000
Personnel costs 200 000Research 50 000Awareness workshop 150 000Charges: Rental 5 000
Telephone usage 3 000Vehicle usage 8 000
Surplus 84 000Fees (shared costs) 40 000Restricted surplus carried forward 44 000
Gender ViolenceIncome 500 000 Expenditure 416 000
Personnel costs 200 000Research 50 000Awareness workshop 150 000Charges: Rental 5 000
Telephone usage 3 000Vehicle usage 8 000
Surplus 84 000Fees (shared costs) 40 000Restricted surplus carried forward 44 000
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Building reservesPage 19 – 22
Reserves are built when income is higher than the
expenditure by:
• Set aside unspent unrestricted income
• Minimise expenditure to generate unrestricted income
• “Charging” programmes/projects
• “Setting aside” funds for specific purposes
• Specific appeal - enlisting funder support
The key is NOT SPENDING all of the income or charges in order to
build reserves!
Reserves are built when income is higher than the
expenditure by:
• Set aside unspent unrestricted income
• Minimise expenditure to generate unrestricted income
• “Charging” programmes/projects
• “Setting aside” funds for specific purposes
• Specific appeal - enlisting funder support
The key is NOT SPENDING all of the income or charges in order to
build reserves!
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Charges/feesPage 20 -21
Charges/fees to the projects
Requires transparency and communication
• Make charges for the use of resources, ie staff,
space, vehicles, photocopier, phone etc.
• Internal management “fee” (support services as a
separate unit which aims to make a surplus)
Charges/fees to the projects
Requires transparency and communication
• Make charges for the use of resources, ie staff,
space, vehicles, photocopier, phone etc.
• Internal management “fee” (support services as a
separate unit which aims to make a surplus)
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Designated FundsPage 21
“Setting aside” funds for specific purposes
• Sustainability fund – held in investments in shares
and/or cash
• Capital fund – held in property, equipment etc.
• Retrenchment fund - held in cash
• Asset replacement fund – held in cash
“Setting aside” funds for specific purposes
• Sustainability fund – held in investments in shares
and/or cash
• Capital fund – held in property, equipment etc.
• Retrenchment fund - held in cash
• Asset replacement fund – held in cash
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AppealPage 21
Specifically appeal for sustainability funds
Enlist the support of funders by requesting:
• specific once-off contributions
• funding to support the organisation’s own income
generating activities
• that any under-spending/savings can be kept
Specifically appeal for sustainability funds
Enlist the support of funders by requesting:
• specific once-off contributions
• funding to support the organisation’s own income
generating activities
• that any under-spending/savings can be kept
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Reserves PolicyPage 22 - 23
Establish and document a clear reserves policy:
• The type and purpose of each reserve – general and
designated
• A clear plan of how to build each reserve, ie set aside %
of unrestricted income (defined for the organisation)
• The target amount or coverage (sustainability ratio) with
target periods
• The anticipated circumstances, authorisation and
procedures required to spend or reallocate the reserve
once established
Establish and document a clear reserves policy:
• The type and purpose of each reserve – general and
designated
• A clear plan of how to build each reserve, ie set aside %
of unrestricted income (defined for the organisation)
• The target amount or coverage (sustainability ratio) with
target periods
• The anticipated circumstances, authorisation and
procedures required to spend or reallocate the reserve
once established
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Financial DisciplinePage 24
Strategy #3. Practice Financial Discipline
• Financial discipline is required to build reserves and
protect reserves.
• It takes discipline to build/save reserves – to set aside
money when there are so many current demands/needs.
• Reserves take a long time to build but can be used up
very quickly without strategic and careful planning,
financial discipline and controls!
Strategy #3. Practice Financial Discipline
• Financial discipline is required to build reserves and
protect reserves.
• It takes discipline to build/save reserves – to set aside
money when there are so many current demands/needs.
• Reserves take a long time to build but can be used up
very quickly without strategic and careful planning,
financial discipline and controls!
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Financial disciplinePage 24
Effective Financial Management:
• Financial planning
• Financial recordkeeping
• Financial monitoring
• Financial controls
Effective Financial Management:
• Financial planning
• Financial recordkeeping
• Financial monitoring
• Financial controls
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Financial DisciplinePage 25
Financial planning:
• Annual budgets
• Plan based on committed or realistic expectation of income &
committed expenditure
• Plan to save a % of income and/or unrestricted income
• Cash flow forecasts
• Match committed/regular payments to committed or regular
income month by month
• Manage cash flow & maximise interest earned
• Longer term planning
• Consider investing for income-generation or capital growth, the
amount of the general funds that exceeds at least 3 months of
current running costs
Financial planning:
• Annual budgets
• Plan based on committed or realistic expectation of income &
committed expenditure
• Plan to save a % of income and/or unrestricted income
• Cash flow forecasts
• Match committed/regular payments to committed or regular
income month by month
• Manage cash flow & maximise interest earned
• Longer term planning
• Consider investing for income-generation or capital growth, the
amount of the general funds that exceeds at least 3 months of
current running costs
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Financial disciplinePage 25
Recordkeeping and monitoring:
• Bank or transfer (unspent) unrestricted income into a
separate interest bearing “savings” bank account (call,
money market, deposit accounts)
• Record, track, and monitor restricted and unrestricted
income, expenditure and balances separately – Analysis
of Funds
Recordkeeping and monitoring:
• Bank or transfer (unspent) unrestricted income into a
separate interest bearing “savings” bank account (call,
money market, deposit accounts)
• Record, track, and monitor restricted and unrestricted
income, expenditure and balances separately – Analysis
of Funds
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Financial disciplinePage 25
Financial controls:
• Avoid spending from “savings” account or transferring to the main
operating account for spending
• Build this “savings” account balance to at least 3 months of running
costs
• Implement strict pre-authorisation procedures that ensures reserves
and savings are not spent or are only spent after careful
consideration
• Monitor borrowing from savings and reinstate/repay asap
Financial controls:
• Avoid spending from “savings” account or transferring to the main
operating account for spending
• Build this “savings” account balance to at least 3 months of running
costs
• Implement strict pre-authorisation procedures that ensures reserves
and savings are not spent or are only spent after careful
consideration
• Monitor borrowing from savings and reinstate/repay asap
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Financial discipline
When to spend reserves?
General funds – (Savings)
• Temporary delays and small shortfalls – replace and maintain at +/- 3
months running costs
Designated funds
• Only as designated to replace assets, retrenchments or
• Approve reallocation if no longer needed or priorities change
Sustainability/Endowment funds
• Invest for income generation and/or capital growth
• Income earned either reinvested or to general funds
• Strategic spending for future benefit or operations for a limited period
• Unexpected unavoidable emergency demand, scale down or closure
When to spend reserves?
General funds – (Savings)
• Temporary delays and small shortfalls – replace and maintain at +/- 3
months running costs
Designated funds
• Only as designated to replace assets, retrenchments or
• Approve reallocation if no longer needed or priorities change
Sustainability/Endowment funds
• Invest for income generation and/or capital growth
• Income earned either reinvested or to general funds
• Strategic spending for future benefit or operations for a limited period
• Unexpected unavoidable emergency demand, scale down or closure
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Sustainability PlanPage 26
• Brainstorm ways of securing resources – particularly
unrestricted income
• Gather all ideas for increasing efficiency and
effectiveness
• Address all the factors that impact on sustainability
• Identify measures of sustainability
• Set and document specific goals and actions for the
future
• Brainstorm ways of securing resources – particularly
unrestricted income
• Gather all ideas for increasing efficiency and
effectiveness
• Address all the factors that impact on sustainability
• Identify measures of sustainability
• Set and document specific goals and actions for the
future
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Characteristics:
Sustainable NPO’sPage 6
• Diversified income sources – including a diversified
funding base – funding mix, no. of different sources.
• Increasing percentage of unrestricted income or self
generated income
• Significant unrestricted reserves – survival ratio of more than
3 months increasing
• Strong stakeholder relationships and collaborations
• Strong financial discipline - cash flow management, liquidity
Discussion: Do what extent does your NPO exhibit these
characteristics?
• Diversified income sources – including a diversified
funding base – funding mix, no. of different sources.
• Increasing percentage of unrestricted income or self
generated income
• Significant unrestricted reserves – survival ratio of more than
3 months increasing
• Strong stakeholder relationships and collaborations
• Strong financial discipline - cash flow management, liquidity
Discussion: Do what extent does your NPO exhibit these
characteristics?
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Resource flow cycle for
sustainability
Ability to show impact
Resources in