The Business of Non Profit

First printed in Focal Point Magazine, Issue 2: http://www.enterfocalpoint.com/focalpoint/?p=288

For years, humanitarian organizations have played their role in improving the living standards for the poor around the world, especially in the third world countries. Some did a lot, some did less; some provided housing, emergency relief, health services, educational facilities and some provided all. These organizations which are commonly known as charities or non government organizations, less familiarly known as non-profit companies,  sweat day and night to perform sustainable activities to improve the living conditions of the deprived community.

Unfortunately, very few laymen and beneficiaries know about the efforts these organizations have to do before and during the implementation of a project or a program: starting from a needs assessment, proposal building, reporting, fund raising, monitoring and evaluation, implementation and disaster preparedness. All of this to make is to make it a success; a success which consumes a lot of resources of the organization. The question is: How do they survive?

Well, they survive on what they accumulate from the public which supports and trusts their cause, passionately. An organizations which has devoted itself in the cause to assist people in need unconditionally gets hold of human resources who are passionate to bring a change and work in the development industry. The combination of such positive factors facilitates the organization to expand the service it provides to the humanity. Those who think that passion is the only driving force for such work are badly mistaken; there is a cost for everything.

Discussions on non-developmental expenditure scares off donors and people who are running such organizations also start feeling insecure; yet like every public relations department, they deny and discard it as a non-issue. For years the issue of non-developmental expenditure has been considered as the opening of a Pandora’s Box; in reality it is not and those who fail to understand the concept and misjudge it to be unjust need to re-examine their theory towards survival of anything and everything.

Only the fittest would survive in this industry over the long run, and they can only survive if they are able to perform the projects and the operations of their organization through a sustainable approach such as business ethics and techniques which have to be employed in order to generate positive and most importantly productive results.

I for one will always reject that these expenses are not non-developmental because these expenditures enables the organization to gather human and capital resources in order to do their tasks in an organized way that produces positive results at all times. In return of this qualitative work, the organization is able to acquire more funds to execute more work for the deprived humanity to come towards prosperity.

Although this money may not be used directly for the beneficiaries, at the end of the day, this money helps the beneficiaries to get a continued support because the organizations tend to survive longer through these expenditures which are regrettably categorized as ‘non developmental expenditure’. The key point needed to be understood is that donors and beneficiaries should allow flexibility to organizations when it comes to this issue because the growth of the organization is directly related to the growth of the society. If both become strong, the result is the rule of peace and prosperity in this world.

In the table below, we would focus on the way the UK non profit organizations use their finances in order to help people in the third world countries immediately. Most importantly, the non profit organizations in UK and USA have usually been the first ones to reach at the point of any disaster. At times, they have reached these places before the local organizations could, and at many instances, facilitated local organizations in the rescue, relief and rehabilitation work. Therefore, to learn how to achieve success in running your organization, one has to observe at how the larger ones are operating; most of the organizations in the list below are more than two decades old and one is surviving since the Second World War!

Organizations registering themselves or which are in the growing phase surely need to learn and adopt the way finances are managed by other successful organizations. The resources can be multiplied through reserving funds, investment management and by adopting income generation drives. As I mentioned earlier, these organizations excelled because they chose to bring business development techniques into this sector. Collecting all and distributing all will only provide short term assistance to the beneficiaries and would do more harm than benefit for the organization. Chances are there that your organization might get popular as it spends 100% on the beneficiaries; but no one remembers short lived successes. The extreme charity model is a failure in the long run.

From now on, the term I am going to use to describe charities and non government organizations are ‘non profit companies’ because that is what the real successful ones are. They have all the departments present in a business: from administration to human resources, public relations to marketing, to ‘you-name-it’ and they have got it. To survive and carve a name for yourself and your organization, the weak ones and the young ones need to do this at the earliest:

Proper Budgeting: allocating reserve funds and for non-developmental expenditure and charitable activities

Up to date book keeping: to keep the financial statements updated in order to get funds from donor agencies and to show the accounts of the organization are transparent

Investment management: if your registration allows you to develop assets and do investment with the finances the company holds for the purpose of using the money for welfare activities, then do not wait and get hold of a person who can guide or manage it for you

Concentrate on public funding: fundraising, registering volunteers, creating liaison with universities/multinationals etc. is now the biggest in the trade get a boost

Tapping institutional funding: In Pakistan, a lot of donor agencies are present which are ready to provide non profit companies funds for the purpose of implementing welfare activities. From embassies to UN agencies to foreign donor agencies  all are present in the country.

Up to date records with the Federal Board of Revenue and linkages with the Pakistan Centre for Philanthropy would help you to get a tax exemption status from the authorities. This will release more funds to be used for development of the society and the organization.

Most importantly, please register your organization with The Act which suits the needs of your organization.

Moreover, as a general practice, foreign non-profit companies do not raise a lot of funds from the public, some do not need it while some avoid to use it in order to evade controversy. The point to be realized is that to make itself, its work and its advocacy accepted in the country, foreign organizations have to create linkages with the local donors, communities and authorities because it will facilitate them to gain the same popularity they have gained in their parent countries. Foreign companies usually target institutional funding as accountability usually has to be shown to one party instead of the general public, though, year end financial statements have to be made public every year in Pakistan.

In contrast, the local non-profit companies are doing pretty well in gathering funds from the public, but more professionalism and effective use of resources is required to be deployed by them in order to succeed to excel in getting hold of institutional funding. There are a few exceptions in the local sector who are tapping both type of donors; the rest are usually struggling in gaining success from the two potential investors of this industry  the general public and the donor agencies.

Consequently, the time has arrived for companies and the publics associated with it to realize the fact that this industry can only blossom and achieve self sustainability if the stakeholders allow a little bit flexibility when it comes to those factors  deemed controversial at times  which will strengthen the company. It is a win-win situation for all stakeholders because a stronger company would be able to carry out programs and projects to enhance the living standards of the destitute more effectively and up to the standards the donors ask for. It’s time to provide room to all so that they can improve. The strength of this industry will help to curb unemployment and curtail the socio economic deficiencies in a rapid pace.