Funding of NGOs

by Apathy is Boring Volunteer Jaclyn — April 22, 2008

So now that you know WHAT an NGO is and does, the question remains: HOW do they do it? NGOs use a number of tactics to raise money for their programs and causes. Some common ones are membership fees, self-generating sales (any provision of goods or services, for economics majors), or securing donations and grants. Regardless of the chosen tactics, all NGOs depend on the funds they raise so that they can make a difference, whether on the local, national or international level. It’s safe to say that the larger the project is, the more funds that will be necessary to sustain it.

Usually, the most reliable fundraising strategy for NGOs involves using a mixture of tactics. This type of diversification eliminates the possibility of dependency on one particular resource. Dependency on one important donor or grant can cause problems because the recipient NGO can become the victim of shifts in fund availability or donor preferences. Just as you wouldn’t bank on receiving an allowance from your parents for the rest of your life, NGOs can’t rest on their laurels and rely on the same funding year after year.

Some popular fundraising methods include:

1. MEMBERSHIP DUES: A large number of NGOs recruit interested and concerned citizens to become official members of their organization. An organization’s base of members might be local, but since the internet is now commonly used to disseminate information, membership recruitment, and thus fees, can be conducted on the international level. NGOs that offer membership either collect a one-time fee to join, like the Sierra Club of Canada, or regular dues (usually in fairly small amounts) as a way of maintaining some regular form of financial support. Members might expect to receive up-to-date information about the organization’s activities in exchange, often in the form of newsletters.

2. SALES OF GOODS AND SERVICES: This is an increasingly popular method of fundraising, as NGOs are resorting to internally generated funds to limit their dependence on outside donors. In an ironic twist, NGOs that have viable internal means of generating income may be in better positions to receive grants and other funding from external sources! This is to say, by demonstrating their financial sustainability, NGOs impress potential funders and donors, and therefore attract more contributions. Many organizations are beginning to adopt entrepreneurial and corporate models to keep their finances flowing and get their institutions growing. For example, Child Relief and You (CRY), in India, generates 50% of its own annual income through the sale of greeting cards, office paper products and children’s toys in India and the U.S. In the Czech Republic, an environmental NGO, Adonis, has started a for-profit tourist office in an attempt to bring eco-tourists to the region.

3. GRANTS FROM ESTABLISHED INSTITUTIONS: NGOs that effectively demonstrate their potential to make an impact might be the recipients of financial grants from other established organizations. Whether coming from a corporation, like a bank or well-known store fulfilling its corporate social responsibility, or a private foundation that has a philanthropy program, this type of financial support is usually subject to guidelines and follow up. NGOs can apply for the grant by demonstrating how their work directly correlates with the mandate of the funding body. If the grant is received, the NGO must report back to the funding body to show that the money was used for the right purposes. For example, Air Canada allows non-profits to apply for corporate grants if their initiatives are focused on children or the economic well-being of local communities. The airline also offers detailed eligibility guidelines on their website for those organizations seeking financial support.  Such institutions are often more willing to offer these strict, project-specific grants because they would rather their money go directly to a community than the operation costs of an organization. Others, like the Alva Foundation in Toronto (which gives to generalized health research and service incentives), are specifically set up to give out funds and offer larger, more sustainable general grants to organizations whose goals match up with their own.

4. GRANTS FROM GOVERNMENTS: Although NGOs should never be directly tied to government bodies, a number of them depend on governments (often national and most often in the developed world) for large portions of their funding. These grants work in the same way as those from institutions – NGOs can apply for them based on a set of criteria, depending on what sector of government is allocating the funds. Heritage Canada, for example, gives grants to organizations that promote awareness and appreciation of Canada’s cultural heritage. Some governments, like those in Canada and the U.S., use NGOs as vessels because they believe that they will provide the most secure and effective means for delivering international foreign aid money. Because of this trend, other non-profit organizations such as NGOWatch have been set up in order to monitor and regulate the impact of government grants on NGO agendas. 

5. PRIVATE DONATIONS: Many NGOs seek individual donations to both raise awareness about their work and the funds to continue supporting it. Donations large and small can contribute to a cause and help bring about further social, economic or environmental justice. Most NGOs attempt to create a fair sized donor base, so they won’t be forced to rely on one, or a few, major donors who could subject the organization to personal preferences or demands. Some organizations implement regular donor programs (the World Wildlife Federation has options to give monthly or annually), while some plan strategic campaigns (around the holiday season, or during a period that has meaning for the organization, like women’s rights NGOs during International Women’s Day on March 8).

Sources:
Global Policy Forum
ISAR: Resources for Environmental Activists
EEA Grants
The Alva Foundation
Air Canada