Sustainability and Non-Profit Management
Added on 2020-02-03
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FACTORS AFFECTING SUSTAINABLE FUNDING OF NON-GOVERNMENTALORGANIZATIONS IN KENYAName InstitutionDate
INTRODUCTIONBackground of the StudyThe financial management processes of not for- profit organizations are generally dominatedby conditions of resource scarcity. Such organizations have limited opportunities forgenerating additional income, but are faced with an ever increasing agenda of programs andactivities on which such funds could be spent (Ducker, 2000).Sustainable funding means being able to be there for your beneficiaries in the long term. Anorganization is financially sustainable if its core work will not collapse if its external fundingis withdrawn. Sustainable funding is a process that leads to the projects have longer life-spans and is further translated to impacts that are of beneficial to communities over a givenperiod of time. Most donors are looking for a range of projects which can utilize theSustainable Livelihoods approach to enhance activities aimed at supporting localcommunities to reduce poverty and disadvantage.Organizations are required to use funds wisely for the purpose intended and improve theliving standards of the populations meant to benefit. Often, uses of funds are diverted to serveother interest of the organization managers outside the scope and work plans of theseprojects. This has resulted in surprise audits where misuses of funds are suspected by donorsand in the extreme cases bank accounts have been frozen to minimize the extent. Goodmanagement practices demand that obvious key management concepts and principles such assustainability, accountability and transparency which are necessary for institutionalizedformal procedures are put in place-administrative efficiency. Most donors attach variousrestrictions to their funding including among others-sound financial management systems inplace, good leadership with integrity, educated staff with experience an advantage and thestrategic plans of the organization. Organizations lacking these ingredients have difficultiesattracting donor funding. Some donors will assess the capacity (systems and structures) of theorganization to handle funds before funding can be approved. They also consider if thepotential recipient has experience and knowledge to meet deliverables. Conventional wisdom says that most nonprofits do not have sustainable funding models: thatis, they cannot develop predictable, ongoing financial support that covers core operatingexpenses. The common image of nonprofits is that they are often led by an executive director
who is not sure how he will find enough money to meet the year‘s budget and is perpetuallypulling rabbits out of his hat to do so.1.3 Purpose of the Study The purpose of the study is to find out the factors that influence sustainable funding in NGO‘s in Kenya with specific reference to Shade Children Foundation in Thika.1.4 Objectives of the study1.To determine the effect of income diversification on NGO‘s funding sustainability.2.To establish the effect of strategic financial managements on NGO‘s fundingsustainability.3.To assess the effect of participation in income generating activities on NGO‘s fundingsustainability.4.To examine how the donor relationship management affects NGO‘s fundingsustainability.Research Questions 1.To what extent does income diversification contributes sustainable funding forNGO‘s?2.What is the effect of strategic financial managements on NGO‘s fundingsustainability?3.To what extent does participation in income generating activities affect NGO‘sfunding sustainability?4.How does the donor relationship management affect NGO‘s funding sustainability?1.5 Significance of the Study The study will be important not only to Shape Children Foundation but also other managersin the NGO sector. It will help them understand the strategic practices and how its understanding can helpdifferent and diverse NGO‘s sustain funding long afterwards.
The study will also help other managers know the methods used in gathering and applyingvarious strategic practices, which would help them improve their management styles. The study also highlights other important relationships that require further research; this isbe in the areas of relationships between funding and conditions attached by most donors andthe impact it can have for not achieving the requirements. The results of this study will also be invaluable to researchers and scholars, as it forms a basisfor further research. The students and academics would use this study as a basis fordiscussions on sustainable funding and the strategic processes it call for. The study is asource of reference material for future researchers on other related topics; it will also helpother academicians who undertake the same topic in their studyLITERATURE REVIEWIntroductionThis chapter presents review of literature on sustainable funding with reference to non -profitorganizations. The sources of literature include books, journal and web articles. The chapter is organized according to the main areas of the study. Theoretical ReviewDespite the fact that NGOs are classified as non-profit making organizations, they still remaineconomic institutions in that they use society‘s scarce resources (land, labour and capital) toproduce goods and services of value. These organizations have operating costs, impose costson society to the extent that they use contributions and voluntary services to provide superiorvalue to society and need a reliable flow of revenue to finance their mission and befinancially sustainable. The currently dominant view of business strategy resource-basedtheory or resource-based view (RBV) of firms is based on the concept of economic rent andthe view of the company as a collection of capabilities. This view of strategy has a coherenceand integrative role that places it well ahead of other mechanisms of strategic decisionmaking (Kay, 2005). The resource-based view (RBV) offers critical and fundamental insightsinto why firms with valuable, rare, inimitable, and well organized resources may enjoysuperior performance (Barney, 1995). Its current prominence is reflected not only by itsdominance in the academic journals, by its inclusion in leading strategic texts which warrants
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