The Role of Boards in Ensuring NPO Sustainability
Posted on 21 December, 2020 at 15:26
Sustainability has been the buzzword in
Not-for-Profit Organisations (NPOs) in recent years as the quantum of funding
for development purposes is rapidly declining. Sustainability can be
categorised into Financial, Organisational and Programmatic Sustainability.
Financial sustainability refers to the ability of the organisation to ensure a
steady flow of funds for maintaining and continuing its work. Organisational
sustainability entails ensuring the continued proper working of the
organisation and any institutions that may have been developed as part of the
organisation. The ability of the organisation to continues its projects or
programmes beyond donor support is encapsulated in Programmatic Sustainability.
These facets of sustainability have to coexist for effectiveness. Jeanne , Masaoka, &
Zimmerman (2010) state that “For non-profits, financial
sustainability and programmatic sustainability cannot be separated. It’s not
enough to have a high-impact programme if there’s no effective strategy for
sustaining the organisation financially. And neither is it enough to be
financially stable: we build our organisations for impact, not for financial
stability.†Additionally, in order to have continued implementation of
programmes, there is need for an orderly and well instituted organisation responsible
for ensuring implementation. Boards have a critical role to play in ensuring
sustained NPO operation.
Organisational
Sustainability
It is essential for organisations to be legally
instituted to work within the jurisdictions they operate. In Zimbabwe, although
organisations can operate as Charitable Trusts, Universitas or Private
Voluntary Organisations (PVOs), there are various taxation, reputation and cost
benefits associated with registering as PVOs. PVOs are subject to periodic
monitoring by the Department of Social Welfare under the Ministry of Labour and
Social Welfare and this places a burden on them to perform in ways that are
impactful to the communities and hence are more likely to be sustainable. It is
the responsibility of the Board of Directors to ensure that their organisations
are legally instituted and are in compliance with the relevant laws and
regulations. Organisations that are legally instituted are less likely to face
legal dissolution by the authorities, hence can be sustained for longer.
According to the Department of Social Welfare, as of March 2018, there were
1,430 organisations legally registered as PVOs and only 10% of these
organisations were up-to-date on compliance with local regulations. Evidently,
the majority of NPOs in Zimbabwe need to either register as PVOs or ensure
compliance with set regulations.
Organisational sustainability can also be threatened
by failure to comply with taxation requirements of NPOs. Whilst funds received
by NPOs for charitable and other developmental purposes are exempt from tax,
NPOs are obliged to comply with employee tax remittances under the Zimra Final
Deduction System (FDS). The Board is ultimately responsible for ensuring that
the organisation is compliant on its taxes and will not face collapse as a
result of non-compliance.
The Board of Directors should also ensure compliance
of the organisations’ with funders’ reporting deadlines and community impact as
non-compliance will eventually lead to failure to mobilise resources.
Brand image is very critical to the continued
reputation of the organisation. The Board should intentionally support initiatives
to keep the organisation visible to the public. Providers of funding,
governments, communities and other stakeholders will be encouraged to continue
engaging with organisations whose impacts and activities are clearly visible
for all. Brand visibility initiatives include the issuance of regular positive
messages about the organisation’s work through various platforms such as
newsprint, online advertising and arguably most importantly social media.
Programmatic
Sustainability
One of the major roles of the Board of Directors is
to set the long-term programmatic direction of the organisation. It is
essential for the Board to be endowed with skills that can forecast the outlook
of the environment that the organisation is operating in and determine the
relevant focus areas that will be of most impact to the communities. This will
ensure that the programmes chosen will benefit the society and in turn continue
attracting support from external funders, governments and other key
stakeholders. After all, NPOs are built on the relevance of the programmes to
the society.
Organisations are built and maintained by competent
human resource base. In order to remain relevant in a dynamic world, there is
need for continued capacity building to strengthen the skills base. The Board
should be able to identify capacity building areas relevant for future
programming needs to ensure that they develop the required skills ahead of
other organisations in this world of competition for the reduced funding pie.
Financial
Sustainability
The most legally compliant organisations promising to
undertake programmes that might bring considerable impact to communities will
not be able to see the light of day in the absence of funding for their
activities. The Board is responsible for setting up strategic and financial
sustainability plans with diverse income sources. Many NPOs have folded as a
result of over-reliance on a single or just a few streams of income caused by
Board myopia – the inability to forecast the need for diversification of income
sources. Instead of depending on donor funding, the strategic plans should
detail how the organisation will mobilise other non-restricted sources such as
fundraising, membership, private sector collaborations etc.
Financial oversight is also an important aspect of
Financial sustainability. The Board should ensure that the available funds are
utilised prudently according to the three pillars of Value for Money –
Efficiency, Effectiveness and Economy. This will ensure that the available
funds are utilised for maximised impact using the minimal resources.
The Board should also work towards stable
infrastructure and ownership of assets. They should ensure that there is
adequate space and facilities with long-term investments such as endowment
funds or a steady flow of membership fees to keep the organisation glued
together. It is also essential to form alliances; build strong relationships
with local business and government, encourage collaborations and share lessons
learned with other organisations and work with many to make a difference in
communities or in the country.
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Effective Boards will ensure that organisations
continue to operate for effective transformation of societies.