----- Original Message -----
From: "Paul Griffiths" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Wednesday, November 26, 2008 1:18 PM
Subject: [Ict4devwg] Charity Begins in the Office - Funding in NGO's
Source :
http://www.ft.com/cms/s/0/29d788d2-af7e-11dd-a4bf-000077b07658.html?nclick_check=1
*Financial Times *
TechnoServe received a $2.9m grant from Microsoft last August. The grant
was not a donation towards one of the non-profit’s programmes, which
equip entrepreneurs in the developing world to establish businesses that
create jobs and reduce poverty.
It was for an information technology upgrade, allowing the organisation
to standardise IT tools across its offices worldwide.
However, for many non-profits, this kind of grant remains an elusive
dream. Too often, funding comes with strings attached – strings limiting
the spending to programme work rather than on support functions such as
staff training, improved IT systems or HR management.
“Funding that is targeted to programmes almost exclusively, with minimal
overhead allowances, remains a major problem,” says Raj Kumar, president
and co-founder of the Development Executive Group, which provides
business intelligence and recruiting services to the development community.
Yet, as many in the sector point out, boosting operational efficiency by
investing in technical training, HR management or streamlined
procurement systems not only helps organisations work more effectively
but can also mean more cash for mission-driven activities.
Online system offers aid for managing grants
As non-profits seek ways to become more accountable to their
funders, one technology solution could help. This is an online
grants management system provided by the PhilanTech company.
The system, called PhilanTrack, streamlines the creation of grant
proposals as well as the reporting on how grants are spent. The idea
is to allow non-profits to spend less time on reporting, and help
re-direct resources towards mission-related activities.
While the service is designed to help donors handle proposals from
non-profits and oversee the grants they give, the grantees benefit
too. “We’ve constructed it in a way that makes it easier for
[non-governmental organisations] to manage their reporting to
multiple donors,” says Dahna Goldstein, PhilanTech founder.
With the help of Elizabeth Keating, a Boston College professor,
PhilanTech is also designing an analysis tool to give foundations a
more accurate view of the financial status of an organisation, from
its funding mix to its liquidity and debt-servicing ability.
The PhilanTrack system emerged from work Ms Goldstein did on an
internship at Ashoka, the social entrepreneurship organisation,
while taking her MBA at New York University’s Stern School of
Business. Ms Goldstein was given the task of evaluating the social
impact of Ashoka’s fellowship programme. “As I was interviewing
their peers and looking at the content, I discovered that everyone
was doing their reporting on paper,” she explains, “I had a
background in technology and this seemed ridiculous to me.”
Ms Goldstein designed a system for Ashoka that was a modification of
the balanced scorecard used in the corporate world that enabled the
organisation to assess individuals at the start of their fellowship
and have them report three years later against the social scorecard
criteria she devised. This led her to develop a centralised system
serving the needs of funders and NGOs.
As a result of working with IBM on a shared procurement system, for
example, the Georgia Center for Nonprofits, which helps organisations
make better use of their resources, found charities could cut
procurement costs by up to 30 per cent. By standardising processes, they
could cut associated administrative costs in half.
And for a charity that, say, delivers emergency relief supplies,
investments in training for logisticians would be money well spent
because it could help the organisation deliver those supplies faster.
What makes it hard to attract money for such initiatives is that
employee training, IT systems and office efficiency measures are
invisible and do not provide the kind of images that appeal to donors
and cannot be easily turned into compelling stories that link to
alleviating poverty, improving access to healthcare or saving a portion
of rainforest.
Moreover, individual donors are often unaware of the importance of back
office operations. “There’s a naivety in thinking that their £10 floats
magically across the world and turns itself into food that goes in the
mouth of a starving person,” says Gib Bulloch, director of Accenture
Development Partnerships, part of the Accenture consulting and
technology services group that provides services to non-governmental
organisations and non-profits in developing countries.
“They don’t understand the fact that investing in people, technology and
systems may actually have more impact on poverty, health and education
than this race to the bottom on overheads,” says Mr Bulloch.
The focus on overheads as an efficiency measure troubles many in the
non-profit sector. In the absence of hard measures, counting spending on
overheads has been raised to a prominence seen as unhelpful. “It’s one
of the few quantitative and universally comparable measures so it gets a
lot of attention,” says William Foster, a partner at Bridgespan, a
non-profit spin-off of consultants Bain & Co that offers services to
foundations and non-profits. “It’s not what people aspire to as an end
goal but, because it’s so measurable, it’s given outsized attention.”
A symptom of this, according to Mr Kumar, is that non-profits are
starting to bid for government contracts from agencies such as USAID –
contracts that were once the preserve of private sector companies but
now attract non-profits as they provide funding for overhead investments.
Another, less positive, effect of funding restrictions is that
organisations may mask overheads as project costs in their accounting.
When Bridgespan, in a report*, calculated the cost of doing business for
four organisations and compared that with the overhead spending those
organisations reported, it found that while they stated rates of 13 to
22 per cent, actual rates ranged from 17 to 35 per cent.
Interviewees complained about funder expectations. “Donors often ask me
about our administrative costs,” said one finance director. “It seems
that they always want to make sure that we’re under 20 per cent. I
always end up launching into my spiel about the importance of effective
administration. It’s so frustrating!”
The finance director’s frustration reflects a bigger problem – the fact
that donors’ focus on low overheads prevents organisations from becoming
more efficient. “It constrains non-profits from investing in
forward-thinking initiatives, such as IT, developing new funding
streams, and strategic planning, because all of these require
overheads,” Mr Kumar says.
There is, of course, another side to the story: the ability of
non-profits to improve their accountability and measurement of the
impact of their programmes – something that might encourage donors to
relax their scrutiny of overhead expenditure.
Paul Shoemaker, director of Social Venture Partners Seattle, a network
of donors that partner with non-profit organisations, believes that in
this respect the funding issue is “a two-way street”.
“People ask whether, if you want less restricted funding and more
flexibility, [non-profits] become unaccountable – and the answer is
absolutely not,” he says. “Accountability in any sector is a good thing.
We’ve just created the wrong kind of accountability mechanisms in the
non-profit sector.”
Mr Shoemaker believes donors must become more flexible and effective in
their funding practices, while non-profits need to do a better job of
demonstrating and communicating the impact of their activities.
Some examples of this type of relationship exist. The Edna McConnell
Clark Foundation, which helps low-income young people gain access to
services and programmes that will improve their lives, has strict
demands for accountability from its grantees. The foundation makes funds
available for things such as leadership development, with grants for
executive coaching and search, succession planning and board development
and recruiting.
“They are well known for giving larger than normal grants over
multi-year periods of time that are unrestricted,” says Mr Foster.
“Which is exactly what non-profits need to build long-term
organisational strength that creates impact.”
And TechnoServe will certainly feel the impact of this kind of grant
making. With Microsoft’s money, it will integrate throughout its
operations Microsoft Office and other applications and operating systems
such as Exchange, SQL Server, SharePoint and Outlook.
“As we grow, we need to upgrade IT and recruitment systems,” says Bruce
McNamer, chief executive of TechnoServe. “Because we need to run our
organisation in an efficient way.”
Chances are, the new systems will not appear in photographs in glossy
brochures or annual reports. But TechnoServe’s enhanced efficiency will
ultimately have an impact, allowing it to support more developing
country entrepreneurs as they build businesses, generate incomes and
improve prospects for their families and their communities.
* /Nonprofit Overhead Costs: Breaking the Vicious Cycle of Misleading
Reporting, Bridgespan Group, April 2008/
--
Paul Griffiths
IT Advisor
ICT4DEV Coordinator
Blog: www.ngocentre.org.vn/ict4dev
Mailing List: http://mailman.ngocentre.org.vn/mailman/listinfo/ict4devwg
VUFO-NGO Resource Centre
La Thanh hotel, 218 Doi Can, Hanoi, VIETNAM
Tel. +844 832 8570
Fax. +844 832 8611
Mob. +84 (0)904 40 54292
Email: [EMAIL PROTECTED]
Website: www.ngocentre.org.vn
_______________________________________________
Ict4devwg mailing list
[EMAIL PROTECTED]
http://mailman.ngocentre.org.vn/mailman/listinfo/ict4devwg
To unsubscribe send a message to [EMAIL PROTECTED] with the subject unsubscribe.
To change your subscription to digest mode or make any other changes, please
visit the list home page at
http://accessindia.org.in/mailman/listinfo/accessindia_accessindia.org.in
