Not-for-profit organisations

Organisations such as charities and trade unions are not run to make profits, but to benefit prescribed groups of people. 

Financial objectives of ‘not-for-profit’ organisations: 

Since the services provided are limited primarily by the funds available, their financial aim is: 

– To raise the maximum possible sum each year (net of fund-raising expenses)

– To spend this sum as effectively as possible on the target group (with the minimum of administration costs).

Funding strategies for NFPs: 

Most non-profit organisations need their core costs to be covered. 

Core costs are the expenditure budgets that are not connected with the levels of activity undertaken by an organisation. 

They are: 

– The costs that will always need to be funded, regardless of the number of projects and

– Are usually fundamental to the organisation’s survival, even if they cannot be directly associated with any specific outcome.

An organisation can only look ahead with confidence when the fundamental core costs are securely funded. 

Creating a core funding strategy has different forms at each stage of a non-profit– seeking organisation’s evolution.

• Infancy – tends to be heavily dependent on one funding source, which can limit independence.

• Growth phase – if funded by a multitude of projects and many donors it is prone to the pitfalls of mission creep (the expansion of a project or mission beyond its original goals, often after initial successes) and inefficiency.

• Maturity and maintenance – funding should be derived from a constantly changing mix of sources.