CSI: How to assess funding requests

Part of effective and strategic social investment hinges on choosing the right organisation to partner with and the following are important factors to take into account when both assessing a potential project as well as evaluating existing CSI commitments.

We have found the following categories and criteria to be crucial in obtaining the right, relevant and revealing information which helps to assess and evaluate potential or current partners:

  1. A brief history and background of the organisation (including its reputation, key activities and management, why it was established).
  1. Mission and vision: what are the objectives, plans, dreams and ambitions of the organisation—as well as their success to date.
  1. Leadership: How good are the project’s leadership and governance structures and who sits on them? Is their succession planning in place? Are people from the community being empowered as leaders?
  1. Initiative and resources: what resources does the project bring to the table, what do they have to offer, what is their track record in developing solutions for themselves?
  1. Financial health and accountability: Analysing the organisation’s audited financial statements for their latest legally required reporting period. How does the NPO fund itself?
  1. Other donors: Who else supports this organisation? See who the other donors to the project are and have been. From both a credibility perspective as well as to ensure that the organisation will not be or become dependent on your potential funding. Community credibility: What is their reputation in the community, and with peers or others working in a similar area?
  1. Legal status and paperwork. Does the organisation have all the requisite paperwork in order? Checking their legal status (it must be more than a simple NPO registration of the Department of Social Development) will usually include the project having the much tougher SARS-granted Public Benefit Organisation (PBO) status and/or being registered as a Non-Profit Company (NPC) in terms of the Companies Act.
  1. Impact and results: What realistically measurable results does the project have and how have these changed over time? Track Record: Is this a start-up or something with a proven track record of success? Is there evidence of longevity, perseverance and the intention to remain committed to serving the community in which they operate?
  1. Project descriptions: What will the money or resources actually be used for?
  1. Funding history: Have you supported them before?

Whether they are grand or modest, practical or ridiculous, you have to choose which applications to take forward. This will involve both objective checks and intuitive feel. So tick all the boxes but also be on the lookout for that ‘X factor’ — that hard-to-define spark that shines through, leaps off the page and convinces you to go the extra mile for this particular group of people.

What kind of entities to invest in?

While there is no specific right or wrong answer here, it is usually advisable to have a combination of different types of NPO partners if you can afford to. The main drawback is that companies tend to prefer funding only well-established organisations with long and strong track records, associated research and evidence of impact. Sometimes, however, we need to take some measured risks and provide seed funding for an initiative that could grow and be replicated over the years.

We would recommend partnering with a mix of organisations where you are able to benefit in terms of B-BBEE and tax benefits, but also to fund organisations or causes where you might not necessarily gain B-BBEE points (such as old age homes or start-ups). Having said that, it is still important to have an idea of the validity of each charity you consider funding. Always ask for their NPO/PBO registration, audited financial statements and other requisite documentation in advance of considering any commitment.

We encourage investment into long-term partnerships with development NPOs, communities and businesses. So, if you have existing relationships that work well and are mutually beneficial, then we encourage you to stick with those, grow with them, and also look at how you can improve or leverage these partnerships in ways that are good for both the beneficiaries and the business.

Setting Funding Parameters

Be clear about where your funding is to be spent and also about the level of reporting and monitoring and evaluation (M&E) expected. Take into consideration your NPO’s levels of skill and resources and offer holistic support where possible.

Restrictive funding or funding dedicated only to NPO programmes (rather than general operating costs) can sometimes limit the level of service that an NPO can deliver to their beneficiaries. Funding that also demands heavy admin from the NPO (such as extremely detailed reporting requirements) can be counter-productive. NPOs, like all businesses, also carry overhead and operational costs and while funding these isn’t always as attractive as supporting programmes directly, they are no less essential.

Much of the value in the work done by NPOs comes through the personnel employed there and so supporting the costs of these people often delivers the best social investment results. In this vein, it can also be very useful for an NPO to have its internal capacity strengthened through upskilling. This element of expenditure is often the last thing that an NPO can afford to budget for even though it has obviously positive results in strengthening the organisation, its work and its overall sustainability.

Capacity-building is thus often a very worthwhile part of a project’s work to fund.

Some guidelines on funding parameters:

  • Establish a guideline on the % of the NPOs total income you are willing to contribute.
  • Match the contribution to the size of the NPO — too small an amount will make no difference and too large an amount can overwhelm and reduce efficiency of the NPO. This applies to both once-off grants and long-term funding.
  • Ring-fence funding for operational costs. All organisations incur operating costs which need to be covered. Seriously consider allocating some funds towards operational costs. It is also true that skilled staff cost more, and to retain talent these NPOs need to offer remuneration of a similar calibre as the business sector.
  • Annual contributions do not allow NPOs to do much future planning as their income streams year on year are very unpredictable. Multi-year partnerships assist NPOs in planning ahead and allowing enough time to start seeing the tangible impacts of the funding contributions.
  • Multi-year contributions come with a little more thought and planning as these contributions need to factor in inflation, available funds in the years to follow as well as capacity to take on new projects and once-off allocations.

How much is too much?

This is a very objective question that will differ from business to business. It is advisable to stay away from creating any dependencies on your business.

A fluctuation in the available funding from your business could sink an NPO who is doing wonderful work as can a skewed leadership structure where your business effectively owns and directs the NPO.

Never guarantee funding

No matter how enthusiastic you are about a funding request, always remember that funding cannot be guaranteed. Make this clear in all your interactions with an applicant, no matter where you are in the grant cycle.

Exit strategies

Always have exit strategies in place — pulling out of projects at short notice with no plan in place can be profoundly damaging to the project and community as well as to your company at a reputational level.

Reducing your involvement in a development start-up project is a delicate matter. Whatever you do, it should never be sudden or without warning. Ensure that you develop exit strategies for your CSI funding in the event that you have to withdraw from projects unexpectedly. Bear in mind that exiting prematurely or not properly has a major effect and can leave the very people you were hoping to help worse off.

An exit strategy should most probably be included in the MOU, setting out the terms or conditions relating to retreating and the due processes involved so that there are no surprises.

This should never be a sudden or unexpected exit but rather a very well planned and fore-warned process.

Give ample time and assistance in finding new income streams and support. It is often good to set the expectation up front on the duration of the partnership and to follow this up with regular discussions around these expectations to make sure that they are still aligned. This has to be undertaken with care to protect both the community and the company’s reputation.

When a project has failed, you should stand by to ensure orderly closure and full settlement of any outstanding commitments. In particular, you should see to it that any local people whose jobs are affected are fairly treated.

All your exit strategies — even those implemented at short notice—should make allowance for a phasing-out period to allow the project to source alternate funding or scale back its work. It is never pleasant or easy to withdraw or exit a partnership but with forward planning, you will have peace of mind that you will be better prepared to handle the situation responsibly, ethically and with fairness and grace.

  • By Lauren Henning and Paul Pereira. Henning is Public Affairs Director at Nation Builder and Pereira runs WHAM! Media. This CSI introduction is extracted from Nation Builder’s “The Good Partner Guide for Business”, available at https://proudnationbuilder.co.za/resources/.

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