An investigation of funding models that influence the sustainability of selected non- profit organisations in Cape Town

Abstract

While the concept of funding models is well developed for profit making organisations, it is not as well developed in the non-profit sector. The aim of this study was to explore different funding models used by non-profit organisations and how these funding models influenced the financial sustainability of organisations. The study objectives were to determine the funding models applied in human rights-based organisations, to establish how chosen funding models influence the financial sustainability and to identify the constraints and stimulators for implementing viable funding models. Qualitative research methodology was employed, conducted on five human rights non-profit organisations located in the City of Cape Town. Data were collected through face-to-face interviews and documents (annual budgets, audited financial statements and funders’ dashboards) obtained from the selected organisations. The data were analysed using content analysis, which groups data into themes, similar data into topics and developing the most descriptive analysis for each topic. Document analysis was done using financial statement analysis tools, being ratio analysis and comparative financial statement analysis. The study found that the most used model was the big bettor, used by all five organisations. The second most-used models were public provider, beneficiary builder and member motivator, each used by two organisations. Regarding the relationship with funding models adopted and financial sustainability, this study suggests that the more diverse sources of funding an organisation has, the more financially self-sufficient and sustainable it will be. This study found that the organisation that managed to diversify its sources of funds was financially sustainable and this organisation mixed the five different funding models of the big bettor, the public provider, beneficiary builder, member motivator and resource recycler. The study identified four main constraints faced by non-profit organisations in their efforts to develop funding models. These constraints are no dedicated person responsible for fundraising, non-standardised reporting templates, restricted funds and high competition among non-profit organisations for the same funders and a limited number of funders for South African non-profit organisations. These constraints exist despite non-profit organisations being favoured by policies that enable them to work freely and by the State using non-profit organisations to provide a variety of services to a society, which stimulates non-profit organisations as it provides a reliable source of income.