Tough times for NPOs

2018-11-19 15:45
Richard Rangiah, the executive director of the local Community Chest, believes most local NPOs are struggling financially.

Richard Rangiah, the executive director of the local Community Chest, believes most local NPOs are struggling financially. (Kerushun Pillay)

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The “vast majority” of Pietermaritzburg’s non-profit organisations are facing tough times financially, making their closure a real possibility — and this will tear apart the city’s social development fabric.

This is according to the executive director of the Pietermaritzburg and District Community Chest, Richard Rangiah. He told The Witness in an interview on the state of NPOs in the city that most needed to adopt better management practices.

Community Chest is an NPO organisation that supports 48 local NPOs this financial year.

Rangiah said a combination of donors themselves facing the tough economic climate and the fact that most NPOs do not manage money wisely were the main reasons behind the “scary” situation.

The Stepping Stones school for children with cerebral palsy closed its doors on October 31 because of a lack of funding, The Witness reported. The school ran solely on donor funding.

Weekend Witness later reported on several local NPOs finding it tough under the strain of a lack of funds.

“Not every NPO discloses its financials, but I’d say the vast majority have insufficient funds to keep afloat. This will be detrimental because lots of people depend on these organisations, and so their closure will push the city back in terms of social development,” Rangiah said.

“Some organisations offer things no one else does, so there will be nowhere people can go if that NPO is no more.”

He explained that, in addition to donors tightening their belts, obtaining funding from institutions like government departments was generally a drawn-out process.

“So this means NPOs need to shift how they operate, and need to start using their funding to build up reserves. But usually NPOs just assume the same amount of money will come next year and they spend without thinking about the future.”

Rangiah said NPOs needed to take more of a business-like approach to their management style, adding that Community Chest was aiding some NPOs in this regard. “With there being less donor funding, many NPOs have not prepared for this with reserve funds, and so many are uncertain as to how long more they have to operate; Stepping Stones is just one example.

“The other problem is that when there is insufficient funds, NPOs don’t know when to draw the line. They usually become emotional about it and say ‘let’s hang in there for just one more month’ and they run the organisation into the ground,” he said.

And because of this staff are deprived of retrenchment packages, and leave the organisation unable to settle outstanding debts, he said.

He said that in his 36 years in the nonprofit industry, he was only aware of one organisation, the Thembalethu Trust, where he is a former director, which had phased out the organisation properly.

“We saw that it was not sustainable, so we took the decision and we managed to pay staff and settle our bills.

“An NPO must look at its financials and ensure it has at least six months’ worth of expenses in its reserves. That will allow a breathing space should a donor say they’re not able to fund anymore.

“Big corporations or trusts are also facing tough times so the pool of money for donations is shrinking. NPOs need to stop having dependency on donors and learn to be sustainable.”

Read more on:    pietermaritzburg  |  npos
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