Money is the lifeblood

Money is the lifeblood of everything, in our personal lives and in our private, public, and charitable organizations.

However, the perspective on money varies among the three types of institutions:

  • In some, money is the goal,
  • In others, money is a necessary means that cannot be dispensed with.

Differences in objectives among institutions:

  • In private institutions:

    Money is a primary goal; they seek profit and avoid loss.

  • In public institutions (governmental):

    Providing services is the main goal.

  • In charitable institutions:

    Positive change is their main goal.

So, money is not a final goal in charitable institutions, but without it, they cannot operate as required.

Financial sustainability in charitable organizations

From this principle, charitable institutions must maintain a stable and increasing rate of financial revenues, in order to contribute to the positive change for beneficiaries while achieving a financial surplus, even with changing internal and external circumstances of the charitable organization.

This is what we call financial sustainability for charitable organizations, where their giving and benefits to beneficiaries continue even with:

  • changes in internal circumstances such as administrative conflicts, or
  • changes in external circumstances such as economic crises and others.

Financial sustainability in charitable organizations is not uniform, rather:

  • some have a high level of sustainability,
  • while others exist in a circle of danger and financial deficit.

Therefore, we will learn about indicators of financial sustainability, which are:

Indicator One: Strategic Financial Plan

This indicator clarifies the financial policies in the charitable entity, and the income strategy in the medium and long term, priorities, partnerships, alliances, risk management plans, expansion, entering new fields, and opening branches, and so on.

Indicator Two: Strong Support from Stakeholders

By stakeholders, we mean everyone who affects or is affected by the programs and activities of the charitable organization, such as:

  • the community in which it operates,
  • the beneficiaries,
  • the supporters,
  • decision-makers,
  • supervisory bodies,
  • program implementers, and others.

Each stakeholder plays an important role and has an impact on the charitable organization and its projects, thus it is important to continuously improve and develop relationships with them.

And the opposition is transferred to neutral, the neutral to the agreeing, and the agreeing to the supporter and advocate.

Charitable entities are concerned with gathering friends and advocates.

Indicator Three: Sound Financial Management

This indicator is very important, as it monitors financial resources from their source until they reach the final beneficiary, and includes:

  • A cash flow plan,
  • A revenue and expense plan,
  • Financial and accounting procedures covering assets and risks,
  • Audit reviews,
  • Reserves,
  • Periodic financial reports.

Sound financial management helps in making the right decisions that improve services or reduce the cost of the final product/service.

Indicator Four: Unrestricted or Unconditional Income

This indicator is specific to charitable organizations only.

It means that the charitable organization decides how to spend the money, not the donor.

For example:

If a person donates to orphans in village (A), the charitable organization is committed to spending the money on the orphans of village (A) only, even if there are more needy cases.

Lack of unrestricted income limits the charity's interaction with crises and emergencies, as well as development.

Unrestricted income typically comes from:

  • Sale of services and products,
  • General assistance,
  • Sponsorships,
  • Memberships,
  • Investment returns.

Indicator Five: Diversification of Income Sources

At least 60% of the charitable organization's budget should come from five different sources, such as:

  • the government,
  • institutions,
  • individuals,
  • investment returns,
  • funding.

Success in this indicator does not only mean increasing the size of donations, but also increasing the number of donors.

Dr. Ali bin Suleiman Al-Fawzan

Source: Al-Youm Newspaper