An NGO may have an important mission statement, dedicated volunteers and intentions to help, but the NGO may not be able to get donations easily. Knowing the reasons why NGOs struggle to receive donations involves considering other factors aside from the fundraising process. The donor wants to be sure that his or her donation goes to where it is intended to go. AABK & Associates helps organisations understand the importance of financial discipline and compliance, while those planning a new organisation can explore our Registration of NGO services.
No one will give donations because of a mission statement only. There are also other factors such as financial prudence. If the NGO fails to disclose details regarding how much work it does, how much money it spends and what results have been accomplished, then people will hesitate to donate.
To know why NGOs struggle to receive donations, it is important to note that the donors should be able to see evidence of work done by the organization.
It is not necessarily that the organization is being dishonest when this happens. It is possible that the small group of people working at the organization do not have enough time to communicate effectively.
Here are some common mistakes that can weaken donor confidence.
The donor wishes to be able to know how the NGO spends the money received from charitable donations. The failure of an NGO to give an account of its receipts and expenditures will make it hard for the donor to see the impact made by his donation.
An NGO needs to have proper documentation and proper presentation of financial data to be able to achieve financial transparency. An NGO should keep documentation of the transactions conducted by the organization and also present financial data in a manner that is understood by the audience.
Simple explanations of the cost of programs, administrative costs, and program results will aid donors in making decisions. It doesn’t take complex accounting terms to be transparent. It takes honesty and understanding.
Another common mistake is related to discussing the events that occur without describing the consequences that are achieved. The fact that an NGO held a program in the community does not imply any changes that were achieved.
NGOs need to be open regarding their goals, actions, achievements and difficulties. Pictures and stories might assist them in conveying the information about their work, yet they cannot replace the accurate accounting of the process and consent.
Moreover, updates are required. It is undesirable for donors to ask repeatedly about the progress of the project.
It is clear that these recommendations demonstrate ways in which NGOs can earn the trust of their donors.
Some organizations devote themselves to fund raising but do not pay attention to why that money is needed. Some others give promises without setting specific objectives.
This is one of the typical fundraising errors made by NGOs because such mistakes leave room for many questions from potential donors.
A stronger approach includes:
Transparency in fundraising will assist the donors in knowing what the organization wants to accomplish and what has been achieved by the organization. Do not make promises regarding the outcome of events that are uncertain.
Good intentions do not organise bank statements, reconcile transactions or prepare financial reports. People and systems must do that work.
Financial management of NGOs in India would have to be organized in such a way as to include adequate book keeping, documentation, bank reconciliation, and preparation of necessary financial statements. It is important for organizations to know what their accounting and audit requirements are.
Consistency in the maintenance of NGO accounts would help them to find answers to financial queries and rectify mistakes.
Accountability and reporting of NGOs also cover issues outside financials. The organization must be able to provide answers regarding who controls the operation and how issues are resolved.
AABK & Associates suggests that financial record keeping be seen as a continuous activity, not as something that has to wait until an audit or other deadline is near.
Taxes may encourage some donors to give, but taxes cannot take the place of trust, substantive efforts or honest communication.
Organizations that are eligible can apply for Registration under Section 80G depending on certain legal conditions. However, this does not mean that donations are ensured, and the NGO must not assume that each donation is taxable.
NGOs must also know about the sections applicable to them like section 12A/12AB. The guide issued by the Income Tax department for the purpose of reporting donations elaborates upon the reporting and certification process related to Forms 10BD & 10BE. NGOs must find out the applicable forms for them and applicable tax year.
Taxing is important to operating properly, but it should be one component of the larger strategy towards trust in NGOs.
It becomes much more meaningful if organizations start implementing these learnings in their practice of why NGOs struggle to receive donations.
Start with a few practical improvements:
There should be defined internal responsibilities when it comes to donation management by NGOs as well. Ownership of donor databases, accounting and communication prevents misunderstandings and enables the organization to act in a coherent way.
Keep in mind that the issue of transparency doesn’t mean presenting everything in an ideal form.
Realizing why NGOs struggle to receive donations is the key to creating a better bond with their supporters. Good documentation, realistic expectations, quick communication, and good financial management will go a long way to proving that an organization means business.
Looking for professional assistance with accounting, taxation and registration of NGOs? Get in touch with AABK & Associates for more information.
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NGOs often struggle because of poor transparency, weak communication and a lack of donor trust.
Through proper accounting and provision of financial reports and project reports on time.
3. Is there any guarantee that donations will flow from Section 80G?
No, Section 80G may give some tax breaks to qualified donors, but there is no guarantee of donations.
4. What are the financial records to be maintained by NGOs?
Donation records, income statements, expenditure records, and bank records must be maintained.
Clear communication, proper reporting and project progress will help small NGOs attract more donors.
