Diversity of Income and Subsidies
Diversification means getting funding from a variety of funders so that you are not dependent on only one donor. Generally, this does not mean the money that comes in through donations, as these tend to be sporadic and you will not be able to predict – from year to year – how much money will come into the organisation in this way. Similarly, annual fees from members pose a risk to your income stream as the organisation is not able to reliably and accurately predict the amount of income that will come into the organisation regularly through this source.
Many organisations supplement their income through fundraising and in some cases, charging a fee for the service that they provide.
Why is it not ideal to have only one donor?
The primary reason, is that donors very often change or refine their focus every few years. It is indeed very seldom the case that a donor will fund an organisation for lengthy periods of time. This could leave the NGO vulnerable and at risk, should the donor move their support.
Many NGOs are eligible to receive funding from government, in the form of subsidies, for the work that they do on government’s behalf. The Public Finance Management Act (PMFA) 1 of 1999 (and the Public Finance Management Amendment Act 29 of 1999) promotes the use of financial resources to ensure good service delivery. PMFA compliance also allows for registered NGOs to qualify for tenders and receive funding from Provincial and National government departments.