The concept of ‘continuity of operations’, commonly referred to as ‘going concern’, is fundamental to the sustainability of civil society organisations (CSOs), and not only those that depend on external financing to operate. It reflects their ability to work in a sustainable and continuous manner. The consideration refers to the assumption that an entity will continue its operations in the foreseeable future, without the intention or need to liquidate or significantly reduce its activities.
This term has developed over time with the evolution of accounting and financial practices. However, it became formally recognised in the early 20th century, especially with the publication of accounting and financial reporting standards, which emphasised the importance of an entity’s continuity of operations. The term and its application have been widely discussed in accounting and regulatory texts, such as generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS), which address going concern as one of the fundamental principles in the preparation of financial statements.
In the case of CSOs, the concept is manifested through sound financial management practices, diversification of funding sources, long-term planning, transparency and adaptation to change. Considerations of “going concern” are essential to ensure that CSOs can continue to fulfil their missions and meet the needs of the communities in which they operate.
The withdrawal of donors directly affects CSOs that depended on their support, but also raises concerns about the possibility of a knock-on effect on other donors, which could further aggravate the financial situation of these organisations. Take the recent case of the United States Agency for International Development (USAID). This article analyses, without any philosophical or ethical pretensions, the challenges and risks associated with this dynamic, as well as the implications for the continuity of CSO operations, and proposes some strategies to mitigate risks.
The relevance of donors for CSOs
Donors have been a pillar of support for most, if not all, CSOs operating in Mozambique, providing financial and technical resources for the implementation of projects in various critical areas such as health, education, human rights and economic development. The withdrawal of donors from cooperation or CSO support programmes represents a significant loss, not only in terms of funding, but also in terms of the continuity of activities or the existence of these entities, due to the lack of internal sources to generate financial means to sustain them.
The withdrawal of donors from cooperation or CSO support programmes represents a significant loss in terms of funding and continuity
Several consequences arise from this cessation of support, such as:
1. Loss of financial resources: The withdrawal of donors can result in drastic cuts in funding, leading many CSOs to re-evaluate their operations or eventually close down.
2. Cascading effect on donors: The departure of donors can trigger a cascading effect, whereby other donors, concerned about the stability and continuity of projects, also reconsider their support, especially when the main aid comes from the entity that is withdrawing its support, fearing that their contributions will not be sufficient. This cascading effect can be exacerbated by factors such as:
- Perceptions of risk: The perception that CSOs are in financial difficulty may lead donors to reconsider their support, creating a cycle of mistrust.
- Changes in funding priorities: The departure of a donor may signal changes in funding priorities, leading others to reassess their own investment strategies.
- Fragility of the donor ecosystem: The interdependence between donors and CSOs means that the departure of a major funder can destabilise the entire ecosystem, affecting not only the CSOs directly affected, but also those that depend on a healthy funding environment.
3. Mistrust and uncertainty: The departure of a major donor, for example, can generate mistrust among other funders. CSOs may face difficulties in justifying their financial needs and demonstrating the effectiveness of their programmes, especially if sustainability is perceived to be uncertain.
4. Increased competition for resources: With funding declining, CSOs may enter into fierce competition for limited resources from donors still willing to continue their support programmes. This can lead to fragmentation of efforts, where organisations that previously collaborated may become competitors, undermining the overall effectiveness of development initiatives.
What strategies can CSOs use to mitigate risk?
1. Diversification of funding sources: CSOs should seek to diversify their funding sources, reducing their dependence on single donors. Some initiatives:
- Use of public funding: CSOs can seek partnerships with the government, requesting grants or funding for specific projects that are aligned with public policies.
- Private donations: Establish relationships with individuals and companies that can contribute financially. This may include fundraising campaigns and charity events.
- Foundation funds: Many foundations offer funding for social projects. CSOs can identify foundations that share similar objectives and submit proposals for funding.
- Revenue-generating activities: CSOs can develop activities that generate revenue, such as selling products or services related to their mission. This may include offering courses, workshops or consulting services.
- Crowdfunding: Use crowdfunding platforms to mobilise resources from a large number of people, such as Mpesa, Facebook, etc. This approach can be effective for specific projects.
- Partnerships with the private sector: Establish partnerships with companies that wish to support social causes, whether through sponsorship, donations or corporate social responsibility programmes.
- Membership programmes: Create a membership programme where members pay a fee to join the organisation and receive benefits such as access to exclusive events or information.
- Impact Investing: Seek investors who are interested in funding projects that have a positive social impact in exchange for a financial return.
- International support: Explore funding opportunities from international organisations, development agencies and CSOs operating in Mozambique.
- Capacity building and training programmes: Offer capacity building and training programmes to other CSOs, communities or businesses, charging a fee for participation.
2. Strengthening organisational capacity: Investing in strengthening organisational capacity is crucial. It is a fundamental pillar for the sustainability of CSOs in Mozambique. Investing in this strengthening involves several critical areas that can directly influence the effectiveness and resilience of CSOs.
First, training in fundraising is essential. This enables CSOs to identify and increase access to new sources of funding, but also to develop more competitive proposals that are aligned with the expectations of funders. Training in financial management is equally important, as it allows organisations to manage their resources efficiently, promoting transparency and accountability, which is vital for maintaining the trust of donors and partners.
With the implementation of appropriate approaches, CSOs can adapt
In addition, training in project monitoring and evaluation is crucial for CSOs to measure the impact of their initiatives. It helps in the continuous improvement of programmes and also provides concrete data that can be used to attract new funders by demonstrating the effectiveness and relevance of the work carried out.
Another important aspect of organisational capacity building is the promotion of a culture of continuous learning within the organisation. This may include holding workshops, seminars and exchanges of experiences with other CSOs, allowing teams to share good practices and learn from the challenges faced by other organisations.
In addition, strengthening organisational capacity should include improving leadership and management skills, ensuring that CSO leaders are able to inspire and motivate their teams, as well as navigate complex and constantly changing environments.
Finally, building networks and partnerships with other CSOs, the private sector and government institutions can broaden the reach and effectiveness of initiatives, enabling the exchange of resources and knowledge. By investing in organisational capacity building, CSOs become more resilient and better able to meet the needs of the communities they serve in an effective and sustainable manner.
3. Building networks and collaborations: CSOs can seek to network, forming collaborations and partnerships that can increase their visibility and attractiveness to potential donors. Joining forces can result in more robust proposals and a greater capacity to respond to community needs.
4. Transparency and accountability: Maintaining high standards of transparency and accountability is essential to gaining the trust of donors. CSOs should clearly demonstrate the impact of their projects and the responsible use of resources.
In conclusion, the departure of donors can pose a significant challenge for civil society organisations, jeopardising the continuity of their operations. The possibility of a knock-on effect, leading to the departure of other donors, further exacerbates the situation and makes the need for risk mitigation strategies even more urgent. But with the implementation of appropriate approaches, CSOs can survive, adapt and thrive in an ever-changing funding environment, ensuring that they continue to play a vital role in social and economic development and increase the social and economic impact of the projects they carry out and monitor.
