Why Will Project Funding Not Save the NGO Sector?


My experience in the non-governmental sector started 15 years ago as an assistant in an EQUAL project. Since then, I have tried many roles related to attracting project funding: I have written applications, administered project activities, prepared payment requests, carried out public procurement, and contributed to the development of descriptions of funding conditions. A wide variety of funds, municipalities’ or ministries’ programs, a European, Lithuanian, Norwegian, Swiss funding mechanism, a strict bureaucratic or somewhat more flexible agency that supervises – the variety of experiences. And not only with project funding. Fate determined that I had and still have the opportunity to work with the other two main sources of NGO funding – income generated by commercial activities and fundraising from natural and legal donors.

All these many years of professional experience in recent years have provided a clear picture of NGO funding – project funding is certainly not the heavenly manna on which the strength, growth and increasing value created for the public of the whole sector depend. I give you 7 reasons why:

1. The funder always pursues his/her own goals, which are not always related to the goals of the NGO. The axis of the description of the conditions of each competition is the purpose of the invitation, which reflects the funder’s intention to fund such organizations, which activities do not contradict (or even better – perfectly coincide) with the field of activity of the money-giver and the chosen strategy. But often project NGO, hunting for money, succumb to the temptation to change its mission with each new invitation. After, let’s just say, five projects (and five missions), the organization no longer knows what it is aiming for or for what purpose it has been established.

2. The genre of project financing is distinguished by its bureaucratic language. The Aukok.lt portal team, evaluating the ideas of the organizations applying to the donation portal, first of all, most clearly identifies pure project NGOs. Super formal statements, a long name of the donation campaign reminding of a ministry document, sentences extending over a third of the page betray them. And the biggest (and the saddest) uniqueness is that such organizations name methodologies developed, organized events or working group meetings they participated in as their main achievements. Not a word about the beneficiaries, their success stories and the social change achieved in solving a particular social problem. Project funding forces NGOs to think in project language and live in a “project bubble”, and the terms they use are not understood by their target audience, potential donors or the general public.

3. Compared to other NGO funding alternatives, project funding is the least efficient to administer. In most cases, public finances are allocated to projects, therefore, it is more than obvious that this type of funding is inevitably surrounded by many administrative processes. Interim and activity reports, payment requests, procurement procedures – all these activities do not create any added value for the direct recipient of NGO services. Of course, an NGO, even funded by income generated from commercial activities or fundraising support, cannot completely avoid administrative work (and it should by no means even try to avoid it). Financial accounting, reports, employment relationships and other documents must be handled thoroughly and accurately. However, projects, especially on a smaller budget, often have a disproportionately large part of administrative processes, which makes project funding exceptionally inefficient in measuring the cost-benefit ratio.

4. The bureaucracy involved in project funding leads to a high degree of budgetary rigidity. During the implementation of the project, the funder not always allows to use the saved funds for other purposes or (and here comes the paradox!) they are even returned to the funder. I have had a situation where I hoped to smoothly return the balance of a few euros at the end of the project to the SPPD (the Department of Supervision of Social Services) budget, but I received an angry call from a specialist explaining in a raised tone that I had to buy a pencil or something else and not transfer any funds back because she will need to fill in an additional document. I am not trying to say that it is absolute, but certainly, some funders are focused on “absorbing” the budget over a given period, and there is a serious lack of saving or efficient use of funds when adapting to the rapidly changing market conditions.

5. Project funding is not designed to fund the ongoing activities of NGOs. In most cases, the funder expects to receive applications full of innovations, new products, innovative methods, etc. In this way, EU Structural Funds and other larger-scale funding programs have generated many unsupported web pages and methodologies, analyzes and studies that become dusty in drawers as they became irrelevant at the same moment as the final project report was approved. Such a situation is inevitable in an organization where the implementation of the project for employees becomes like an anchor next to direct activities. NGOs seek to ensure ongoing activities, but when employees are paid “through a project”, its indicators need to be somehow “made”. Thus, the quality of project activities remains the last priority. There are rare exceptions when a ministry or municipality allocates funds to a specific organization or a small group of them for direct ongoing activities through competition of projects. For example, the Ministry of Social Security and Labour of the Republic of Lithuania announced invitations regarding the selection competition for “Nevyriausybinės organizacijos projekto, skirto emocinei psichologinei pagalbai telefonu vyresnio amžiaus žmonėms teikti, atrankos 2020 metais konkursas” (A non-governmental organization project for the provision of emotional psychological assistance to the elderly by telephone in 2020) or “Nevyriausybinių organizacijų projektų, skirtų konsultacinėms paslaugoms, teikiamoms telefonu (nuotoliniu būdu) vyrams, išgyvenantiems emocines ir psichologines krizes, stiprinti 2020 metais, atrankos konkursas” (Projects of non-governmental organizations to strengthen consulting services provided by telephone (remotely) to men experiencing emotional and psychological crises in 2020); these invitations were clearly targeted at specific non-governmental organizations, the names of which can be clearly identified from the name of the competition alone. I’m glad that the ministry has understood the social impact created by the organizations and the quality of the services provided, but there are very few organizations in Lithuania that have the luxury of receiving invitations exclusively for them. And in general, such imitation of a project competition should not be practiced. If the public sector sees that an NGO is doing well in a particular area, it should buy services and organizations should fund their activities from sales revenue.

6. Project funding is unpredictable. The rules of the game depend only on the funder – the date of an announcement of the invitation, the maximum amount of the budget, the requirements for the applicant, the evaluation criteria, etc. And most importantly, the final decision – to fund or not to fund – depends only on the funder. It’s sad to admit, but sometimes the success of an application does not depend at all on its quality or the originality of the idea. Indeed, there is a biased assessment, ignorance of the social problem and the specifics of NGO activities, and an elementary political decision not to allocate funding to an NGO that openly and publicly criticizes the public policy pursued by the funder. Project funding is difficult to predict, so project organizations’ three- or five-year strategies and budgets are good-for-nothing.

7. Project funding funds are very limited. Reading the funding descriptions of some of the competitions, it becomes clear that the money-giver will fund only 2 organizations. And there are 50 applicants. And sometimes – 100. Due to limited project money, competition is only growing and it is programmed to grow.

Some NGOs, when raising the question regarding the financial sustainability of the sector, require the public sector to do only one thing – to increase the budgets for project funding invitations and the maximum project amounts. The truth is that with each larger or additional invitation, the NGO’s focus on project funding will increase even more, and with it – the competition for the same money. Instead, it is worth looking back at the support sector, which has great potential – both physical donors and legal funders are certainly ready to donate more, all we have to do is to ask them in the right place and in the right way. The huge sums donated during the COVID-19 crisis in the spring of 2020 proved this.

By no means am I saying that NGOs should not take project funding opportunities. If the invitation announced directly matches the goals and mission of the organization, and the funded activities – the lines of the cost the organization, it is worth seriously considering your resources to prepare a quality application and the potential to win. And to apply if the odds are good. However, the continuity and development of an NGO are not possible without a balanced budget, which should seek the “three-thirds” ideal when an organization is funded equally by at least three different sources of funding (such as 1.2% GPM (Personal Income Tax) support, legal funders funds and project funding). It is naive and short-sighted for the NGO sector to wait for project money and hope that it will save the organizations. Because if it could save, it would have already done so.