“Myths of financial management: We only need to fund the direct project costs…”

At Ziyo, we are delighted that Cathy and Paul have co-authored the book Practical Financial Management for Nonprofits, edited by Nicole Copley and published by Juta & Company (Pty) Ltd.

It summarises many of Ziyo’ recommended practices, and even a quick dip into the book provides gems of insight.

Over the next few weeks, we will be offering a curated selection from the book, with this as our first myth from page 32:

We only need to fund the direct project costs; money spent on salaries and infrastructure is wasteful!

We might think this myth is ridiculous, but many donors have unrealistic expectations for projects and like to insist on funding only “actual project costs” without recognising that people and good administration are always required to make projects happen.

When budgeting for a project, remember that a project is carried out by people and within the context of the organisation as a whole. Any project makes demands on the staffing and the infrastructure and support of the entire organisation, and all of these costs must be included in the project budget.”

We urge you not to let your organisation become a victim of this mentality. There is no best practice ratio of overheads (however one chooses to define these), or salaries, to direct costs. It all depends on the organisation’s operating model, and effectively communicating this model to potential funders and other stakeholders is critical.

If your organisation needs assistance with understanding or changing its operating model, tailoring its financial reporting to represent its operating model, budgeting, preparing funding proposals or anything else related to financial management, please contact us!

The book can be purchased online through Juta & Company (Pty)Ltd.  You can click here for further details or to place an order for this practical book.

There are 3 books currently in the NGO Matters series. “A practical legal guide to starting up” author Nicole Copley, “Governance for non-profit boards” author Ricardo Wyngaard and “Practical financial management for Nonprofits” authors Cathy Masters and Paul Tyler