The finances of NPOs
Not making profit does not mean not accounting for the money that moves through the business.
Revenue: Charities can receive donations from private donors, from other charitable foundations or from public grants.
To raise funds, charities can organise events and collect goods.
Some also organise commercial activities to bring in more revenue (sale of craftworks, for example).
Cost: Many charities are service providers and their main cost is manpower.
Many rely on volunteers to carry out the work, but charities also employ people, as volunteer turnover is often high.
Other costs vary according to the work done.
Reporting: Charities have a moral (and often legal) duty to tell their donors what they have done with the money.
Charities also provide assessments of their actions. They don't aim to make a profit, they measure the qualitative results of what they have done through non-financial indicators.
Control: Reporting is the first control, and in some countries, organisations have been set up to audit charities and determine whether they use the funds according to their status.
Sustainability: As charities mostly depend on external funding, sustainability is a recurring issue for those who want to ensure long-term action on behalf of the charity in five or 10 years' time.
