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Digital Nonprofit Finance – Investment to Impact for Nonprofits

Unlocking the Potential: Optimizing Digital Nonprofit Finance for Lasting Impact

May 15, 2024

At a time of confluence of major crises— economic and geopolitical turmoil, accelerating climate change, and stalled progress on the Sustainable Development Goals - the gap between funding needed to address these crises and funding available to nonprofits is widening. Digital transformation is an essential approach to help organizations bridge that gap, as it can help them to operate more efficiently, increase their agility to respond to unforeseen events, unlock access to more funding, provide parts of their mission value as digitalized services, and ultimately deliver more impact.

However, securing funding for digital investment in nonprofits remains a challenge. While research has identified that nonprofits with successful digital transformation lead with investment, in many organizations, digital investments are still viewed as cost sinks vs. impact boosters. For IT leaders, it is increasingly challenging to finance ICT and digital efforts through unrestricted funding. As digital activities in nonprofits are still relatively novel compared to mission focus, donors that specifically fund digital are scarce, and development professionals may lack experience and training for this type of fundraising.

Our initial research has shown that:

  • Donor funding tends to focus on digital programming/ICT4D; however, this is where IT leaders tend to have the least visibility, which can weaken digital protection, enterprise architecture, and data standards, lead to duplication of efforts and inefficiency in procurement, and an overly strong focus on the type of solutions favored by donors such as data collection tools, or newer technologies such as AI. While local implementing partners play a more and more important role in the delivery of services, there is even less visibility on their ICT and digital solutions (or lack thereof), making the integration of processes and data across an organization’s overall ecosystem to achieve a single source of truth a real challenge.
  • Organizations struggle to formulate solid business cases that link digital investment to outcomes such as more efficient operations, improved fundraising, and increased impact. Without a defined baseline, such as the effort and cost of running a specific process or service, it is difficult to quantify what can be achieved. For example, our research on Enterprise Resource Planning (ERP) implementations in the sector has shown that although 58% of surveyed organizations say they have achieved business process improvements, they struggle to objectively measure and quantify these, as the necessary approaches and expertise are not in place.
  • IT leaders are feeling the funding squeeze, with the availability of unrestricted funds that are typically used to undertake large investments diminishing, and they are looking for mechanisms to charge the cost of central business applications out across their organization rather than keeping one large central budget that is perceived as a “back office” overhead. At the same time, the benefits of these applications are not necessarily visible or understood at the country and program level due to a lack of engagement and user-centric approaches during and after implementation.

Building on these findings, The Digital Nonprofit Finance (DNF) project seeks to support nonprofits with capabilities and tools to establish the link between digital investment and impact. This will allow them to better make their investment case with external and internal stakeholders in a way that accelerates and sustains the digital transformation of their organizations, as well as manage the digital funding that they have at their disposal efficiently.

Zoning in on the “investment” category of the Digital Nonprofit Ability (DNA), it seeks to establish, through a structured approach, what the actual capability gaps are that stop nonprofit organizations from linking digital investment to impact across categories such as investment decision making, financial management processes, and procurement. Based on the outcomes of the DNF Survey, the project will look to generate learning content and tools to help close those caps.

Are you a budget holder in a nonprofit organization? Are you involved in the decision-making or funding of ICT and digital investment?


NETHOPE’S 2024-2030 STRATEGIC PLAN - BRIDGING THE NEW DIGITAL DIVIDES

A generation ago, the Digital Divide described the gap in access first to computers, and then to the internet and essential technologies. But today, in a world where more people have access to computers and the internet than ever before, our international NGO Members—and the people, places, and planet they serve—are grappling with new digital challenges that threaten mission advancement and slow global progress on the United Nations’ 2030 Sustainable Development Goals. These new challenges—The New Digital Divides— represent critical gaps in infrastructure, systems, capabilities, and knowledge across five prominent areas. Over the next decade, NetHope in collaboration with our Members will lead collective action to bridge these divides, leveraging our powerful, proven model for advancing global good. Read more about our new strategy here.


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