For most NFPs, the reason for the creation of the organisation was to raise money for a worthwhile cause or to fund additional research. Regardless of the reason, the outcome is expected to be the same; to make a real impact. Interestingly, it has recently been identified in a report from the Centre for Social Impact at the University of Western Australia, that identifying whether an NFP is in fact making a difference to their cause, is vastly unknown.

We now have the situation where NFPs are created and operated to support an issue, however, the lack of funding available, inhibits the ability of the NFP to determine if it truly is making a difference. We are funding the operation of the NFP in a variety of ways, whether they be through government grants or private donations and it is expected that those funds will be accounted for and reported to the various authorities and boards. However, there is nothing in place to determine if the funding that is being provided is being utilised to make a difference.

There is a serious imbalance in the way we are funding NFPs if we don’t have any way of measuring the effectiveness. Millions of dollars are being provided for so many causes yet the actual impact is unknown. We can account for how the money is obtained, we can account for how it is spent, and we account for the ways we spend it; but we have very little understanding whether the money being spent is making a difference.

According to the report above, the main reason for this is that there aren’t enough funds to go around for an NFP to allocate funding to measuring its effectiveness and outcomes. As anyone in private business will tell you, if you don’t know if your brand/product/service is working, how can you continue to grow and expand, let alone continue to pour more financial resources into it. The same rule must apply to NFPs.

Is your NFP able to tangibly determine if it is making a difference and having an impact in comparison to the amount of time and money utilised to run the NFP? Do you have reporting in place to determine the effectiveness of your NFP? If so, we would love to hear from you about how you make this work for your organisation and if you are receiving any funding that assists with this process.