Financial Sustainability of CSOs

Outcome

number or % of target CSOs that have strengthened their financial sustainability

This indicator measures the proportion of civil society organisations (CSOs) that have improved their financial sustainability as a result of project-supported interventions. It focuses on the organisations’ ability to secure, manage, and sustain financial resources over time through diversified funding, sound financial management, and strategic planning. Strengthened financial sustainability indicates a reduced dependency on single funding sources and increased capacity to operate independently beyond project support.

Determine the indicator’s value by using the following methodology:

1) Together with the target CSOs, define what “strengthened financial sustainability” means in the context of your intervention. This may include (but is not limited to) one or more of the following dimensions:

• Increased diversity of funding sources (e.g., mix of donor funding, service contracts, membership fees, income-generating activities, or private contributions).

• Verifiable increase in income stability (e.g. multi-year funding).

• Strengthened financial planning, budgeting, and reporting systems.

• Enhanced cost-recovery mechanisms (e.g. service fees, membership dues, or inclusion of overhead costs in donor-funded projects) and/or reserve management (e.g. contingency fund or financial reserve).

• Demonstrated increase in annual operating budget and/or reserves.

• Improved ability to mobilise funds from new and/or existing donors.

2) Establish measurable criteria and safeguards to determine when a CSO can be considered to have “strengthened” its financial sustainability. Together with CSOs develop a simple scoring system that assess their capacities against the selected dimensions (step 1). This system should use clear and transparent criteria to define what constitutes achievement in each dimension. To ensure feasibility, verify the criteria with several CSOs before rolling them out to the full target group.

To maintain flexibility while avoiding overly-weak definitions of financial sustainability, include at least one minimal methodological safeguard appropriate to the context. Examples include:

• Requiring that at least two different dimensions (step 1) be met for a CSO to be considered to have strengthened its financial sustainability; or

• Requiring that at least one dimension (step 1) relates to income stability or diversification, not only to internal systems strengthening.

3) Set a reference period (e.g., “in the past 12 months” or “since the beginning of the intervention”) and ensure that both baseline and endline information are available for comparison.

4) Collect data using reliable and proportionate sources, such as:

• Self-assessment or joint assessment forms completed by CSOs.

• Interviews with CSO leadership, finance staff, or partner organisations.

• Verification by project staff or external evaluators, where feasible.

• Financial statements, budgets, annual reports, or audit reports, where feasible and appropriate.

Recognising that CSOs may face confidentiality constraints when sharing detailed financial information, data collection may rely on high-level summaries or self-reported data (such as aggregated figures or broad funding categories, including information already publicly available) where appropriate. This approach should balance data quality with proportionality and the need to maintain trust with participating CSOs.

5) Calculate the number of target CSOs that meet the minimum number or type of agreed criteria for strengthened financial sustainability defined in step 2.

6) To calculate the indicator’s value, divide the number of target CSOs that strengthened their financial sustainability by the total number of target CSOs assessed. Multiply the result by 100 to convert it to a percentage.

The data can be disaggregated by CSO type (e.g., community-based organisation, network, NGO), size, or thematic area (e.g., governance, youth, environment,), and geographic level (local, regional, national), as relevant and appropriate.

1) Clearly define and document your criteria for “strengthened financial sustainability” before data collection to ensure consistency across organisations and reporting periods.

2) Where possible, combine quantitative data (e.g., number of funding sources, annual budget size) with qualitative insights (e.g., how financial management systems improved) for a more comprehensive understanding.

3) Select data collection methods carefully to ensure proportionality, respect confidentiality, and maintain trust with CSOs. Where detailed financial data cannot be shared, high-level or self-reported information may be used as appropriate.

4) Encourage participating CSOs to use the findings to strengthen their financial planning, risk management, and fundraising strategies.

5) Simplified alternatives: If measuring financial sustainability through a multi-dimensional assessment is too complex, you may instead use one or both of the following simpler indicators:

• Number of target CSOs that increased the number of their funding sources by at least [specify number] donors while not decreasing the overall financial volume of their operations 

• Number of target CSOs that increased the financial volume of their operations

6) To assess sustainability trends over time, repeat the measurement annually or at key project milestones.