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The National Lottery and the non-profit sector

2.1.7 What sort of applications should be funded?
 
Three issues need to be raised here. Firstly, the question of whether funding should be short-term and project based, or whether funding should be available for longer-term projects and core organisational expenses as well. At present, funding is geared exclusively towards the former. However, given the stated intention of the National Lottery to introduce a degree of financial stability and predictability into the non-profit sector,67 a call for longer-term funding would appear appropriate.

One way to structure this would be to introduce a dual distribution system, whereby applications could be made for annual expenditure, typically focussed on a specific project, or for a longer-term combination of project and core organisational funding. As the licence to run the National Lottery is granted for a seven year period, such applications could be for a period of three to four years, i.e., half the life of the Lottery. The Department of Trade and Industry has indicated that it is willing to entertain such a request.68

Secondly, and related to the objective of introducing a degree of financial security into the non-profit sector, it has been suggested that the Lotteries Board identifies a list of nominated beneficiaries, who can be assured of regular funding. This category would include organisations that take on long-term funding commitments, for example, child welfare organisations who are responsible for looking after a child for many years.

The third issue concerns the degree of organisational, administrative and financial capacity that can legitimately be expected of applicants. Presently, applicants are expected to be registered organisations, and be in a position to furnish (usually three years) audited financial statements. Opinions on the merits of this vary enormously within the sector. For some, this is unduly restrictive, as it effectively prevents many unregistered community based organisations (CBOs) from receiving funding, despite the fact that many of these organisations are very effective at delivering services at community level.69 Others are quick to point to the poor track record of grants administered by CBOs, and are generally supportive of the need to ensure stringent financial accountability.

The Lotteries Board, largely in response to criticism from parliament,70 is attempting to make it easier for CBOs to apply for funding. This is seen as an adaptation to the changing nature of South Africa, and of the developmental sector in particular. Thus, according to Mr Alister Ruiters, the Director-General of Trade and Industry, the principle of offering smaller grants to help smaller organisations to get started had been accepted by the “adjudicating panels” [Distribution Agencies], whilst the strict requirement that only juristic persons [i.e. registered organisations] can apply for funding had been relaxed, and is now only enforced with larger organisations. Thus, according to Ruiters, a woman hoping to start a community crиche can now apply on the strength of “a letter from a person of standing in the community.”71

It is not clear whether and to what extent this claimed relaxation of the rules has actually occurred. Moreover, as the stipulation that only juristic persons may apply for grants is a statutory one,72

it is highly that either the Distribution Agencies or the DTI has the power to take such a decision.

The main way in which the Board is able to facilitate broader access is by encouraging larger non-profit organisations to form partnerships with un-registered CBOs. The larger organisations will, it is hoped, assist the CBOs to improve their financial and administrative capacity, and help ensure that the funds are administered as intended. The CBOs, in turn, will bring their close contact with “communities” to the partnership. This will improve the capacity of both partners to deliver services efficiently. Such partnerships are meant to foster empowerment relationships, and not indefinite partnerships.73

Whilst supportive of the need to broaden funding channels, many larger organisations are, understandably, concerned about the impact of this shift on their operations. Firstly, they are concerned about a general tendency for Board members (and parliament) to make sweeping generalisations about what the Chair of the Portfolio Committee on Welfare describes cursorily as the “eighty percent” of organisations that existed “before transformation” and which “served certain populations.”74

Such generalisations about civil society organisations point to the paucity of information informing decisions taken by the Lotteries Board, and by parliament. As noted above, the Board lacks the capacity to make systematic and regular visits to applicants, and to audit properly their operations. The Board has only five field officers (although it hopes to increase this to nine 75), and operates solely at a national level. As such, it is difficult to see how it is able to make informed decisions regarding the extent to which organisations are, or are not, “transformed” (whatever that is taken to imply); or even to gather meaningful information about what the organisation applying for funding actually does and which interest groups it actually serves.

In one case, a senior member of the Central Distribution Agency openly challenged an applicant about the racial composition of its senior management, without having any direct contact with the organisation.76 Surely it is a legitimate expectation that the Board requests information about how an applicant operates, how efficiently they deliver services, what percentage of funds go to administration and what percentage goes to services, etc., before making sweeping statements about degrees of “transformation” and political acceptability.

Whilst the concerns of larger more professional organisations are valid, it is clearly important to broaden the net of potential funding, and the decision to allow CBOs to apply for funding in partnership with non-profit organisations has been received positively. It will be interesting to see how this evolves over time: what types of partnerships are formed, how the CBOs benefit from this funding, and whether the CBOs are able to use this money to develop into sustainable organisations or not.

At the same time, it is not clear how the larger non-profit organisations are to be compensated for entering into partnerships with CBOs. The application forms makes provision for “reasonable” reimbursement for organisational time spent in mentoring the CBO, but this is an ill-defined term. The Board complains that many of the applications received to date make vastly inflated claims, whilst others have not claimed for money at all.77 Again, one will have to wait until the next round of funding decisions are made before passing judgement on the way in which this principle is being applied.

Footnotes:
  1. Interview with Edwin Smith, 28/06/2002.
  2. Interview with Edwin Smith, 28/06/2002.
  3. Sentiment relayed by Rob Davies, interview 11/06/2002; Interview with Lionel Louw, 27/06/2002; Social Development Portfolio Committee (2001).
  4. Simphiwe Xako, “ANC wants to change lotto bill,” Business Day, 4/10/2001.
  5. National Lotteries Board (2001: 4).
  6. National Lotteries Act 57 of 1997, s.28(5), s29(5), s30(5), s31(5). In the RDP category, money is to be paid into a designated fund.
  7. Interview with Sershan Naidoo, 20/05/2002.
  8. Cas Salojee, as reported in Social Development Portfolio Committee (2001: 4).
  9. Social Development Portfolio Committee (2001: 4).
  10. It is preferable not to reveal the names here. The senior CDA member has since left, however she/he has challenged at least three organisations known to the author on this basis. Of these, one was Johannesburg based, one was a National organisation, and one was a Provincial community arts organisation. To a lesser extent, this sentiment was expressed by one of the two Agency members spoken to, and by a senior Member of Parliament.
  11. Interview with Sershan Naidoo, 20/05/2002.
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