Financial Management Role for NGOs


  • Aleksandre Mikeladze Department of Finance, Caucasus University, Georgia



Financial management in NGOs, financial planning, control and reporting practices of NGOs, issues of accountability and transparency, financial sustainability of NGOs, benefits and risks of self-financing NGOs, the impact of income diversification on NGOs


The main purpose of NGOs is to carry out public activities and not financial management - this is an idea that one may have often heard. However, as long as the NGO's finances and funds are unorganized, NGOs will not be able to achieve their goals with maximum effectiveness. For NGOs, the key importance of financial planning and management is determined by the achievement of organizational goals. They work on communities, suffer from a lack of staff, and this role is assigned to an employee who does not have a financial education and puts the successful operation of the organization at high risk. With limited funding, rational and planned cash management is important for the organization. The financial condition of any type of organization determines its future and long-term stability. Accordingly, NGOs should opt for sustainable use of finance. This means that NGOs have to spend today considering future expenses. Therefore, it is important to develop financial plans and their further implementation in order to maintain sustainability. Most NGOs rely on external funding and therefore having a proper financial management system is quite important. The NGO is accountable to donors and those who support the organization. An NGO with a sound financial management system is able to track its own expenses, plan future expenses, and submit timely financial statements to the donor upon request, which will help strengthen the organization's trust and long-term support. All NGOs are guided by pre-defined policies and procedures that are based on the overall goals of the organization. Each decision made by the competent authority is aimed at the successful achievement of the goals and objectives. Without organizing finances, it will be difficult for both the individual employee and the organization as a whole to achieve the set goal. We cannot ignore the fact that some NGOs are characterized by illegal activities such as excessive use of resources, fraud, theft, etc. With full financial planning, coordination and control, the issues mentioned above can be easily addressed. Through sound financial management, NGOs can make effective decisions on resource allocation, fundraising and mobilization. Financial management is a set of skills and approaches that can be changed from time to time. With financial management, NGOs improve their profile, which enhances donor trust. With well-defined financial plan and policy frameworks, NGOs also gain a good reputation in the community. Most NGOs operate on their own funds, and well-organized financial management facilitates fundraising. Information on available finances, in turn, makes it possible to determine the exact amount of money that needs to be accumulated.