NESsT Argentina Executive Summary

NESsT Learning Series

NESsTNonprofit Enterprise and Self-sustainability Team - NESsT

Written by Santiago MazzeoEdited by Nicole Etchart

Executive Summary

CSO Self-financing Activities in Argentina:

A National Assessment

NESsT Learning Series 1: RESEARCH METHODOLOGY

Executive Summary - CSO Self-financing Activities in Argentina: A National AssessmentCopyright @2009

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Tinker Foundation

Published by:

Jose Arrieta 89Providencia, Santiago, CHILEPhone: + (56 2) 222 5190Fax: + (56 2) 634 2599E-mail: [email protected]

NESsT promotes the social, political, economic, and religious rights of all people and does not discriminate on the basis of gender, race, age, national origin, mental or physical disability, sexual orientation and political or religious opinion or affiliation.

Copyright ©2009. All rights reserved.

This document contains information prepared by sources outside NESsT as well as opinions based on this information. NESsT strives to provide accurate information and well-founded opinions, but this does not mean that the content of this publication is error-free. The laws and regulations cited herein may change. NESsT does not undertake to update this publication.

This document is a translation of the original written in Spanish and is an executive summary of the full-length version available only in Spanish, which is part of a learning series published by NESsT. It was researched and written by Santiago Mazzeo, Enterprise Development Manager for Argentina, with content and editorial input from Nicole Etchart. Additional editorial support was provided by Carola Delgado, Alejandra Díaz, Kerry Dudman and Gonzalo San Martín, and designer Jorge Moraga was responsible for the layout. This version was translated to English by Shamrock Idiomas.

NESsT Learning Series1: RESEARCH METHODOLOGY

3Executive Summary - CSO Self-financing Activities in Argentina: A National AssessmentCopyright @2009

Index

Introduction .............................................................................................. 5

1. Research methodology ........................................................................ 7

2. Civil society in Argentina ..................................................................... 9

3. Self-financing trends among CSOs with

a social mission ................................................................................... 11

4. Ten CSO experiences with self-financing

activities .............................................................................................. 13

5. Limitations and potential of self-financing activities,

based on CSO experiences ................................................................ 15

6. Perspectives of CSO support organizations and donor

organizations on self-financing activities .......................................... 17

6.1 Perspectives of CSO support organizations .............................. 17

6.2 The donor perspective ............................................................... 18

7. Basic information on the legal and taxation framework ................. 19

8. Conclusions ........................................................................................ 21



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INTRODuCTIóN

Introduction

This document is a summary of the National Assessment published by NESsT to analyze the self-financing1 activities of civil society organizations (CSOs)2 in Argentina. This executive summary reviews key information from the National Assessment and provides a general overview of Argentine civil society organizations presently implementing self-financing activities and on the opinion of a variety of CSOs, donors, and CSO support organizations. It also contains important information about legal and taxation issues related to such activities.

This study lays the groundwork for a more in-depth study to identify existing needs in the country and to design instruments of support and training for CSOs interested in implementing or expanding self-financing activities.

This study would not have been possible without the cooperation of the following 10 CSOs: AMIA, Fundapaz, Fundación Silataj, Fundación Mediapila País, Fundación ph15, Taller Protegido Panificadora Nuevo Sol, El Ceibal Asociación Civil, Tiflonexos Asociación Civil, AEDROS, and Fundación Rumbos. The participation of the following 10 donor foundations was also fundamental: Fundación AVINA, Fundación YPF, Fundación ACINDAR, Fundación ARCOR, Fundación MAPFRE, Fundación La Nación, Fundación Standard Bank, Fundación Navarro Viola, Fundación Emprendimientos Rurales Los Grobo, and Fundación IRSA. The following 15 CSO support organizations were also interviewed: Fundación Compromiso, Fundación SES, Fundapaz, ASHOKA, Help Argentina, Idealistas, GADIS, Fundación Poder Ciudadano, INCIDE, Fundación Impulsar, Fundación Cruzada Patagónica, COMUNIA, AMIA, AEDROS, and Red de Comunidades Rurales.

NESsT is also grateful for legal input from Dr. Guillermo Canova and the tax expertise of Isabel Friz, who both generously contributed their knowledge, experience, and time to this document.

1 NESsT uses the term self-financing to re-fer to diverse strategies used by civil so-ciety organizations to generate revenue, including service fees, sale of products, use of hard or soft assets, membership dues, and investment dividends. NESsT uses the term social enterprise to refer to self-financing activities that are desig-ned by a CSO to significantly strengthen its financial sustainability and further its mission.

2 NESsT uses the term civil society organi-zation (CSO) to refer to a wide range of formally registered nonprofit, non-state organizations and community-based associations and groups that fall outside the realm of the government and busi-ness sectors. In Argentina, this defini-tion includes the legal entities known as associations and foundations.



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INTRODuCCIóN



1. Research methodology

The study focused on six essential elements for understanding this sector and its income-generating activities in the Argentine context. First, bibliographical research was conducted using information from a variety of secondary sources that addressed aspects such as: the history of the civil sector in Argentina; statistics and fields of activity; infrastructure and support mechanisms used; and specific self-financing strategies and trends. The second element consisted of in-depth interviews with civil society experts in Argentina, including several academics and authors of studies on the subject. These interviews sought to capture different perspectives on the sustainability of CSOs in Argentina, as well as current trends and challenges in this sector.

Other elements included: A primary study of CSOs, their self-financing strategies and lessons learned; the function of CSO support organizations and their attitudes towards self-financing; and donor support --or lack thereof-- for self-financing activities. Finally, interviews were conducted with Argentine legal experts on the legal and regulatory framework for CSO self-financing.



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NESsT Learning Series2: CIvIL SOCIETY IN ARGENTINA


2. Civil society in Argentina

Argentina’s civil sector is considered by most experts to be broad, diverse and fragmented. CSOs are highly important to Argentine society, emerging in response to the government’s oftentimes weak management of social policies and the business sector’s limited capacity to resolve problems that affect broad segments of the population. Civil society organizations have emerged with a different operational approach, aimed at meeting collective needs and serving the public interest. Civil society also performs other functions such as providing government oversight, building social networks, promoting volunteer work and donations, making information more widely available and mobilizing considerable economic and financial resources.

In 1999, the Centro Nacional de Entidades de la Comunidad (National Center of Community Organizations, or CENOC), an agency of the Ministry of Social Action, reported an estimated 80,000 CSOs in the country; by 2005, this figure had grown to 105,000 (IDB/UNDP/GADIS: 2004), reflecting significant annual growth.

These organizations have emerged as the creators of specific institutional social arenas, and due to their credibility, receive requests from the government to design programs for the disabled, the environment, community development, land use planning and accessibility, as well as requests from multilateral credit organizations to supply social welfare and training services.

In addition to providing opportunities for private sector financial support, these organizations have fostered corporate involvement in community activities, in partnership with non-governmental organizations, and even with local governments in some cases.

The sustainability of CSOs does not solely depend on their ability to generate funds for program improvement and organizational growth. Today, CSOs need to have a global, strategic vision that is focused on interacting with their environment and on building their own capacities as opportunities arise. In order to form partnerships with groups in other sectors, these organizations must improve their accountability and ability to assess and measure outcomes. To do so, they need clear strategies and missions and consistency between their programs and mission to generate activities that have a measurable impact. Their interventions must be effective and the number of their beneficiaries should increase over time. Finally, they must

NESsT Learning Series 2: CIvIL SOCIETY IN ARGENTINA


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also generate resources to continue improving their efforts and be accountable.

However, the sustainability of CSOs is complex and made even more difficult by the present political and economic context, including the reduction in international cooperation funding for Argentina. Since the economic recovery that began in 2004, civil society organizations face a worsening fundraising scenario as funds from external sources have decreased. Today, there is fierce competition among CSOs for the limited funds available. This has led to a constant search for new ways of achieving organizational sustainability.

Today, it is crucial that CSOs develop different strategies for generating resources, diversifying their sources of funding in order to achieve or secure greater stability. It is in this context that the issue of self-financing enters the discussion.

NESsT Learning Series3: SELF-FINANCING TRENDS AMONG CSOs WITH A SOCIAL MISSION


Civil society organizations in Argentina have developed numerous self-financing strategies. This study revealed a diverse array of strategies currently in use, which range from membership dues to the creation of companies to sell products or services with a social purpose.

One of the observations of the study is that traditional CSOs with a longer history and greater public recognition receive more support from local and international sources because they tend to be well organized and have strategies in place to generate resources and communicate effectively, giving them a competitive advantage over other CSOs.

Furthermore, donor agencies tend to finance programs rather than operating costs, in order to prevent CSOs from becoming overly dependent on donations. While it is important that CSOs achieve autonomy in the pursuit of their missions, this refusal to cover a CSO’s operating costs is detrimental in most cases. According to Carlos March, Executive Director of Fundación AVINA in Argentina, “this results in the execution of rich programs by poor organizations.”

It is important to help donors understand the need and importance of covering operating costs, at least temporarily, as part of their funding, since support for CSO administration and management directly impacts the implementation of the same programs and projects that these donors do fund. Even more important is the need to support strategies aimed at promoting the institutional development and sustainability of these organizations, as part of an exit strategy.

The Argentine government, for its part, is also quite reluctant to recognize self-financing activities as a valid strategy for nonprofit civil society organizations, interpreting the term nonprofit as mutually exclusive of such activities, even though organizations use the revenue generated to further their mission and their sustainability.

3. Self-financing trends among CSOs with a social mission

NESsT Learning Series 3: SELF-FINANCING TRENDS AMONG CSOs WITH A SOCIAL MISSION


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NESsT Learning Series4: TEN CSO ExPERIENCES WITH SELF-FINANCING ACTIvITIES


CSOs in Argentina have employed a variety of self-financing strategies. One of these involves the sale of products made by the very beneficiaries of a CSO. A second strategy involves the sale of services based on the organization’s knowledge and expertise in certain areas. In these cases, the self-financing activities are carried out by the CSO itself and there is no need to form a separate company for this purpose. There are also self-financing strategies that involve the sale of both products and services.3

The study identified a variety of self-financing activities carried out by CSOs in Argentina (see Table 1). Although these activities are occurring in many CSOs, they are not prevalent among Argentine civil society, for various reasons that are shown in the National Assessment.

Table 1: Different types of self-financing activities

Case studies Mission Self-financing activity Annual income from self-financing

% that self-financing contributes to organizational budget

Fundación Mediapila País

Create and develop a replicable, self-sustaining model that enables low-income individuals to reenter society through employment and adoption of a strong work ethic.

Manufacture and sale of T-shirts.

uS$ 61,464

85%

Fundación ph15 Education through art and using art as a medium for social inclusion and transformation.

Sale of photographs produced by workshop participants as works of art.

uS$ 2,400 15,7%

Tiflonexos Civil Association

Promote the comprehensive development of blind and visually impaired persons through the adaptation, use and development of technology.

Training service on the use, technical support, maintenance and repair of IT equipment for blind persons; Braille printing services.

uS$ 101,000

70%

4. Ten CSO experiences with self-financing activities

3 These two self-financing strategies are the key ones used by the organizations studied in this report. Other strategies do exist, however, such as: membership dues, use of hard and soft assets and investment income.

NESsT Learning Series 4: TEN CSO ExPERIENCES WITH SELF-FINANCING ACTIvITIES


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Case studies Mission Self-financing activity Annual income from self-financing

% that self-financing contributes to organizational budget

El Ceibal Asociación Civil

Implements sustainable development programs, with special emphasis on those that promote the autonomy of low-income individuals and communities, fostering their economic and social development and improving the quantity and quality of opportunities available to them.

Land use planning service for rural communities. Income generated from the Social Investment Fund.

uS$ 56,538

37%

Fundación Rumbos

Fosters human and civil rights of disabled persons in a context of physical and social inclusion.

Translation service. Accessibility consulting services.

uS$ 94,134

100%

Fundación Silataj

Fosters job creation for indigenous peoples in northern Argentina through the sale of their handicrafts. Encourages and supports artisans in forming their own enterprises to sell their goods and promote their own interests.

Sale of handicrafts in local shops.

uS$ 101,500

100%

Asociación de Ejecutivos en Desarrollo de Recursos para Organizaciones Sociales de Argentina (AEDROS)

Promote, encourage and create awareness about the importance of and need for developing human and economic resources for nonprofit organizations and their causes.

Membership dues.Sale of resource development training services to organizational leaders.

uS$ 17,507

87%

AMIA Promote the well-being and development of Jewish persons, families and institutions in Argentina, to ensure continuity, uphold traditional values and foster a sense of community; strengthen the basic principles of democracy and pluralism and foster creative coexistence in a diverse society.

Employment service for individuals and companies.

Sale of a variety of services.

Sale of a variety of products.

uS$ 284,341

12,7%

FUNDAPAZ Promote human development and solidarity in poor rural communities in northern Argentina.

Sale of products from different communities. Microcredit. Investment dividends.

Rent the use of property and equipment.

uS$ 127,518

14,4%

Panificadora Nuevo Sol, Taller Protegido de Producción

Promotes job skills among differently-abled persons and fosters their social integration for the benefit of individuals, families and the community.

Production and sale of baked goods.

uS$ 22,688

44%

NESsT Learning Series5: LIMITATIONS AND POTENTIAL OF SELF-FINANCING ACTIvITIES, BASED ON CSO ExPERIENCES


Although the CSOs selected for this study are a diverse group, they are not necessarily representative of civil society in the country as a whole. In general terms, the CSOs studied represent a small sample, as they were selected based on regional criteria and with a view to representing a variety of activities, beneficiaries, missions, size, and degrees of public recognition. There are many organizations working in other fields of action, including ecotourism and environmental protection, which also engage in interesting self-financing activities. Because of this, more studies are needed on Argentina’s diverse civil society and its activities.

The cases analyzed show that self-financing activities come in different forms, have emerged in different ways, and have achieved varying results for different organizations. In each of the cases studied, self-financing activities were key components of the organization’s work and the fulfillment of its mission. One of the elements most valued in retrospect among the organizations studied was the need for a business plan to help them with market assessment, financial projections and clear strategies, as most groups initiated their efforts without first engaging in an in-depth analysis or clear planning process. Experience indicates that having a business plan would have saved the organizations both time and money. Moreover, the organizations consulted recognize the need to have procedures and systems in place to improve the performance and administration of these activities. The organizations are aware of the need to introduce more efficiency into their work. Despite these lessons, their general conclusion is that self-financing activities have had positive impacts on their organizational culture that include strengthening entrepreneurial capacity, developing flexibility in the face of changing conditions (in the market, for example), and building confidence through teamwork.

None of the organizations studied had neglected their mission as a result of self-financing activities. Remaining focused on their mission is not an obstacle to self-financing activities; indeed, all those interviewed affirmed that the entrepreneurial activities were chosen for their relatedness to the organizational mission. Although the logic of a business is different from that of a nonprofit organization, the groups studied have a clear idea of the primacy of their mission over self-financing activities as they seek to harmonize profit-seeking (self-sustainability) with their pursuit of the public benefit.

5. Limitations and potential of self-financing activities, based on CSO experiences

NESsT Learning Series 5: LIMITATIONS AND POTENTIAL OF SELF-FINANCING ACTIvITIES, BASED ON CSO ExPERIENCES


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The most common scenario is that self-financing activities are carried out by the CSOs using existing human and financial resources. With the exception of AMIA and Fundapaz, the CSOs included in the study have no staff members who are specifically trained in business; they have learned about business and financial administration and management by implementing self-financing activities. In many cases, this lack of expertise has meant lost profits and opportunities.

In regard to self-financing for CSOs, the groups studied also expressed some criticisms about the current legal and taxation framework in place in Argentina. There is agreement that current legislation limits this kind of activity among foundations; the legal system is currently designed to allow only associations to implement such activities. In addition, the groups indicate that it is becoming increasingly difficult to meet the requirements of the Administración Federal de Ingresos Públicos (Public Revenue Federal Administration, or AFIP) without hiring accountants and lawyers, since they fear that the failure to keep up with constant changes in tax laws could lead to the loss of certain tax exemptions.

Furthermore, there are no sources of financing to support CSO self-financing activities. Many groups have launched these activities with funds contributed personally by their founders or using the very limited untied resources that they have available. As a result, minimal funding was available to stimulate these activities as needed and to cover operating costs during the start-up phase before the activity becomes profitable.

NESsT Learning Series6: PERSPECTIvES OF CSO SuPPORT ORGANIzATIONS AND DONOR ORGANIzATIONS ON SELF-FINANCING ACTIvITIES


6.1 Perspectives of CSO support organizations

The support organizations consulted for this study advise CSOs by providing training in financial consolidation, fundraising, institutional development and joint programs that directly assist beneficiaries. The work of support organizations is also seen as crucial for enabling the actions of other much smaller organizations such as grassroots organizations, community kitchens, and small community associations. Although these support organizations voice support for CSO self-financing activities, they have not developed comprehensive programs focused on making these organizations sustainable.

While they see the need to improve and expand the work organizations do by making more funding available, they have not extended that vision to include other key components of sustainability, such as developing team stability, clear and effective strategic plans, and other institutional systems. Efforts such as these must complement more traditional fundraising efforts.

Most of the support organizations consulted for this study view self-financing activities as a way to help organizations cover their operating costs, provided that management of such activities is transparent. The importance of this need for transparency is that the society in which these organizations operate often does not comprehend how a nonprofit organization can carry out business activities intended to finance their programs and not to obtain a profit. In this regard, one key point that all agreed on was the need to increase the transparency, oversight, and quality of CSOs’ financial statements and impact reports.

Support organizations identified a widespread need for training in fundraising, although their programs did not incorporate the notion of sustainability beyond simple financial sustainability. For the same reason, they emphasized only the need to diversify funding sources and modes of fundraising as possible sustainability strategies.

Most CSO support organizations emphasize the risk for CSOs that self-financing activities create a diversion from the CSO’s mission and vision, and therefore highlight the importance of implementing only self-financing activities that are mission-related. Nevertheless, some support organizations believe strongly in the prospects for CSO self-financing. Overall, the need to disseminate the experiences of CSO

6. Perspectives of CSO support organizations and donor organizations on self-financing activities

NESsT Learning Series 6: PERSPECTIvES OF CSO SuPPORT ORGANIzATIONS AND DONOR ORGANIzATIONS ON SELF-FINANCING ACTIvITIES


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self-financing among CSO support organizations is important so that these organizations can develop programs and services that are better suited for this end.

6.2 The donor perspective

Among the opinions gathered from donors --mostly corporate foundations-- there is consensus on the importance of supporting CSOs in the development of self-financing strategies as one of their sources of income. However, the current trend is to strengthen communities located in areas surrounding their manufacturing plants and, in some cases, to support organizations that can raise the corporate sector’s visibility as socially responsible companies. These entities therefore want to foster training processes, funding organizations with a stable, solid history and identifying opportunities for coordinating and joining the efforts of CSOs with those of other actors.

They seek partnerships to support capacity-building programs that will sustain the organizations beyond the period in which the donors provide direct support. They also consider that collaboration among the private, public, and social sectors is a better way of capitalizing on the work and projects carried out for the public benefit.

With reference specifically to self-financing activities and CSO sustainability (which includes financing, planning, and management aspects), there is no systematic support among donors for programs or organizations working to strengthen the sustainability of civil society organizations. However, they do emphasize that any self-financing activities should uphold and strengthen the organization’s mission.

Although donors have not developed support strategies for self-financing activities, they do value efforts by CSOs to incorporate business structures in order to generate their own revenues. This lends legitimacy to the organizations in their fundraising efforts, and if done with permanent oversight and evaluation, can be a valuable management tool. Donors also believe CSOs should adopt a business approach (including strategy development, market studies, cost analysis, efficient administration and management) that seeks to create wealth and is properly adapted to the needs of a of social organizations.

NESsT Learning Series7: BASIC INFORMATION ON THE LEGAL AND TAxATION FRAMEWORk


In Argentina, legal, nonprofit entities (CSOs) are governed by the Civil Code and its specific laws and operate under different types of legal figures. The figures used almost exclusively among Argentine CSOs with a social mission are civil association and foundation. These must be registered with the Inspección General de Justicia (General Justice Inspectorate, or IGJ) in the City of Buenos Aires or the equivalent office in other provinces of the country.

The main features of civil associations and foundations are that they work for the common good, are not profit-seeking, have their own assets, are able to acquire legal rights and responsibilities, have government authority to operate and do not depend exclusively on government funding.

In addition to the general provisions of the Civil Code, in 1972 a specific law was passed for regulating foundations: Law of Foundations 19,836. There is no specific law that regulates civil associations. The Inspección General de Justicia (IGJ) establishes its own regulations and in most cases the corresponding authorities in the provinces follow its lead.

To receive funds from different sources —including international cooperation agencies, private individual donations and public entities—a foundation must be registered with the IGJ or its equivalent and be a legal entity. This registration enables the organization to apply for tax exemptions from the Administración Federal de Ingresos Públicos (AFIP).

Regulations applicable to CSOs in Argentina are not excessive but are legally and administratively complex.

A CSO may not distribute the income it receives directly or indirectly for whatever end (donations, programs, self-financing) among its partners, and this income must always be reinvested in the development of its social mission.

Current Argentine regulation of CSOs treats associations and foundations differently: the latter are not permitted to engage in self-financing activities unless they are willing to give up their tax-exempt status.

As viewed through the lens of ICNL’s criteria4 for enabling self-financing, Argentina has a hybrid model that combines the destination-

7. Basic information on the legal and taxation framework

4 ICNL is an international organization whose mission is to facilitate and support the development of civil society and the freedom of association on a global basis. ICNL, in cooperation with other international, national, and local organizations, provides technical assis-tance for the creation and improvement of laws and regulatory systems that permit, encourage, and regulate the not-for-profit, non-governmental sector in several countries around the world. Chapter 2 of the Legal Guide explains the framework used for analyzing the regulations that govern CSO self-finan-cing activities. It describes four areas that are essential for understanding the legal structure for CSO self-financing before assessing the specifics of Ar-gentina: 1) the legal characteristics of CSOs; 2) the legal definition of self-financing; 3) the criteria for permitting self-financing; and 4) the taxation of self-financing activities. See http://www.icnl.org.

NESsT Learning Series 7: BASIC INFORMATION ON THE LEGAL AND TAxATION FRAMEWORk


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of-income and principal-purpose criteria. In other words, current legislation relating to self-financing activities ignores the economic or commercial nature of the activity in question and focuses exclusively on the purposes for which the profits from the activity are used (destination-of income criteria). However, this in itself is not sufficient, as organizations registering with supervisory entities must state their objectives clearly in their bylaws. This requirement limits such activity in Argentina under the principal-purpose criteria, as the CSO’s bylaws must clearly state that self-financing activities will be aimed at fulfilling the mission and are not the organization’s main activity.

The main tax advantage for CSOs is that they are exempt from paying income tax (35% of net earnings). In regard to value-added tax (VAT, known as impuesto al valor agregado or IVA in Argentina), the text of Law 23,349 of 1997, the Law of Value-Added Tax, establishes that services provided by foundations and civil associations that are exempt from income tax are also VAT-exempt, provided that these services are directly related to the specific purposes of the institution. In other words, the exemption refers exclusively to the provision of services and not to the sale of tangible assets. Moreover, if the income tax exemption is lost, this benefit is also lost.

The VAT exemption for foundations and civil associations does not exempt them from paying sales tax on purchases. The only purchases exempt from this tax are common, natural items such as water, bread, milk without additives, etc. They also do not have to pay tax on items imported as duty-free goods.

The law also establishes other barriers to donations, since Argentine law only allows donations to be deducted from taxable income when made to CSOs that have specific social purposes.

In regard to the taxation system, it is appropriate for CSOs to be exempt from paying income tax, provided that any revenue they earn is not distributed among the organization’s partners but is reinvested in the social mission, with proper oversight by IGJ and AFIP. The fact that the legal framework is favorable in terms of taxation does not constitute unfair competition in relation to for-profit activities in the private sector, as any profits generated are reinvested into the organization and used to cover the high social costs5 incurred by these organizations in carrying out their self-financing activities as well as their social programs overall.

As the analysis shows, there is a need to promote the reform or improvement of the legal framework, taxation framework and administrative procedures associated with self-financing activities carried out by CSOs.

5 The social costs are those that a CSO incurs to reach its target group: remote geographical areas, subsidized or below-market prices, training and education for the community and for disadvantaged groups to assist them in obtaining employment. When a workshop is established for disadvanta-ged persons or persons with disabilities, typically the productivity level of the workshop is not high. It is difficult for these activities to engage in large-scale production and when they do, there are usually a very large number of benefi-ciaries involved.

NESsT Learning Series8: CONCLuSIONS


Although there are many very positive experiences of self-financing among CSOs in Argentina, self-financing has not been a strategy adopted by most organizations to secure their sustainability; instead, most still depend on different kinds of donations.

Although the possibility of becoming self-sustaining is an objective shared by many organizations, the reality shows that many CSOs still share the perception that they cannot carry out self-financing activities while remaining fully focused on their mission, as they assume that the social problems they address are by nature unprofitable.

Some organizations, as shown by the case studies, have adopted a more business-oriented approach from the beginning. These organizations seek to implement self-financing activities in parallel to their regular programs. In some cases, these activities become practically an extension of their programs, which endows them with a more long-term vision and enables them to have a more direct impact on their social mission. However, even in those cases, CSOs carry out their activities with little planning, knowledge and/or internal capacity; exceptions to this are larger organizations such as AMIA.

Despite the lack of strategic planning, in cases where the CSO is familiar with the market and has know-how, the income levels are sufficient to have a significant impact on the organization’s sustainability. In other cases, however, the opposite occurs, and self-financing activities do not become profitable enough to make a significant impact. Lack of planning and unfamiliarity with the market, lack of marketing and sales experience, lack of financial resources needed to invest in and expand activities, and the lack of human resources have all limited the ability of self-financing activities to meet their financial objectives.

Although they achieve a social impact, it is unclear whether this is on the scale that a well-planned and implemented self-financing activity could have, in terms of job creation and inclusion opportunities, as well as outreach to new sectors and increased visibility and support for social issues.

Support organizations and donors strongly favor the adoption of self-sustaining self-financing strategies by CSOs. However, these is some concern that CSOs carrying out these activities will shift their social focus and lose sight of their mission in the pursuit of financial and

8. Conclusions

NESsT Learning Series 8: CONCLuSIONS


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business objectives. This also highlights the importance of training in this area in order to improve the internal capacities of CSOs. Such training will enable them to achieve continuity through self-financing activities and ensure that the organizations remain focused on their missions. Such an approach would definitely establish conditions that would enable self-financing activities to have a greater financial and social impact. There is a marked commitment among donors and support organizations to collaborate in this regard and uphold efforts in this area.

Within the Argentine regulatory framework, however, foundations are discriminated against; unlike associations, they are not allowed to carry out self-financing activities. For associations, VAT exemption is limited to certain activities related to specific purposes. Moreover, the complicated bureaucratic procedures required to register with IGJ and then apply for income tax and VAT exemption forces CSOs to hire attorneys and accountants to ensure they are eligible and can meet the ever-changing deadlines.

In 2008, NESsT launched the Venture Fund in Argentina. The NESsT Venture Fund works with organizations in an early stage, in which they prepare for self-financing and develop the ability to assess self-financing activities to determine if they are aligned with the CSOs’ financial goals and mission. The final product of this stage is an installed capacity within the CSO to manage the activity and a business plan that enables it to implement the self-financing activity. There is also a later stage, where the organization implements its business plan with financial and technical support from the NESsT Venture Fund, developing a system to monitor its plans for marketing, sales, finance, operations, and also its plans for mitigating any risks.

Given the results of this assessment, NESsT believes that the implementation of the Venture Fund in Argentina is fully justified. There is a clear need to introduce services specifically focused on CSO self-financing activities; while some support organizations do provide training to CSOs on sustainability plans and programs, these are largely provided on a case-by-case basis. In most cases, CSOs initiate these activities with a minimum of knowledge and capacity, which limits the returns in terms of their human and financial resources.

Donors that participated in this study are willing to contribute to and collaborate in helping CSOs to obtain the results desired, using their resources to build the capacities needed in each case. This supports NESsT’s hope that a group of donors will support and co-finance a business plan designed within the framework of the Venture Fund. The study also revealed that there is an opportunity --even for the Venture Fund-- to present proposals developed by the CSOs in its

NESsT Learning Series8: CONCLuSIONS


portfolio to donors for funding to enable the CSOs to implement their respective self-financing activities. Many of the support organizations consulted also indicated their willingness to collaborate in these efforts.

The study confirms the importance of NESsT’s specialized training, which ensures that the entire planning process of a self-financing activity is coherent with the organization’s mission and vision, a task that begins at the earliest stages of the process. Based on the experience of the Venture Fund in other countries, this coherence will allow CSOs to launch self-financing activities that strengthen their missions and have a much greater chance of being commercially successful. This ties in with the preference of certain donors to work through intermediaries to channel resources more efficiently into sustainable initiatives.

NESsT Argentina Executive Summary

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