1 Nonprofit Mergers and Collaborations This is an abstract. Click here to access the full study, available in portuguese. Sponsored by
2 Nonprofit Collaborations and Mergers In Brazil there are close to 300,000 NGOs i many of which face large obstacles to financial sustainability, struggling to secure funding from the private sector, the public sector, and international organizations. Philanthropic giving in Brazil accounts for only 0.2% of GDP ii compared with 2% iii in the United States. Brazil s federal government reduced its allocation to NGOs from 2.5% of its total budget in 2005 to 1.8% in 2010 iv, and as Brazil s rapid economic development has led it to become the world s 7 th largest economy v, global perception around its need for international aid has diminished, causing a further strain on the already capital-strapped social sector. Even though Brazil has a large economy, it still ranks 85th in the world on the UN Human Development Index vi. Over 16MM people live below the poverty line and over 11MM in slums or favelas vii. Despite the clear need for a strong social sector, only 30% of social organizations have more than one formal employee and many depend entirely on volunteers to run their programs. There also exists a large geographical and sectorial disparity, with organizations concentrated in the South East of the country. Structured mergers, collaborations, and partnerships may be the most effective way for NGOs and social enterprises to overcome financial obstacles due to limited funding and lack of full-time professional staff. Such partnerships will permit access to greater resources and infrastructure, providing tools necessary to serve a larger population or geographic area, and offer a wider range of programs.
3 Cases The following case studies look at three successful collaborations between Brazilian nonprofits; highlighting benefits to their operating budgets, program capacity, and geographic reach. Mission Driven: Fundação BRINQ Save the Children Merger Save the Children and Fundação ABRINQ joined forces in Both organizations focused on children s rights and related services. They decided to merge to improve efficiency, expand geographic reach, and incorporate national and international methods in the project areas of education, health, and emergency protection. Before the merger, operational expenses made up 11% of the combined budget of both organizations. By 2011 Fundação ABRINQ Save the Children s these had fallen to 7%. During the same period, the number of donors increased as did the number of people served. viii Mission Driven: Associação de Assistência à Criança Deficiente takes over Lar Escola In 2012, Associação de Assistência à Criança Deficiente took over Lar Escola Sao Francisco, expanding its platform of services for children with disabilities as part of its organization-wide mission to aid in the prevention, habilitation, and rehabilitation of disabled people of all ages. In the process AACD added Lar Escola s campus, integrated the organization into its management model (including inviting Lar Escola s President to join AACD s board of directors), and expanded its program offering. ix Methodology: Comitê para Democratização da Informática CDI promotes social inclusion using information technology as a tool for civic expression. The organization adopted a franchise model in 2002 with operations centralized in CDI headquarters. The central management team takes the lead on fundraising while disseminating best practices and standardized procedures to regional offices, who in turn manage CDI s community chapters. x
4 Flavia de Oliveira, partner at the law firm Mattos Filho, highlighted some of the challenges NGOs face when deciding to merge and/or structure successful long-term partnerships, such as deciding who will be in charge, branding the new organization, establishing uniform procedures, and agreeing on program offerings. Recommendations to increase success include: Engage in structured and well-documented organization and planning around risks and contingencies, as well as marketing and strategy. From a resource standpoint, it is in donors best interest to finance the most efficient efforts in the sector, meaning that maximizing efficiencies may improve fundraising efforts. Given the potential complexity of NGO mergers and collaborations, there is a need for capable intermediary organizations to manage the process and coordinate the subsequent flow of resources. A study of US-based organizations dedicated to support nonprofit collaborations whether financially or with technical expertise -- Catalyst Fund and SeaChange-Lodestar yielded insights that: xi xii 1) The better structured a NGO collaboration, the greater its potential to increase organizational efficiency and scale. 2) Complex partnerships, collaborations, and mergers require technical support in the areas of management, legal structure, accounting, public relations, marketing, fundraising, and technology. 3) For a collaboration or merger to succeed, organizational missions must be aligned and objectives clearly lain out. However, expertise and capital are also critical. A fund manager that coordinates the process from start to finish may improve outcomes. SITAWI is leading the discussion to create a fund that finances and manages strategic collaborations, resulting in stronger missions, greater impact, and a more efficient allocation of capital to the social sector in Brazil. If you are interested in participating, please reach out to us by phone 55 (21) or
5 i IBGE: As Fundac o es Privadas e Associac o es Sem Fins Lucrativos no Brasil, 2010; ii IBGE PIB Brasil 2012 R$ 4,4 trilho es Giving USA: relato rio anual de filantropia 2013; iii Pesquisa Arquitetura Institucional de Apoio a s Organizac o es da Sociedade Civil no Brasil- Novos Formatos de Mobilizac a o de Recursos das OSCs Brasileiras; iv IPEA 2011: Transfere ncias federais a entidades privadas sem fins lucrativos ( ); v Segundo dados do Fundo Moneta rio Internacional (FMI), o Produto Interno Bruto (PIB) do Brasil ficou em US$ 2,396 trilho es em 2012 vi UNDP Human Development Report The Rise of the South: Human Progress in a Diverse World (Brazil s HDI value for 2012 is 0.730) vii IBGE - Censo Demogra fico de 2010 viii Paper: Nationalization of international CSOs in Brazil: The case of the Abrinq Foundation ; Diversifying Membership and Building Inclusion in Governance- The Hauser Center for Nonprofit Organizations; savethechildren.org; fundabrinq.org. br; aacd.org.br; istoedinheiro.com.br/noticias/288_o+jeito+eficiente+de+fazer+o+bem; epocasaopaulo.globo.com/ vida-urbana/eduardo-de-almeida-carneiro-o-homem-que-fez-a-aacd-dar-lucro/; saudeweb.com.br/34101/aacd-implementa- novo-modelo-de-governanca-corporativa/; saudeweb.com.br/29031/aacd-contrata-executivos-e-estuda-como-ampliarreceita/;saudeweb.com.br/28908/aacd-assume-administracao-do-lar-escola-sao-francisco/; ix saudecrianca.org.br x cdi.org.br; Paper Reaplicac aõ de Projetos Sociais no Sistema de Franquia Social - O caso do CDI xi nonprofitfinancefund.org; pinestreetinn.org; bostonglobe.com/business/2013/04/09/pine-street-newprogram-helps- homeless-find-work/vunkw2mklrpoj38jcarj8m/story.html; The Chronicle of Philanthropy:http://philanthropy.com/blogs/ money-and-mission/what-it-takes-to-succeed-in-a-nonprofitcollaboration/28099 xii XXV. seachangecap.org; lodestarfoundation.org; The SeaChange-Lodestar Fund for Nonprofit Collaboration - Final Grant Report;cancersupport-phila.org/documents/TWC-GildasMerger.pdf; cancersupportcommunity.org; twccaz.org;ssireview.org/ blog/entry/a_new_source_for_funding_nonprofit_mergers_and_collaborations/