Donor expectations prompt German nonprofits to under-invest internally

Civil society organisations (CSOs) in Germany are deliberately reducing investment in internal infrastructure, training and other processes because of the “unrealistic expectations” of some donors, a new report highlights.

The report by Germany’s Maecenata Institute for Philanthropy and Civil Society was originally published in German at the start of the year, and has now been translated into English.

“A low overhead ratio is often perceived as a key indicator of trust and quality for nonprofit work,” says the finance and fundraising section of the comprehensive report. Unfortunately, this misconception has created “enormous cost pressures for CSOs in Germany”, as they cut their expenses in order to appear more attractive to current and future donors. The public sector is particularly guilty of creating this pressure, the report says.

The fundraising section of the 130-page paper also says that many CSOs, smaller ones especially, focus more on short-term liquidity than on long-term strategies and financial sustainability. At the same time, there is a decline in the number of larger donations being made, “whereas micro-donations, project- and crisis-related donations and inheritances are gaining in importance”.

The German version of the report was published in January, not long after the formation of a new federal government. With the new government appearing keen to engage with civil society, the report outlined the strengths and weaknesses of the country’s CSOs and the environment in which they operate.

Despite concerns around financing, as well as in other areas, the report is overall optimistic about the future of German civil society, saying: “With its democratic, federal system of government and its political culture, Germany offers auspicious conditions for an active civil society, even if current as well as longer-term developments pose a challenge to citizen participation.”