RIS ID
13440
Abstract
Financial sustainability and accountability are ever-present issues for nonprofit organisations (NPOs) as they seek to balance their mission with financial responsibility. Both issues arise as a result external demands and internal needs.
The mission of an NPO is usually expressed as the role it plays in the segment of society within which it serves. Once its mission is defined, an NPO often finds that it is unable to withdraw. This may be due to external exit barriers placed on the organisation by local community groups, ethnic or religious groups, or by other organisations which are convinced that the maintenance of some other activity is dependent on continuing the current activity. In addition, an NPO may find itself with internal exit barriers because of its societal interests and its humane commitment to its clients. Thus, the centrality of mission to the operation of an NPO may expose it to issues of financial sustainability that are not faced by organisations operating in other sectors.
With the increase in the scope and size ofthe nonprofit sector have come calls for the need for increased financial accountability. Yet, because NPOs are established to accomplish altruistic rather than financial goals, their accountability systems have often developed on an exigency basis. Nevertheless, the public, in the role of volunteers, donors and taxpayers, have made significant contributions to the development and resources of the third sector are thus entitled to effective systems of accountability. This call for accountability has arisen from two sources. One is an internal need for an NPO to be well managed, because the nature of its mission and the sources of its revenue demand a high degree of accountability which in tum demand a sound internal control system. Secondly, there is the external demand for accountability because resource providers expect an NPO to utilise resources in a manner that is consistent with its mission. Thus, there is a fiduciary duty between the resource provider and the managers of an NPO. In addition, there is demand for accountability from the public, from potential donors and from the media.
The increasing body ofliterature that addresses financial management ofNPOs focuses on the "how to" of accounting, rather than providing measures of an organisation's financial sustainability or accountability. This study presents a model for determining the financial health of an NPO by investigating various operational criteria over time, and addressing these in relation to accountability issues such as intergenerational equity. It makes a significant contribution to nonprofit research by providing an analytical means of investigating a single organisation's financial sustainability and suggesting specific measures that can be undertaken to its improve financial health.
Publication Details
Abraham, A. (2003). Financial Sustainability And Accountability: A Model For Nonprofit Organisations. AFAANZ 2003 Conference Proceedings, 6-8 July 2003 (p. 26). Brisbane, Australia: AFAANZ