Government and Not for Profit Accounting

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  • Topic: Resource allocation, Non-profit organizations, Government
  • Pages : 21 (5908 words )
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  • Published : March 21, 2013
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NOT-FOR-PROFIT
ORGANISATIONS
13
2 Not-for-profit organisations
Key points
Many not-for-profit organisations (NFPs) feel they are poorly understood by government and the general public. Pressures to be more efficient have seen overhead spending reduced at considerable detriment to effectiveness and improved resource allocation over time (allocative efficiency). The sector is diverse, but NFPs display some common behavioural patterns: – Whereas the behaviour of for-profit business is driven mostly by their desire for profits, the behaviour of NFPs is driven mostly by their mission or communitypurpose. – Demonstrated commitment to their community-purpose underpins support for their activities, whether by members for member-serving NFPs, or by donors and government who provide funding for community-serving NFPs.

– Processes, often highly participatory, matter for NFPs because they provide value to the volunteers and members, and because of their central importance to maintaining trusting relationships that form the basis for effective service delivery. – Control can be a major motivating factor for the managers of NFPs. While generally motivated by altruism, NFP management also benefits personally from their role when it confers status or power, builds their skills and contacts, and where it improves the environment for their other activities. These characteristics of NFPs have implications for the drivers of efficiency and effectiveness:

– Processes that appear messy and inefficient to outsiders can be essential for effective delivery of services, especially those requiring engagement with clients who face disadvantages and are wary of government and for-profit providers. They can also be important to attract and retain volunteers, the involvement of which can be valued as much for the engagement outcomes as for replacing the need for paid labour.

– It is possible that, for some managers, ‘doing’ can take precedence over ‘achieving’. Unless NFP boards are able to act decisively, such behaviour can undermine efficiency and effectiveness and threaten the sustainability of an NFP. – While greater scale and sharing of support services can improve production efficiency, NFPs can be reluctant to merge or collaborate where other interests might be eroded or where the purchase of support services adds to overheads. (continued on next page)

14 NOT-FOR-PROFIT
Key points (continued)
Community-serving NFPs may lack adequate feedback mechanisms on their effectiveness (or lack thereof) as clients are often grateful for the assistance. This contrasts strongly with member-serving organisations, particularly small grass roots organisations, where member satisfaction is paramount to survival. While historically Australia fits in the ‘liberal’ social origin category (where government social spending is low and NFP activity is relatively large), since the 1970s government funding of the sector has grown. From the 1980s, this has increasingly been under competitive allocation arrangements, with greater use of the sector to deliver government funded services. More recently, social enterprise is being seen as a way to harness network governance to address social issues. Along with demographic, ethnic and cultural changes (such as increasing environmental awareness), these forces are increasing demand for NFP activities. In responding to rising demand, NFPs report constraints arising from growing regulation and contract requirements, and challenges in accessing funding, finance, and skilled workers.

Government can assist in addressing these constraints to facilitate sector growth and development; nevertheless the sector remains responsible for its own future. The diversity of the not-for-profit (NFP) sector makes any attempt to describe how NFP organisations (NFPs) behave challenging at best, and quite likely impossible. Nevertheless, such a description is important as one of the complaints from the sector is that...
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