Government and Not for Profit Accounting
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
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