Why So Many Measures of Nonprofit Financial Performance? Analyzing and Improving the Use of Financial Measures in Nonprofit Research

Prentice, Christopher R.

doi:10.1177/0899764015595722

Cited by 77 publications

(86 citation statements)

References 45 publications

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“…Greenlee and Trussel (2001) [27], Keating, Fisher, Gordon and Greenlee (2005) [28] and Silva and Burger (2015) [29] consider it in their works. Indicators such as liquidity, solvency or margin should be carefully considered by non-profit managers, and non-profit financial management textbooks recommend multiple measures for each construct [30]. Some scholars [31] emphasize liquidity such as current ratio, quick ratio, working ratio and capital ratio, others add days of cash on hand, for instance [32,33].…”

Section: Literature Surveymentioning

confidence: 99%

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Toward a Romanian NPOs Sustainability Model: Determinants of Sustainability

Ceptureanu

Orzan

et al. 2017

Sustainability

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Non-profit organizations (NPOs) have become increasingly important in the last decade for Romanian society since the state often failed to fulfill some of its social responsibilities. Romania's economic and financial crisis several years ago hardly hit non-profit sector because it led to a significant drop in public spending at the government level and cuts of financing programs from companies, two main donors for NPOs while simultaneously has amplified society's problems and gave rise to new target groups requiring support. This led to an acute need to address sustainability at organizational level since existing sustainability models in the literature are hardly adequate for Romanian context. We developed a model based on literature survey and Romanian experts' interviews, which allow us to identify relevant factors for Romanian non-profit sustainability. Three determinants were considered: Cognitive competence (nine items analyzed), Social awareness (seven items analyzed) and Financial vulnerability (four items analyzed), as well as two types of results: economic and social. The model was tested through an empirical research on 103 Romanian NPOs and on two sub-samples (nongovernment organizations and community based organizations) and found, using univariate and bivariate analysis, that the three considered determinants are correlated and statistically influence Romanian NPOs sustainability.

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Section: Literature Surveymentioning

confidence: 99%

“…Reporting Requirements [30][31][32][33][34]88,89] Revenue diversification [28][29][30]90] Financial planning [28][29][30]43,44] Previous year result [29,30,43,44] Stability of revenue [29,30,43,44] Accounting ratios [29,30,43,44] Net asset change [28][29][30] …”

Section: Financial Vulnerabilitymentioning

confidence: 99%

Toward a Romanian NPOs Sustainability Model: Determinants of Sustainability

Ceptureanu

Orzan

et al. 2017

Sustainability

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“…(a) focused on financial viability or long-term economic growth of non-profits [47][48][49][50][51][52] emphasizing indicators like liquidity, solvency or margin [48]. Some scholars consider current ratio and capital ratio [49], others consider days of cash on hand [50,51] or cash and cash reserve ratio [52].…”

Section: Sustainability Approaches In Non-profit Organizationsmentioning

confidence: 99%

“…(a) First, while there are various sustainability frameworks for non-profits [48,[90][91][92], most of them are rather unidimensional. Success Factor Analysis is one framework that manage to comprehensively measure sustainability in 5 critical areas of any organizations while being simultaneously specific for non-profits.…”

Section: Conceptual Modelmentioning

confidence: 99%

Sustainability Perceptions in Romanian Non-Profit Organizations: An Exploratory Study Using Success Factor Analysis

Ceptureanu

Bogdan

et al. 2018

Sustainability

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This paper analyses sustainability perceptions in Romanian non-profits by investigating 81 non-profits managers and board members. Using a multidimensional sustainability measurement framework, Success Factor Analysis, as a conceptual model, we measured perceptions on 5 critical sustainability factors: People, Business Model, Operations, Strategy and Culture and concluded that there are significant differences in the perceptions of sustainability depending on respondents' previous failure experiences. While those which previously experienced failure adopt a long-term approach based on marketization, clear accountability standards and rely on strategy, while the others prefer a short-term approach, focused more on non-profits operations and focus on human resources.

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“…These gaps include that there is no common conclusion on the use of financial ratios in the non-profit context (Helmig et al, 2014) and also that there are no theorised frameworks for financial analysis (Chen & Shimerda, 1981;Prentice, 2015a) or financial sustainability (Helmig et al, 2014;Leviton et al, 2006). Further, Chikoto and Neely (2013) consider that the research which has been undertaken has focused on the question of financial stability rather than the broader issue of financial capacity.…”

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confidence: 99%

An Accountability Framework for the Financial Sustainability of Australian International Development Organisations

Booth¹

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Non-government organisations (NGOs) are non-profit organisations (NPOs) that contribute toward the support and development of people and countries in need. They play an important humanitarian role in the developing world, acting as a conduit for government funding and an expression of donor concern.NGOs need to be financially sustainable in the long term as they face economic uncertainties. Their situation is more difficult than government or business organisations. For example, governments can access tax revenues and business can access the financial markets. Further, governments and business organisations have access to ongoing feedback for gauging and guiding the current and future sustainability of their enterprise through the use of well-developed tools, or the operation of the market itself. The NPO sector lacks the full discipline of business markets and analysts' metric tools for gauging current and future sustainability.Exacerbating these deficiencies are different stakeholder expectations for the stewardship of NGO resources in order to achieve their mission. The public have a perverse view about overhead expenses and there are confounding issues where beneficiaries are not the principal funders.Given the importance of financial sustainability, arguably there should be a level of accountability by officers for its achievement. While there are formal 'solvency' accountability regimes for organisations there are no similar requirements for the longer-term goal of financial sustainability. Extensive research exists proposing operational approaches to increasing organisational sustainability; however, there is no accepted framework which facilitates accountability for financial sustainability over time.This thesis first investigates the understanding of accountability for financial sustainability by officers of three, long-term, high-integrity Australian NGOs. Next the research assesses whether financial metrics can assist in enhancing NPO accountability through diagnosing and monitoring financial sustainability. The research aims are operationalised by using a qualitative participatory methodology. vi The research found that formal demonstrations of accountability for financial sustainability were mixed. 'Felt' responsibility-that is, responsibility informally accepted rather than externally imposed-presented as a strong lever for achieving an NGO's mission, with tensions identified between mission-generated felt responsibility and more traditional formal accountabilities. Officers of participating NGOs expressed personal responsibility for financial sustainability; however, no shared understanding of financial sustainability was observed either within or among the participant NGOs. The focus was commonly on individual strategies or shortterm solvency.While the outcomes of the research varied between participating NGOs, the theorybased framework developed proved successful as a diagnostic tool, with elements adopted, or intended for adoption, as measurement and monitoring tools.

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Why So Many Measures of Nonprofit Financial Performance? Analyzing and Improving the Use of Financial Measures in Nonprofit Research

Cited by 77 publications

References 45 publications

Toward a Romanian NPOs Sustainability Model: Determinants of Sustainability

Toward a Romanian NPOs Sustainability Model: Determinants of Sustainability

Sustainability Perceptions in Romanian Non-Profit Organizations: An Exploratory Study Using Success Factor Analysis

An Accountability Framework for the Financial Sustainability of Australian International Development Organisations

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