Page 158 - BA2 Integrated Workbook - Student 2017

Chapter 10

2.5 Reports in a not-for-profit organisation

Not-for-profit organisations such as local authorities and charities have their own
rules and requirements in terms of accounting. Some of the financial measures we
have looked at so far (gross margin, contribution, ROCE) will not always be
appropriate in a not-for-profit organisation.

There are two main problems involved in assessing performance of these
organisations:

 the problem of identifying and measuring objectives

One of the issues in performance evaluation, in any sector, is defining
organisational objectives. In not-for-profit organisations the objectives may be
much more varied, reflecting the variety of organisations included in the sector:

 charities

 educational establishments

 government bodies

The general objective of not-for-profit organisations could be to provide the
best possible service within a limited resource budget.

 the problem of identifying and measuring outputs

 outputs are often not valued in monetary terms. How do we measure the
output of a school or hospital?

 they are not motivated by a desire to maximise profit.

 the benefits arising from expenditure by these bodies are often non-
quantifiable

 these organisations often do not generate revenue but simply have a fixed
budget for spending within which they have to keep

Go over illustration 7

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