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The financial management function

Not for profit organisations

5.1 Objectives

The primary objective of not for profit organisations (NFPs or NPOs) is not to make
money but to benefit prescribed groups of people.

NFPs will use a mix of financial and non-financial objectives.

However, unlike companies, the non-financial objectives are often more important for
NFPs:

 key objectives may be difficult to quantify, especially financial ones

 multiple and conflicting objectives are common

5.2 Value for money (3Es)

Value for money can be defined as ‘achieving the desired level and quality of service
at the most economical cost’.

It can be measured using the 3 Es:

 economy – minimising the costs of inputs required to achieve a defined level of
output

 efficiency – ratio of outputs to inputs – achieving a high level of output in relation
to the resources used or providing a reasonable level of service at reasonable
input cost

 effectiveness – whether outputs are achieved that match the predetermined
objectives

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