Growth Of NPO In Malaysia Accounting Essay

Non Profit Organizations or alleged “ 3rd ” sector plays of import functions in communities around the universe in countries runing from instruction, health care, catastrophe alleviation, societal work and overall betterment of human status ( Liu, 2010 ; Seo, 2011 ) . Their operation fund is provided by their givers who do non anticipate any refund ( Iwaarden, Wiele, Williams, & A ; Moxham, 2009 ) . It has become widely recognized that efficiency and effectivity of the operation of non-profit organisations is every bit of import as net income organisations.

Over the last 20 old ages, non-profit organisations have become of import suppliers of societal services in many states. The range, graduated table and scope of their activities concentrate non merely on the traditional sphere of charity but include occupation preparation, community and economic development, lodging, substance maltreatment plans, refugee arrangement, and assorted other services ( Nahar & A ; Yaacob, 2011 ) .

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NPOs need to show their effectivity as this sector entirely comprises of U.S. history for about 10 % of the gross national merchandise, history for about 13 per centum of employment in the U.S ( Murphy, 2007 ) , and corporate assets represent about 2.5 trillion dollars ( Small, 2009 ) . NPO being is increasing in size and sum as it is bit by bit being put accent on by market economic system, hence it is of import to be able to find and measure the public presentation every bit good as to develop practical rating mechanism for NPO though this facet is among many countries that continue to dispute the research workers and practicians.

Research done in the Netherlands by the Dutch Institute for Public Opinion and Market Research showed that the big bulk of charity protagonists would wish to cognize more about what happens with their contributions ( Scholten, Scott, & A ; Fynes, 2010 ) . Furthermore, there are assorted parties that are eager to cognize and guarantee that the organisation they donate to, the plans they fund on for the populace, the plans they devote their valuable clip into, whther those truly are contibuting to the lives of community ( Murphy, 2007 ) . Those parties such as the authorities bureaus, foundations, other non-profit-making funders every bit good as public community by and large. However, in their findings, the research workers emphasize on the difference between investors and givers. Investors frequently do desire to cognize the exact comparative public presentation of an organisation because so they can put their money in something that will give them a somewhat higher return on their financess, whereas givers are non so interested in puting their money in the really highest returning organisations. Therefore, it is so of import to them to cognize about efficiency ratios irrespective of the truth or questionable those ratios are since they are signal of efficiency of public presentation of non-profit organisations ( Iwaarden et al. , 2009 ) .

Religious and other non-profit organisations have a duty to their assorted components to be in fiscal matters responsible and crystalline in transporting out their missions ( Elson, O’Callaghan, & A ; Walker, 2006 ) . Those organisations are executing assorted task-oriented and services every bit good as functioning human-centered maps which are besides playing a function of conveying the societies concern to authorities and governments to explicate farther measure. Those organisations encourage engagement of civil society stakeholders at the community degree therefore they are made up of people with a common involvement including paid up employees and voluntaries ( Awio, Northcott, & A ; Lawrence, 2011 ) .


As at November 2011, in Malaysia, there are 47376 non-profit organisations registered under one of the society registrar which is Registrar of Society ( Society, 2011 ) . In Malaysia, all non-profit organisations are required to register. The chief statue covering with constitution and ordinance of non-profit organisations are the Societies Act 1966 ( Zainon, Atan, Wah, & A ; Nam, 2011 ) . Non-profit organisations can be registered under one of registrar either Companies Commission of Malaysia or Registrar of Society. Some non-profit organisations will register under Registrar of Society which this registrar is under Ministry of Home Affairs. This section is the 1 who administer and record all the inside informations of advancement of non-profit organisations. Besides, this section is the one which commanding and supervising organisation which non consistent with the demands of the Societies Act 1966 and Societies Regulations 1984 and to guarantee all societies comply with the established society policies, regulations and processs. This registrar has vision which is to be a dynamic chief authorities section that responsible to oversee and command the activities of non-profit organisations in order to accomplish national socio-economic development, security, peace, public order, good offer, public assistance or morality in Malaysia. This section ‘s chief aim is to guarantee registered societies comply with the Societies Act 1966, their articles of association and national policies. This registrar has classified those non-profit organisations under different types of non-profit organisations which are harmonizing to their chief activities. There are 13 classs which are spiritual, public assistance, societal and diversion, adult females, civilization, common benefit societies, trade associations, athleticss, young person, instruction, political, employment associations and general ( Society, 2012 ) .


There are many non-profit organisations particularly charity fund-raising organisations which have been established but it does non last long ( Witmer, 2006 ) since many non-profit organisations are losing their support therefore leads to inability to services to their communities and society. In world, there is no for net income or non-profit-making organisation can last without fiscal support ( Shepeard, 2007 ) . Those charity fund-raising organisations can non last for long due to the deficit of fund received by them ( Smith, 2010 ) . Normally, survival depends extremely from contribution from authorities, concerns, corporations, foundations, establishments, persons, fees and loaning ( Beiser, 2005 ; Elson et al. , 2006 ; Feng, 2010 ; Irvine, 2011 ; Keating, 2001 ; Seo, 2011 ; Sloan, 2010 ) .

Besides, these organisations rely on the populace for a important part of their one-year budget ( Elson et al. , 2006 ) . Harmonizing to a survey by ( Soobaroyen & A ; Sannassee, 2007 ) , approximately 44 per centum of the NPO relies chiefly on public contributions and corporate interim the staying 24 percent depend on some signifier of authorities support. It is besides known that such organisations receive and depends for authorities subsidies for run intoing their regular operational costs. Support is received by non-profit-making organisations in the signifier of tithes, pledges or contributions ( Elson et al. , 2006 ) .

As universally known, there is ever an absence of a net income motivation in non-profit organisations. Consequently, these organisations are more dependent upon the external environment for bring forthing fiscal resources for them to run. As studied by ( Afifuddin & A ; Siti-Nabiha, 2010 ) , contributions are likely to happen in the spiritual religion based sector such as spiritual organisations or human-centered mission based organisation, where these certain phenomena are something that seldom occurs in concern organisations. Hence, these phenomena which involve important part to the fiscal support of the organisation are served to vouch the continuation of their activities ( Afifuddin & A ; Siti-Nabiha, 2010 ) .

Without exclusion, non-profit organisations could non forestall themselves from being affected by the economic crisis faced by the universe which finally leads to the exposure of challenges in run intoing the mark public presentation ( Smith, 2010 ) . This is due to the size of non-profit organisations which are usually little and deficiency of capital every bit good as unsure fund beginnings. The factors that could be the cause of the job faced by about every non-profit organisation is that many organisations lack political support and depend to a great extent on the leader influence.

Many non-profit organisations are confronting greater uncertainness, peculiarly in the fiscal field, as authorities budgets are being cut back and as non-profit organisations are being asked to shoulder more duties ( Irvine, 2011 ) . Previously, the contributions in charities fell by about 6 % in 2008 which is the sharpest bead from 53 old ages ago ( Charities Aid Foundation and National Council for Voluntary Organisations, November 2009 ) . For many non-profit-making organisations, one of the biggest challenges is non raising so much money from givers ( Carol M. Ostrom, 2001 ) . Some of those charity fund-raising organisations are holding high fund while some of charity fundraising organisations are holding low fund ( Felix Salmon, 2011 ) . Public must hold privation to cognize how the charity fund-raising organisations spend their fund, money and resources obtained so that the populace can make up one’s mind whether those charity fund-raising organisations are effectual and efficient or non ( Iwaarden et al. , 2009 ; Murphy, 2007 ) . This state of affairs will take the populace on whether to donate on that peculiar charity fund-raising organisation or non. NPOs are holding limited chances for bring forthing extra income, but are faced with an of all time increasing docket of activities. Similar scenario occurs in Malaysia on the turning mission, functions and maps as a mark of importance of non-profit organisations in universe day-to-day life ( Lightbody, 2000 ) . In this context, the fiscal direction procedures of NPOs are by and large subjected by conditions of resource scarceness.

In some instances, despite the big sum of charitable giving, there are marks that givers are non happy with the public presentation realized by charities ( Iwaarden et al. , 2009 ) . Therefore, it would give significance that organisation administration is more of import than organisation direction. If organisation administration is non good arranged, it is impossible to accomplish good direction. From this sense, not-for-profits must work out administration above all, in order to recognize rapid development.

Nonprofit administration is going the critical issue with respect to healthy development and realisation of its mission. In a wide sense, non-profit-making administration involves broader stakeholders, including givers, board of managers, directors, employees, voluntaries, donees, associations, the authorities and community since these parties have a good relationship with organisations. Nonprofit administration must harmonise the not-for-profit with all stakeholders to recognize scientific determination and power equilibrium, to accomplish the organisational mission ( Liu, 2010 ) . Because of features such as absence of proprietors, every bit good as separation of givers and donees, non-profit-making administration is widely different from public administration and corporate administration. Since not-for-profits are self-governed, boards are the nucleus of administration activities without inquiry. Board administration has become one of the hot spots of non-profit-making administration for the last few old ages. Many surveies were carried out to analyze the function of board on house ‘s public presentation ( Dalton, Daily, Johnson, & A ; Ellstrand, 1999 ; Gu, 2009 ; Hodge & A ; Piccolo, 2011 ; Kaufman, 2007 ; Neal, 2007 ; Pins, 2011 ) .

However, most if non all of these surveies were concentrating on private sector. Currently, surveies that examine the function of BOD in heightening the public presentation of NPO is non widely available. Many bookmans are implementing related in-depth and practice-meaning researches, including board form and efficiency, nucleus competency, scheme devising, member motive, board public presentation and rating.

The market environment for civil society organisations has changed significantly over the last decennary. Nonprofit organisations are happening themselves viing for social resources and making so are going serious business-like rivals. NPO are no longer live in a protected environment in which small is expected in exchange for fiscal support. The support community, both authorities and philanthropy demand these non-profit-making organisations to show their impacts on society and their cost-effectiveness, and to warrant their support and particular benefits in public policy. Donors claim more say over the allotment of the financess they contributed, and want not-for-profits to be accountable and mensurate their public presentation and consequences.

These lifting concerns are naming for reforms that transform civil society organisations to mensurate up to the criterions of concern, and to travel non-profit sector further in the way of the market. Therefore, givers who are progressively paying attending as to whether non-profit-making organisations provide transparence in their operations requires non-profit organisations to hold a duty to their assorted components to be in fiscal matters responsible and crystalline in transporting out their missions ( Elson et al. , 2006 ) .

Good purposes are no longer sufficient ; so, legion dirts of some major not-for-profits have spoiled public trust towards civil society as in the instance of American Red Cross and the United Way where inordinate wages paid to executives and board members at other non-profit-making organisations are some of the actions that are raising concerns among the assorted components ( Geer, 2009 ; Gollmar, 2008 ) . Many people readily recall dirts affecting the United Way of America in the early 1990s when the executive manager misused financess and spent extravagantly on concern trips and the really similar and more recent dirts at the United Way of the National Capital Area and United Way of the Carolinas, during which the former executives misappropriated financess by taking salary progresss and inappropriate reimbursement of concern disbursals and arranged for inordinate compensation and retirement benefits. The American Red Cross has besides suffered rough unfavorable judgment for non clearly pass oning the usage of parts and for non deploying donor parts for their intended intents following 11 September and Hurricane Katrina. These incidents are easy recalled because the organisations involved have a long history and national profiles. However, answerability oversights appear to be much more widespread. Oversight of the fledgling U.S. not-for-profit sector was originally provided by assorted spiritual organisations, but as the sector became larger and more secularized, this inadvertence was either no longer adequate or show, taking to breach in answerability.

All these instances raise the concern by many parties and besides affected non-profit-making sector whereby now it has been under examination from many parties such as funders, regulative organic structures, and the general populace ( Nava, 2009 ) . Scandals such as inefficient direction and the usage of improper fundraising activities have raised inquiries sing the administration and answerability of these organisations such as authorities ordinance, public perceptual experience of not-for-profits, demand for rank in a national organisation and rating by non-profit-making funders ( Gollmar, 2008 ) .

( Shepeard, 2007 ) reported that about 2 % of the $ 260 billion dollars donated to non-profit-making organisations in 2005 was lost to executive manager fraud, waste, and maltreatment. Therefore, this causes the rise of non-profit-making board of managers as one issue to be analyzed as the uneffective non-profit-making executive manager leading can negatively act upon client assurance, fundraising, financial public presentation, funding determinations by protagonists, and eventually the organisation ‘s ability to carry through the mission.

In add-on, the community sees that the contributions for some non-profit-making organisations from the local authorities budget are prone to be misused. Such as in the instance of a spiritual organisation as one type of non-profit organisations which is the administer of church confessed on stealing of $ 1.35 million of money contributions for over 26 old ages from two churches that he had served ( Afifuddin & A ; Siti-Nabiha, 2010 ) . Similarly, a batch of grounds claimed that spiritual organisations show a deficiency of transparence and answerability to the populace, particularly to their givers. Therefore, finally, in visible radiation of recent dirts and cases, answerability is going progressively of import and is now being demanded of spiritual organisations ( Nava, 2009 ) . In other words, such contributions given to the organisation requires a supervising by the givers including society in big.

Charities have in the past non been concerned about stakeholder direction and public presentation measuring and direction. However, many people have come to see the measuring of charity effectivity and transparence as far more of import over the past decennary there was issue of dissatisfaction of givers with the current degree of information provided by charities. It is hence clear that most of them now realize that they have to pay more attending to these countries in order to last to the hereafter since public presentation of a charity is one of the major facets to givers when make up one’s minding which charity to back up. Donors are now bespeaking more information about what is really go oning to their money ( Mitchell, 2009 ) . In other words, givers would wish to cognize in respects to the public presentation of non-profit organisations as overall. However, ( Mitchell, 2009 ) found that the charity watchdog and evaluation groups emerged to help givers in measuring the more donation-worthy charities in which they compile public information for assorted charities into a searchable database frequently freely available through a web site.

( Nugent, 2008 ) claimed that both the corporate andA nonprofitA universe were shocked by a series of maltreatments and illegal activities which led the non-profit-making executive to react to this altering environment and implement any reforms needed in the organisation for the jurisprudence and recommendations by authorities for nonprofitA sector which requires greaterA answerability. ( Nava, 2009 ) found that recent dirts affected executives in assorted ways and demanded a proactive response from them as claimed by feeling direction theory that executives are motivated to pull off the image that others have of them in presence of dirt.

In add-on, ( Zietlow, 1985 ) claimed that the decision makers of NPOs are by and large regarded as hapless directors of fiscal resources. The inability to pull off fiscal resources efficaciously and expeditiously by the direction of non-profit organisation is no exclusion for the independent spiritual mission bureaus nonprofit charitable organisations which are being studied in this research. This spiritual organisation is being included in the types of non-profit organisations as stated in the ROS. Past surveies on answerability tended to concentrate on the function of answerability in bettering the public presentation of private sector organisation. Surveies that examined the relationship between answerability and public presentation of NPO are non widely available.


This research is undertaken:

To analyse the types of fiscal direction patterns used by non-profit organisations

To analyze the relationship between fiscal direction patterns and public presentation of non-profit organisations

To analyze the relationship between board of managers effectiveness and public presentation of non-profit organisations

To analyze the relationship between answerability and public presentation of non-profit organisations


This research relies on the model lineation by the resource dependance and bureau theory to look into the relationship between non-profit organisations and both independent variables. The undermentioned research inquiries are addressed:

What are the bing fiscal direction patterns used by non-profit organisations?

What are the effects of the usage of fiscal direction patterns on public presentation of non-profit organisations?

What are the deductions of board of managers ‘ effectivity on public presentation of non-profit organisations?

What are the effects of answerability on public presentation of non-profit organisations?


This survey will analyse three independent variables which are fiscal direction patterns, board of managers ‘ effectivity and answerability. Previous surveies have examined the three independent variables in many dimensions. Previous surveies have examined both answerability and administration facet in non-profit organisations dimensions and it finally gives impression to the direction, board of managers and employees of non-profit organisations to better towards betterment in both facets. Therefore, from all the findings from old researches done so far, it can be concluded that findings in this survey could supply good part to the non-profit sector country. First, fiscal direction patterns in non-profit organisations for case budgetary application which being studied should be valuable input to other research workers, hence, this could be considered as a variable in cognizing the factors in public presentation of non-profit organisations irrespective in facet of fiscal or non-financial. This ground arises due to aggregate sum of resources consumed yearly by the non-profit organisations. Therefore, the economic experts are chew overing over the factor that can take to efficiency or effectiveness of financess spent. Although there were some surveies on non-profit organisations have been done antecedently, nevertheless, they have been executing to some sections such as merely on educational, health care or spiritual non-profit-making organisations. For this research, the sections are non restricted and the inclusiveness of all types of non-profit organisations is being explored.

Second, this research will besides supply some general position on the argument over the appropriate aim and to do decision makers of non-profit organisations clear on what facet to be designate as precedences for the ain non-profit organisations. Additionally, the findings will supply valuable information for interested perceivers who wonder if non-profit organisations are truly different from ordinary concerns.

Importantly, this research will give background information into the current position of non-profit organisations in Malaysia as there are huge Numberss of non-profit organisations in Malaysia. However, to day of the month, non all non-profit organisations can prolong for a long clip due to shortage of fund and resources. All parties need to see the non-profit organisations every bit of import as net income organisation in footings of their operation effectivity and efficiency and can non allow NPOs goes nonextant and vanished since community by and large can non afford to populate in better environment without recognizing and indirectly having the benefits of NPOs. Hence, it is of import to transport out this survey to accomplish the research objectives to able to cognize whether the factors have impact on the operation of non-profit organisations and indirectly guarantees a longer life.

Finally, this survey is of import for non-profit organisations to foster explore and analyze fiscal direction patterns, board of managers ‘ effectivity and answerability on fiscal public presentation of non-profit organisations. The research findings may be utile to non-profit organisations directors in general as they would endeavour to be effectual directors and stewards and accountable of the limited fiscal resources given by the fund suppliers. For future non-profit organisations, the consequence can assist non-profit organisations staffs and practicians to develop new attacks in planing fiscal direction system for the organisation. For overall organic structure of cognition, the consequence can enrich the cognition database for non merely holding net income organisation country but besides in non-profit organisations country. All these researches contribute to the bing overall organic structure of cognition, including the country of accounting and finance literatures on house administration.


The thesis consists of five chapters. The sum-up of each chapter is presented below:

Chapter 1: Introduction portrays the importance of non-profit-making organisations and the growing of non-profit-making organisations in Malaysia. This chapter besides covers the research significance which covers the job statements, the aims and range of thesis.

Chapter 2: Literature reappraisal provides the reappraisals of development of non-profit-making organisations, every bit good as the factors of public presentation which are the fiscal direction patterns, board of managers ‘ effectivity and answerability. This chapter besides includes the theories used refering to the factors. This chapter besides includes reviews literature on public presentation of non-profit-making organisations. This subdivision followed by the development of the hypotheses.

Chapter 3: This chapter describes the sample and research method used in this survey. Following subdivision consists of variable measurings.

Chapter 4: This chapter presents the analysis of findings from the research. The first subdivision describes the demographic profile of the respondents and their organisation. The 2nd subdivision analyzes the consequence of each hypothesis and it includes the treatment on this subdivision.

Chapter 5: The decision summarizes the treatment with the analysis on the findings. Another way and country for future research are besides included.

1.7 Chapter Summary

This chapter provides the background of survey which gives accent on the importance of analysing the impact of fiscal direction patterns, board of managers ‘ effectivity and answerability in the position of the non-profit-making organisations in Malaysia. Statement of the jobs and the aims of the survey are presented in the following subdivision. The following subdivision highlights the significance of the survey. The organisation of the thesis was presented in the concluding subdivision of this chapter.

Chapter 2


2.0 Introduction

This chapter begins with the development of NPO in subdivision 2.1 which includes brief literature on the definition of NPOs. Section 2.2 discusses the theories used in this survey. Section 2.3 provides a wide context and literature relevant to public presentation measuring in NPO. Section 2.4 provides a reappraisal of fiscal direction patterns, board of managers ‘ effectivity and answerability by non-profit administrations. This chapter reviews the findings from anterior research that examines the determiners to fiscal public presentation and non-financial public presentation of NPO for variables fiscal direction patterns, board of managers ‘ effectivity and answerability.

2.1 Non Net income Organizations

NPOs have alone definition which is different with net income organisation. NPO is defined as charitable, revenue enhancement exempt, voluntary, and independent, private and institutionally separate from authorities even though some of their beginnings for happening come from authorities ( Uzonwanne 2007 ) . Another feature is absence of portions, therefore, leads to absence of dividend to be paid or to be distributed ( Dotan 1998 ) . Therefore, any fiscal excess earned by organisation can non be distributed to the givers or equivalents ; the net income has either to be reused in operating activities or to be donated to other NPOs with proper certification ( Uzonwanne 2007, Seo 2011 ) . As by and large known, those organisations basically contribute to public sector by supplying services and aid. In simple words, non-profit-making organisations are known as a alone set ofA organisations that are mission and non gain driven ( Dotan 1998, Murphy 2007 ) . Voluntary organisations, another name for NPO, particularly the smaller 1s established at local degrees are usually depends to a great extent on the supply of contribution goods, hard currency and engagement of persons who are voluntaries, with small or to some extent without trust on professional paid staff ( Soobaroyen and Sannassee 2007 ) . Whilst a figure of labels are used to depict non-profit organisations, the term voluntary organisations selected in their survey is to connote a more impersonal and broader set of features which viz. organisations made up of persons who are freely associated themselves towards accomplishing a common aim, corporate persons who make determination for NPO waies, dockets and actions every bit good as those persons who are non seeking wage or pecuniary returns for their clip spent or resources invested in pursuit of the NPO ‘s aims.

In some instances, the words of NPOs and NGOs are interchangeable because the features are about similar. There is no standard definition of NGOs by ( Awio, Northcott et Al. 2011 ) . NGOs have been described as extended in, for illustration, size, maps, positions, criterions, scheme and tactics. This definition is used by those research workers in originating their research. In add-on, infirmaries, community public assistance centres, political parties and private schools are non included in non-profit-making organisations harmonizing to the Korean Nonprofit or Nongovernmental Organizations Support Act, unlike in US whereby it is allowed to hold NPO which back uping specific political parties or elected functionaries ( Seo 2011 ) .

The function ofA non-profit-making organisations is increasing in the United States where they are make fulling the spreads when the service is absence by authorities ( Olinske 2009 ) . This of all time spread outing function ofA non-profit-making organisations has created an involvement in the organisational and leading kineticss of such entities. Those services include plans that protect, maintain, and heighten the personal wellbeing of 1000000s of persons who would otherwise suffer from the deficiency of federal or province allocated resources or aid and some of them found that those organisations are viewed as their last hope when their lives are turned upside down such as in the instance of national catastrophe, Hurricane Katrina that devastated New Orleans, Louisiana, and parts of Mississippi and Alabama in twelvemonth 2005 ( Shepeard 2007 ) .

Since the NPOs Numberss have grow continuously, the outlook for information and greater transparence in programmatic and fiscal operations are besides rise which has lead to the increasing of answerability demands from not-for-profits by authorities through greater ordinance ( O’Dwyer and Unerman 2007, Mitchell 2009, Nava 2009 ) . Those demands have directing many taking NPOs have called for induction of better administration processs as greater degrees of self-regulation. Furthermore, this self-regulation betterment on answerability in non-profit-making organisation is progressively being accent and promoted since one council named The Evangelical Council for FinancialA Accountability ( ECFA ) has been established as one effort in advancing this self-regulation.

There was a important development continually being occurred on non-profit-making organisations. One independent survey as cited in ( Gollmar 2008 ) provides grounds that there was an addition in the figure of organisations of 74 % between 1987 and 1998. Gose stated that there were 800,000 non-profit-making organisations in United States by twelvemonth 2005 ( Gollmar 2008 ) . ( Smith 2010 ) reported that the figure of organisations has about doubled to more than 1 million organisations since 1996, therefore, these Numberss have undeniably mean the importance of NPOs in United States in add-on to the significance of the valued public services provided to the citizens and as the topographic point where 1000000s of people work or voluntary.

2.2 Theories

2.2.1 Resource Dependence Theory

( Froelich 1999 ) argues that NPOs usually do non bring forth gross the same as private companies normally do. These organisations by and large rely on support from assortment of support beginnings in order to run. It is known that NPO rely on assorted givers such as fund-raising, grant and other support to remain go on operating and executing mission and aims of organisation. This resource trust makes the organisation relate to the resource dependance theory.

Harmonizing to resource dependance theory ( Seo 2011 ) , dependence feature on critical resources influences and gives important impact which leads to diverse actions and behavior portrayed and acted by organisations. The practicians are inclined to pass and give a batch of attending on the practical facets to picture the answerability image. Result indicate that local not-for-profits are more likely to follow legal and fiscal answerability mechanisms such as registering the IRS Form 990 and holding a board approved runing budget, apart from holding those patterns include fiscal recordkeeping and plan results ( Geer 2009 ) .

Organizations that depend on diverse beginnings of support will be concerned with assorted voices from funders and stakeholders, therefore, it does significantly act upon organisation ‘s ends, missions, behaviours and functions of the organisation. As for organisational behaviour, specifically on the organisational construction, the organisation tends to hold formalisation hierarchy managerial factors in determination devising as the consequence of resource dependance forms ( Seo 2011 ) . Resource dependance which is viewed as environmental factors can impact organisation to hold formalisation system and it can be visualized by the sum of written regulations and ordinances. In order to fulfill the stakeholders, the organisation makes an attempt to make favourable state of affairs to show the organisation. Favorable status of organisation is important since it is among the status in obtaining the resources. In other words, the established power the givers have does act upon many organisational activities. In general, for-profit and non-profit-making organisations make an attempt to obtain equal resources that they need which some of them are through the alteration of their construction and actions in order to cut down the influence of environment ( Bryant and Davis 2011 ) .

( Twu 2007 ) examines the effects of undertaking environment on the organisation structures every bit good as high spots how directors strategically obtain and procure important resources to keep organisational endurance as being claimed in resource dependance theory. This theory emphasizes the organisational necessity of accommodating to environmental uncertainness, get bying with debatable mutualities and actively pull offing or commanding the resources flow because non-profit-making organisations are accountable to assorted stakeholders such as their clients, givers, board of manager, community in general ( Geer 2009 ) .

Cleary 1998 argued that there is an progressively force per unit area in competitory support environment, along with the turning outlook that contributions through fund-raising ought to come from the private sector such as concern ( Irvine 2011 ) . Raising money from the populace had become more hard ; in add-on to scarcer Government funding along with restrictive demands imposed such as accrual accounting was required for assorted studies necessary for authorities grants. As being claimed in resource dependence theory, leaders ‘ consciousness as institutionally acceptable image should be maintained and enhanced if the organisation were to look legitimate to those on whom it relied for support, specifically the province and federal authorities, corporations, societal services, fund-raising and the general populace. This organisation which relies to a great extent on the external beginning of income for the care of support degrees to carry through this mission and the on-going successful operations, they need to protect the image in which sing the fiscal affairs, acceptance of accrual accounting is lending much to better image. However, it did non merely working as powerful image foil, but besides a proficient benefit is expected from the acceptance of accrual accounting. Consequently, in order to set up and keep legitimacy as worthwhile receivers for charitable dollars, not-for-profit organisations like Hearts & A ; Hands were besides following the structural signifiers and cultural patterns non merely for authorities and general populace, but besides for the corporate universe to show resource dependences ( Irvine 2000 ) . Besides, ( Hodge 2006 ) findings prove in consistent with the resource dependance theory whereby the organisations are observed to develop a board construction that supports the fiscal demands of the non-profit-making organisation.

Indeed, an organisation depends on a assortment of resources for their endurance, success, or high public presentation, such as repute of persons or groups, information, political support, legitimacy, and engineering besides fiscal resources ( Seo 2011 ) . This statement is in line with the resource dependance theory that suggests that to heighten NPO efficiency, NPO will make distinguishable structural characteristics such as larger size of board of managers ( Dalton, Daily et Al. 1999 ) and besides follow peculiar fund-raising schemes such as professional fundraising ( Callen, Klein et al. 2010 ) that will assist develop connexions with institutional funders to procure support support. This theory suggest that when the NPO rely on external funders for raising gross and under force per unit area to better their public presentation will be given to use more rational decision-making procedures ( Nemati, Bhatti et Al. 2010 ) and so it will take to proper fiscal direction patterns and good fiscal system used by NPO ( Geer 2009 ) . Through the societal web that board members belong to, they are able to procure the resources that otherwise could non hold been available ( Bryant and Davis 2011 ) . The board is able to supply linkage to the organisation ‘s major fiscal bankers and brings into the organisations different sort of expertness that is good to the organisations ( Bryant and Davis 2011 ) .

( Twu 2007 ) added that the construct of mutuality in resource dependance theory can besides be applied in the board of managers ‘ variable which emphasizes on how board of managers and direction of non-profit-making organisations can construct connexions or linkages with members of other organisations for geting capital resources and act uponing the usage of different public presentation measuring criterions. This survey besides contributes to the position of resource dependance by supplying cogent evidence that to heighten fundraising efficiency, non-profit-making organisations choose to make distinguishable structural characteristics such as a larger board and follow peculiar fund-raising schemes such as particular event that can assist to develop connexions with institutional funders to procure support support.

( Irvine 2011 ) noted that the organisations besides implement a proper accounting provided in conformity with organisational outlooks as internal answerability, based on a civilization of good stewardship to demo that resources were to be used sagely and good. Consequently, external answerability was fulfilled by agencies of the one-year study and certified fiscal statements by independent hearers as mentioned in Sarbanes-Oxley Act of 2002 ( SOX ) Section 302 ( Bryant and Davis 2011 ) and there was a strong accent on operating within budgetary restraints. The alteration in accounting patterns was being implemented from hard currency based accounting since there were complain that the accounting information exist in the system presently was undependable, inaccurate and late was transmitted to them from assorted centres. Therefore, the organisations made a move to alter to accrual based accounting that is timely mode of fiscal information. ( Geer 2009 ) This is particularly due to the fact that support is the cardinal ground why organisations adopt these legal or quasi-legal answerability mechanisms within their bureaus. Finally, consequence of survey done by ( Geer 2009 ) back up the hypotheses based on resource dependance theory that organisations are more motivated to follow answerability mechanisms with greater grades of organisational interconnection, external dependance on coercing components, societal legitimacy achieved, economic addition and legal coercion.

2.2.2 Agency Cost Theory

Agency theory trades with the separation of ownership and control of the house ‘s assets ( Callen, Klein et al. 2010 ) . NPO face the same job in pull offing bureau cost due to absence of proprietors where directors are mostly free from outside subject which creates the hazard of managerialism or in economic expert term is managerial bureau cost ( Bryant and Davis 2011 ) . This managerial bureau cost makes organisation relate to the bureau cost theory. This theory suggests that the principal-agent job, in this instance funder and direction of NPO, or so called possible struggle exist because of under conditions of uncomplete and asymmetric information when a principal hires an agent.

Agency theory suggests that a major board map is to supervise costs and the allotment of resources. In this regard, bureau theory views the administrative map of monitoring and commanding top executive determinations and actions as the primary map of the BOD. Agency theory by and large states that the bureau costs associated with managerial struggles of involvement are held in cheque by the BOD as the delegate group of the stock proprietor corporate principals as a whole. The bureau perspective suggests that board monitoring will hold an impact upon organisational costs ( Callen, Klein et al. 2010 ) .

Consistent with this statement, the board must supply mechanisms that separate its monitoring map from direction ‘s execution of the organisation ‘s ends. Within net income organisations, assorted mechanisms have been used to aline the involvements of the agent with those of the principal. ( Callen, Klein et al. 2010 ) mentioned that NPOs can utilize mechanism construction such as the inclusion of non-executive managers on board managers, the inclusion of major givers on board managers, others such as the usage of compensation and audit commissions likewise practiced by for-profit organisations in order to protect the involvement of funder.

Therefore, harmonizing to normative bureau theory, corporations should either increase monitoring, control and inadvertence of direction by holding board of managers or increase incentive constructions that align the involvements of funders and direction such as fiscal result based inducements. The logic behind these prescriptions is to guarantee that direction ‘s ego involvements will be aligned with the principal proprietors ‘ involvements.

( Geer 2009 ) argued that answerability issue can be based on bureau theory since there are several parties involved during the operation of non-profit-making organisation. There are parties who are working in the organisation and there are parties who are organisation held accountable to, for illustration the givers and society in big since they are the support supplier and beneficiries, therefore, giving a impression of struggle of involvement among those parties. This state of affairs gives rise on the concern of how to carry through the answerability which are utilizing mechanisms such as studies and rating.

The theory used in corporate administration is to research the relationship between board public presentation and organisational public presentation. The theory suggests that there is a struggle relationship between the board of managers and the direction squad as the top direction ‘s self-interest behaviour is non aligned with the involvement of the shareholders. Thus it is the responsibility of the board of managers to supervise the direction squad to guarantee that the involvements of the shareholders are protected. This is supported by that non-profit organisations rely to a great extent on the board of managers ‘ regulating function which are supplying leading, strategic counsel, fiscal inadvertence and resource allotment for fiscal and non-financial affairs for the benefits of organisation ( Shepeard 2007, Hodge and Piccolo 2011 ) .


The contribution for non-profit-making organisations in some instances depends on the public presentation achieved by the organisation ( Iwaarden, Wiele et Al. 2009, Afifuddin and Siti-Nabiha 2010 ) . Funding organisations will necessitate fiscal information in determination devising on the support of NPO the funders wanted to allow ( Huang and Hooper 2011 ) . ( Irvine 2011 ) showed that NPOs are practising good fiscal certification by fixing the fiscal statement and audited fiscal histories which they regard as their common types of fiscal information that can be presented to the funder organisations. Khumawala and Gordon ( 1997 ) stated that persons givers are utilizing fiscal statements prepared in contribution determination doing particularly information in gross, disbursals, plan, fund-raising and administrative disbursals information ( Roberts 2000 ) . In procedure of taking the organisation to donate, they will mensurate the non-profit-making organisation public presentation either in footings of fiscal or non-financial.

The choosey attitude of givers is the cause of an increasing figure of net income and without left out, those non-profit organisations to use public presentation direction system such as the Balanced Scorecard ( BSC ) in order to obtain better organisational consequences ( de Waal 2010 ) . As stated before that public presentation of organisation can be measured either in fiscal or nonfinancial component, therefore the organisation needs to hold clear and formalistic duty construction which a clear direction manner, clear undertakings and duties are defined.

( Lin 2010 ) argued that public presentation rating is a hard and complicated undertaking in any organisation particularly for non-profit-making organisations in which those organisations have alone feature of combination of fiscal and non-financial dimensions. In the existent universe, the struggle of precedence of public presentation elements among the organisational members and of political involvements by in-and-outside stakeholders make it hard to specify what public presentation means and mensurate the size of public presentation. The inadequacy of resources negatively involves the managerial liberty, organisational public presentation, and the continued being of the organisation ( Seo 2011 ) .

Measurement is a critical issue in all organisation irrespective either for-profit or non-profit organisation. The construct of public presentation is complex and multidimensional, hence, there is no best manner to specify and mensurate it. Performance is defined as achieving organisations ‘ established intents efficaciously and expeditiously or productiveness eventhough the construct of organisational public presentation is more than mensurating effectivity, efficiency, end products, quality and equity today ( Seo 2011 ) . More specifically, public presentation is conceptualized through interaction among assorted measuring standards which is mark ends, result, aims, intents, and missions. ( Lin 2010 ) argues that NPO input and end product can be measured through accounting information that allows non-profit-making directors to compare cardinal variables such as grosss and costs, and finally to carry on farther fiscal analysis. Beside, ( Lin 2010 ) argued that a set of standards is developed to measure an organisation ‘s socially oriented public presentation such as organisational growing.

( Seo 2011 ) added another position which is the acquisition of valued resources successfully obtained as one of index of success or high effectivity of an organisation in the systems resource attack. Resource could be described as touchable or intangible something that organisations need for interactions with the environment and something that organisation acquire in an exchange with others. ( Beard 2012 ) measured the fiscal public presentation through the entire gross successfully received by the organisations. Nobbie and Brudney ( 2003 ) identified fiscal viability as another public presentation measuring ( Lin 2010 ) . In add-on, Frumkin ( 2001 ) , Ritchie and Eastwood ( 2006 ) , Ritchie and Kolodinsky ( 2003 ) include administrative or entire disbursals successfully achieved by the organisations as one of fiscal public presentation measuring ( Lin 2010 ) . ( Seo 2011 ) added that both internal and external steps are important in mensurating organisational public presentation. Measuring organisational public presentation should see the positions of both external stakeholders and internal employees. In add-on, it can be measured by fiscal measuring such as gross of organisation, gross growing, net income border, cost decrease.

( Kinyua and Lewis 2009 ) stated that the success of an organisation is depending on the effectivity of vision and competences of leaders in organisation every bit good as depending on the cognition and accomplishments of organisation human resources in overall. It besides gives accent on the reappraisal of some common occupation responsibilities and cognition, accomplishments and abilities ( KSAs ) for modern-day non-profit leaders such as planning, motivation, forming, determination devising, deputing, organizing, coverage, oversing, pull offing fundss, and fund-raising. Another necessity in an organisation that may assist to better the public presentation is accountability as behavioural dimension which imply the grade of organisational members really feels responsible for the public presentation and the willingness to utilize the system to obtain public presentation information.


Numerous articles elaborate on the importance of public presentation of the NPOs. In this regard, the public presentation is being measured and focal points on organisational public presentation and non on single public presentation. This is due to the givers and investors who are more inclined, willing to put their contribution and money to the organisation that are effectual and efficient in their operations and day-to-day modus operandi ( Scholten, Scott et Al. 2010 ) . A declined in support and handiness of grants as fund aggregation combined with fiscal hurt can significantly related to the ability of NPO to go on in supplying services ( Feng 2010 ) . The givers would wish to hold their money to be deserving being placed there ( Iwaarden, Wiele et Al. 2009, de Waal 2010, de Waal, Goedegebuure et al. 2011 ) . This issue is the cause where now the organisation is now increasing the accent on the public presentation measuring for cognizing their public presentation irrespective in footings of either fiscal or non-financial facet, development of accomplishment and competences, and betterment of client attention and procedure quality. The public presentation measuring has been defined as the procedure of mensurating their operation where the organisation traveling as per NPO aim being established and mensurating their operation through public presentation indexs in order to take disciplinary action when necessary ( de Waal, Goedegebuure et al. 2011 ) .

( Lin 2010 ) argued that public presentation is difficult to specify for any organisation, peculiarly for non-profit-making organisation. Performance is the action or procedure of transporting out or carry throughing a undertaking, map, or mission, and organisational public presentation is hence dependent on aims and missions assumed by organisations. It is argued that the multiple services and ends nevertheless make the public presentation of not-for-profits more equivocal. Organizational efficiency and effectivity are cardinal constituents of organisational public presentation in the RDT. Organizational effectivity is conceptualized by the relationship between organisations and the external factors ; on the other manus, organisational efficiency is a standard for stipulating internal direction of organisation. ( Shepeard 2007 ) stated that the manager needs a board to set up policy and measurings in guaranting the not-for-profit is runing efficaciously and expeditiously.

( Seo 2011 ) mentioned that given their great resource scarceness, not-for-profits ‘ liberty in the procedures of decision-making and goal-setting is likely to be reduced. The grade of fight to obtain critical resources can straight or indirectly affect organisational behaviour and public presentation. Competition for resources makes non-profit-making organisations more reliable on in-and-outside stakeholders that control needed resources. Organizations are likely to alter their decision-making and goal-setting to run into the demands of stakeholders. Such competition for critical resources has been strong in both the American and Korean non-profit-making organisations.

In general, public presentation can be operationalized by the undermentioned dimensions: efficiency ( or productiveness ) , effectiveness, quality, and equity in the modern non-profit-making organisations. Boyne ( 2003 ) proposes dimensions for measuring public presentation which is through consumer satisfaction ( Seo 2011 ) . Another writer provide another measuring should be more concerned with are non-profit-making organisations major stakeholders ‘ including single funders, private companies, authorities bureaus, citizens, and clients desire, dissatisfaction, and ailments above economic values on mensurating their public presentation ( Berman, 2006 ; Carnevale and Carnevale, 1993 ) . Another measuring is through image portrayed by the several organisation. Measuring organisational public presentation is explicitly or implicitly related to what the organisation attained through ends, missions, marks, or aims.

Prior research has been seeking to place different dimensions of organisational public presentation for non-profit-making organisations ( Lin 2010 ) . Forbes ( 1998 ) identified end attainment and client satisfaction as not-for-profits measurement while Shoham et Al ( 2006 ) suggested that public presentation should include external dimension such as stakeholder satisfaction and mission accomplishment ( Lin 2010 ) . As for non-financial dimension, a set of standards is developed to measure an organisation ‘s socially oriented public presentation including stakeholders ‘ satisfaction and in footings of carry throughing ends and missions established by non-profit-making direction for the organisations ( Lin 2010 ) . ( Gollmar 2008 ) argued that not-for-profits have no stock and no net income to function as steps of organisation effectivity unlike net income organisations.

( Mitchell 2009 ) Effectiveness is many times defined as attainment of ends related to the mission of an organisation. However, efficiency in non-profit-making organisations is non ever measured in the traditional sense of the ratio of end products and inputs that would be seen in a for-profit organisation such as a fabrication installation. Other footings used to depict the effectivity of an organisation were results, impact, or success rate. However, figure of persons served is non on the concern, but it is more concern on the consequence of services provided by the non-profit-making organisation that expected to be in the positive way into better for persons.

From old researches, as the public presentation is being measured in a systematic manner, it leads to better committedness through resource allotment and public presentation coverage by organisation. Therefore, it can be concluded that organisation that set up public presentation measuring to measure their public presentation would hold a positive important impact on the client satisfaction as the organisation donees.


Study carried out by ( Zietlow 1985 ) discovered that the decision makers of NPOs covering with spiritual foreign mission bureaus are by and large regarded as hapless directors of fiscal resources. The findings besides discovered that the fiscal direction patterns adopted by spiritual foreign mission bureaus were fund accounting and fiscal coverage, and plus direction, fiscal planning, hard currency direction, fund elevation direction, capital budgeting, portfolio investing scheme and cost-benefit analysis as the tools in administration in NPOs operations. This paper claimed that end scheduling which considered as one of fiscal direction techniques is highly helpful in budgeting and working capital applications, hence, NPO would happen this technique helpful in get bying with the multiple aims which are stated in fiscal footings and non-financial footings.

In the research carried out by ( Keating 2001 ) , it described assorted fiscal analysis techniques and how they apply in the non-profit-making scene. These techniques are peer benchmarking, tendency analysis, comparings in relation to the budget, profitableness steps, liquidness ratios, steps of fiscal hurt or exposure, activity and efficiency steps and compensation issues. Another related technique which being suggested is risk-benefit analysis might give society better environment but at considerable cost or hazard depending on the nature of NPO. At the same point of position, the writer proposing that there are multiple aims NPO wants to accomplish. NPOs would wanted to make good where their mission is to find the demands, wants and involvements of mark markets or clients and to present the coveted satisfactions more efficaciously and expeditiously than rivals in a manner that preserves or enhances the consumer ‘s and society ‘s wellbeing. It is expected to be helpful in run intoing the aims and mission mark points financially such as net incomes, market portions, gross revenues growing and other public presentation indexs.

This is consistent with to research by ( Soobaroyen and Sannassee 2007 ) that has focused on analyzing the fiscal direction patterns in locally established voluntary organisations in developing state which is in Mauritius. Those voluntary organisations which are regarded as non-profit organisations use fiscal or control pattern to convey the image as their organisations ‘ legitimacy that determinations are done objectively which the fiscal direction is managed by a bed of constructions who are fiscal commissions and direction commissions and so the procedures approved by commissions and members meetings since they are financially dependent on one beginning of funding comes from members or givers. As mentioned, among the processs are fiscal budget readying, engagement, airing and blessing among the members which these are considered as voluntary patterns either for cost or gross appraisal. Budgeting is one scheme used by organisations to act upon the chance that people will act in ways which lead to the attainment of organisational aims ( Abernethy and Stoelwinder 1991 ) . It is the chief financially-orientated scheme for planning and commanding organisation activities. The consequence proves systematically with the resource dependance theory that the non-profit organisations which are externally funded needed to pattern good fiscal direction at least fiscal budget study to convey the image that the determinations on the fund are non taken lightly.

This is supported by other survey that indicate the local not-for-profits in their findings are more likely to follow legal and fiscal answerability mechanisms such as registering the IRS Form 990 and holding a board approved runing budget, apart from holding those patterns include fiscal recordkeeping and plan results ( Geer 2009 ) due to answerability towards legion stakeholders such as their clients, givers, boards, the community at big. In add-on, they are finishing and printing fiscal records and plan ratings with hope that they are perceived as favourable by the funders.

( Paisey and Paisey 2011 ) have studied on the fiscal direction exercised in the church in Aberdeen, Scotland as one of spiritual establishments. It has been identified that there is deficiency of answerability and neglectful of responsibilities within the cathedral as the church priest who was in place and has authorization in church. It has been found that many cathedrals were ill educated therefore ; it leads to job in enlisting and keeping. However, the bing records show that accounting was cardinal to the operation of the church and that the records were of import to its punctilious fiscal direction though basically rather simple. In add-on, the Constitutions provide some grounds of important budgetary activity in the church since budgeting is a cardinal planning and control tool in non-profit-making and evidently for net income organisations ( Beard 2012 ) .

( Greiling 2010 ) continued to analyze on balance scorecards used in NPO as fiscal direction pattern despite the deficiency of research on this facet. The consequences show that fiscal steps play an of import function in non-profit organisations. Findingss noted that balance scorecard is being used as public presentation steps in fiscal position which good in improved fiscal consequences in the long term such as steps like liquidness, hard currency flow and in footings of resources allotment. Sing the elements of the balanced scorecard, they confirmed that balance scorecard has stronger consideration of non-financial drivers for public presentation as the respondents indicated that was a really helpful instrument in footings of strategy-focusing procedure and recipient satisfaction. In other words, the balanced scorecard which comprehensive since it comprises of fiscal and non-financial direction constituents can be helpful in public presentation of NPO. The bulk of the non-profit organisations interviewed use the balanced scorecard because it is regarded as a modern direction tool and it helps to make legitimacy. They argued that the balanced scorecard may hold a dual map. First, it helps to increase trust in the direction of a non-profit organisation and therefore it may function as a signal that the direction is up-to-date with modern direction tools. Second, it may besides add to the legitimacy of the major fiscal resource suppliers because they can pass on to their ain key stakeholders that they have doing the attempt in presenting efficiency in social ends. Therefore, this direction tool can better the image of NPOs where it helps in obtaining fund.

( Tyler 2005 ) suggested that benchmarking has great possible benefit for the non-profit sector, peculiarly given the trust of non-profit endeavors on efficaciously utilizing human capital, therefore it might be expected that this pattern would be helpful in helping organisation in bettering their public presentation, in add-on to the deficiency of available resources to run into the demands of aims of non-profit organisations. This paper is analyzing on Australian non-profit sector. This pattern is considered as effectual manner of set uping ends and aims, more efficient manner to do betterments than test and mistake, helps organisations to do betterments faster, has the possible significantly to better organisational public presentation, can take to betterment in understanding and run intoing the demands of clients or clients and enables organisations better to run into the demands of their stakeholders and for uninterrupted betterment. Given the importance of the sector, it is critical that benchmarking be promoted as a manner of bettering organisational public presentation.

In this article, it has been shown that good communicating as behavioural dimension could take towards better public presentation. Communication can take topographic point in different manner which top-down communicating, bottom-up communicating or horizontal information exchange. I


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