Management and Assessment of Financial Resources (of international associations)

-

[Parts: Next | Last | All] [Links: To-K | From-K | From-Kx ]

An international nonprofit organization has acounting and financial problems which have many features in common with those of profit organizations. The most fundamental problem is to maintain the financial equilibrium of the organization or any independently financed programme (e.g. an international conference). In every case the amount of money coming in should exceed the amount of money spent (unless future income from other sources is expected, e.g. bank loans or subsidies). When a particular organization has many different sources of income and many more types of expenditure, it is not immediately obvious whether financial equilibrium is being maintained - sometimes this is only found out after the damage has been done. Techniques are required to detect over a period of months or years any slow trends towards a dangerous financial situation. Such techniques have been developed for profit organizations.

There are however other forms of disequilibrium which are of vital interest to the secretary-general of an international organization. One which is most often reported in the press is the proportion of income which goes to meet administrative overheads as compared to that which is actually used directly on the programmes of the organization. If, for for example, one disaster relief fund-raising organization spends 35 % on administrative overheads and another spends 20 %, it could be deduced that allocation of funds to the second organization results in 15 extra cents per dollar to actual relief operations in comparison with allocation of funds to the first. The first organization, armed with this information, could then evaluate its own operations to see whether funds were not in fact being spent on nonessential overheads. Alternatively its members and the public could be reassured that the extra 15 % was in fact being used for an educational programme, for example, which contributed indirectly to the long-term objectives of the organization. Another ratio, which has been of significance to INGOs in recent discussion of the relationship between INGOs and UN Agencies, is the percentage of income derived from national governments as compared to income from other sources. Such discussions can be considerably clarified if a definite percentage figure can be used to give precise significance to a range of funding situations, (e.g. a ratio of 90 % means something completely different from 20% or 5%).

No doubt it would be an advantage to anticipate similar debates by determining one appropriate ratio for the INGO programme funds spent in, or for, developing countries as a percentage of total expenditure, (e.g. a ratio of 5 % means something completely different from 60 %). Should the social problems and wastage, arising from the tendency of organizations to formulate and implement programmes in isolation from one another, continue, a standard INGO ratio may eventually be defined to indicate the proportion of expenditure allocated to coordination with other bodies (or even to multidisciplinary and ecological programmes - if the environmental situation becomes critical enough).

[Parts: Next | Last | All] [Links: To-K | From-K | From-Kx ]