Performance measurement of Non-Profit Organizations (NPOs) is of
increasing importance for aid agencies, policy-makers and donors. A widely used
benchmark for measuring the efficiency of NPOs is the overhead cost ratio, consisting
of the total money spent on administration and fundraising relative to the budget.
Donors generally favor a lower overhead cost ratio as it ensures that more Money
directly reaches beneficiaries. Unlike fundraising expenses, administrative costs do
not contribute to advertising the actions of an NPO even though they account for a
significant proportion of overhead cost. Reducing administrative expenses is a logical
consequence from a financial viewpoint, but might negatively affect NPOs through the
resulting administrative capacities. This phenomenon is known as "Nonprofit Starvation Cycle" This work provides an analytical framework for analyzing NPO decision
making concerning administrative costs. The paper provides answers to important research questions on the optimal level of administrative spending, the influencing
factors and the effects of available information on NPOs. The research shows that focusing on financial performance measurements can result in reduced utility created
for NPOs. Less transparency often leads to increased utility for NPOs, but more transparency can increase NPOs' utility if the information available exceeds a certain threshold. Fluctuating donations are challenging for NPOs' planning and may Impact
administrative capacities negatively.
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:5957 |
| Date | 27 June 2018 |
| Creators | Burkart, Christian, Wakolbinger, Tina, Toyasaki, Fuminori |
| Publisher | Springer |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, PeerReviewed |
| Format | application/pdf |
| Rights | Creative Commons: Attribution 4.0 International (CC BY 4.0) |
| Relation | http://dx.doi.org/10.1007/s10100-017-0512-9, https://link.springer.com/, http://epub.wu.ac.at/5957/ |
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