A non-profit organisation (NPO) uses surplus revenues to achieve its mission; unlike a for-profit organisation, it does not distribute them as profit or dividends. Surplus revenues are retained by the organisation for self-preservation or for further expansion. NPOs are usually governed by a board of trustees or directors; larger NPOs employ paid staff including management, while smaller NPOs utilise volunteers (usually unpaid).Unlike a for-profit organisation, an NPO does not have owners (or shareholders). NPOs can be organised in different forms, including charitable trusts, companies limited by guarantee, registered societies, trust companies, co-operatives, private foundations and public charities. A charitable organisation is an NPO that focuses on non-profit and philanthropic goals as well as social well-being (e.g. charitable, educational, religious, or other altruistic activities). They are usually tax-exempt, or at least enjoy tax benefits.
Published in Chapter:
Towards Predicting Financial Failure in Non-Profit Organisations
Sharon Cheuk (Universiti Malaysia Sarawak, Malaysia)
Copyright: © 2016
|Pages: 18
DOI: 10.4018/978-1-4666-9484-2.ch019
Abstract
Non-profit organisation financial failure has been a prevalent problem in developed and developing economies. Such incidences bring adverse effects to the reputation of the non-profit organisation in question and the third sector as a whole, especially if the organisation in question is significantly large in size, leading to possible knock-on effects such as disruption to society, litigation, loss of investor confidence in the economic environment, and a worsening of a country's ranking under the Corruption Perceptions Index. This chapter examines past financial failures amongst non-profits and reviews past literature on attempts to predict non-profit failures before they occur. Finally, it proposes an additional governance-related factor to be taken into consideration when considering potential financial distress amongst non-profit organisations. Suggestions for further research are made accordingly.