the development of financial management practices as a necessary

8/17/2019 The Development of Financial Management Practices as a Necessary

1/15

University of Wollongong

Research Online

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Te development of nancial managementpractices as a necessary rationalisation for the

support of mission in an Australian nonprotorganisation Anne AbrahamUniversity of Wollongong

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http://ro.uow.edu.au/http://ro.uow.edu.au/theseshttp://ro.uow.edu.au/thesesuowhttp://ro.uow.edu.au/http://ro.uow.edu.au/thesesuowhttp://ro.uow.edu.au/theseshttp://ro.uow.edu.au/http://ro.uow.edu.au/http://ro.uow.edu.au/


2/15

University of Wollongong Thesis Collections

University of Wollongong Thesis Collection

University of Wollongong Year

The development of financial

management practices as a necessary

rationalisation for the support of missionin an Australian nonprofit organisation

Anne AbrahamUniversity of Wollongong

Abraham, Anne, The development of financial management practices as a necessaryrationalisation for the support of mission in an Australian nonprofit organisation,

PhD thesis, Department of Accounting Finance, University of Wollongong, 1999.http:/ro.uow.edu.au/theses/865

This paper is posted at Research Online.

http://ro.uow.edu.au/theses/865


3/15


4/15

The Development of Financial Management Practices

as a Necessary Ratíonalisation for the Support of Mission

in an ustraiian Nonprofit Organisatíon

A th es is s ub m it te d in ful fi lment of th e req u i r em en ts fo r the aw ard of

the degree:

DOCTOR OF PHILOSOPHY

from the

UNIVERSITY OF WOLLONGONG

by

NNE BR H M

Bachelor of Science (Universi ty of Sydney) , Graduate Diploma in

Educa t ion (Sydney Teachers ' Co l lege) , Maste r o f Accountancy

(Charles Stur t Universi ty) , Master of Commerce (Universi ty of

Wollongong) , Graduate Cer t i í îcate in Higher Education (Universi ty of

New South Wales)

D ep a r tm en t of Acco u n t in g an d F in an c e

1999


5/15

Certlficate

I, An n e A b rah am , ce r ti íy th a t th i s th e s i s h a s n o t b een su b m i t t ed

prev ious ly as par t o f the requ i rements o f ano ther degree and tha t i t i s

th e p ro d u c t of my o wn in d ep en d e n t r e se a rc h .


6/15

Dedication

For Ross

Two are hetter than one

.

and a threefold cord is not

quickly broken

E cc l es i a s t e s 4 : 9 ,12


7/15

cknowledgement

I t i s w i th a he ar t overw helm ing w i th g ra t i t ud e th a t I ackn ow ledge the

love, p a t i e n c e , u n d e r s t a n d i n g a n d e n c o u r a g e m e n t of m y h u s b a n d

Ross and my ch i ld ren , Raewyn , Michae l , Dav id and Pe te r .

I wish to th a n k m y su pe rvi ser , M ichael Gaff k in , for h i s wil l ingess to

a l low me the f reedom of d iscovery as I s tumbled th rough the maze o f

r e sea rch . I th an k h im fo r h e lp in g an d en co u rag in g m e d u r in g th e low

times and re jo ic ing with me in the h ighs.

The Gir l Guides Assoca t ion has p layed a major par t in var ious s tages

of my life , no ne less th a n in a l lowing m e the acc ess t h a t m ad e th is

thes is poss ib le . In pa r t i cu la r I would l ike to thank Barbara , Liz , Mil

and Roger o f Guides NSW and Margare t Cour tney , a rch iv is t o f Guides

UK.

V


8/15

Note

As fa r as poss ib le , I have used the o r ig ina l spe l l ing , g rammar ,

p u n c ta t io n , ab b rev ia t io n s an d fo rma t t in g in my q u o ta t io n s f ro m

d o c u m e n t s .

On 14 Fe br ua ry 19 66 , A ust ra l ia chan ged i t s cu r re nc y ba se . Before

th a t d a te , mo n ey i s r eco rd ed in Po u n d s (£), Shiliings (s) and Pence (d)

w h ere 12d = I s o r l / -

a n d 2 0 / - =

£1 .

After that date , money is recorded in Dollars ($) and Cents (c)

w he re $1 = lOOc.

At the t ime o f the cur rency change ,

£1

= $2

1 / - = lOc

Id = l c


9/15

bstract

T h is s tu d y co n cems th e d ev e lo p men t o f f în an c ia l man ag emen t

prac t ices in a nonprof î t o rgan isa t ion , Guides NSW, an o rgan isa t ion

which has i t s miss ion as i t s cen t ra l focus , and , l ike o ther nonprof i t

o rg an is a t ion s , i s pe rm ea ted by i t s h is to ry , it s cu l tu re a n d i t s

t r ad i t io n s .

In p a r t i cu la r , th e s tu d y ad d re sse s th e two p h en o men a o f th e

organ isa t iona l a t t i tude to f înanc ia l mat te rs and the d icho tomy

b e tween sh o r t t e rm an d long te r m fînancia l m an ag em en t . As

o rg an i sa t io n a l p h en o men a , i t i s ap p ro p r ia te to in v es t ig a te th em in

th e i r so c ia l co n tex t . Al th o u g h co n tem p o ra ry p h en o m en a , th e i r ro o t s

a re deeply en t r en c h ed in h i s to ry . T h u s , th i s ca se s tu d y in v o lv es b o th

fîe ldwork in te rm s of pa r t ic ip an t obse rva t io n and eng ag em en t , an d

also

historical analysis

of

archival

r eco rd s an d a r t i f ac t s .

T h e memb er s an d man ag emen t o f th e Asso c ia t io n v iew i t s miss io n a s

sac red , b u t mo n ey a s secu la r .

C o n s e q u e n t l y ,

the cons idera t ion o f

fînances can only b e rationalised wh en th e miss io n i s en d an g e red .

Guides can be v iewed as a game of life

bu i l t on the founda t ion o f the

Boy Scou ts , and in f luenced by the p re fe rences and p red i lec t ions o f

th e Fo u n d e r of b o th , wi th p lay e r s , sp ec ta to r s an d u m p i re s all

e n d e a v o u r i n g t o m a i n t a i n t h e

essential

e thos o f the game.

V


10/15

Table o Contents

Page

CERTIFICATE

ii

DEDICATION

iii

ACKNOWLEDGEMENTS

iv

NOTE V

A B S T R A C T Vi

T A B L E OF FlGURES

XÍ

T A B L E OF T A B L E S xii

C H A P T E R 1 m X R O D U C T I O N 1

1.1 O B J E C T I V E S 1

1.2 SIGNIFICANCE 4

1.3

M E T H O D

11

1.4

R E S E A R C H S I T E

12

1.4.1 TH E O R G A N I S A T I O N 12

1.4.2 ACCESS 16

1.5 T H E M E S 19

1.5.1 ACCOUNTING IN CONTEXT 19

1.5.2 S A C R E D - S E C U L A R CONFLICT 19

1.5.3 E M B E D D E D O R G A N I SA T I ON A L M O D E L 21

1.5.3.1

Financ ia l Control Sys tem

21

1.5.3.2 Organ isat ional S tructure 23

1.5.3.3 Organisa t iona l

Culture

24

1.5.4 S P O R TI N G M E T A P H O R 25

1.6 O R G A N I S A T I O N O F T H E T H E S I S 26

C H A P T E R 2

R E S E A R C H M E T H O D

30

2.1

I N T R O D U C T I O N

30

2.2

Q U A L I T A T I V E

R E S E A R C H T H E M E S 31

2.2.1 N A T U R A L I S T I C I N Q U I R Y 31

2.2.2 INDUCTIVE A N A L Y S I S 33

2.2.3 DlRECT P E R S O N A L CONTACT 33

2.2.4 A HOLISTIC P E R S P E C T I V E 34

2.2.5 A D Y N A M I C , D E V E L O P M E N T A L P E R S P E C T IV E 35

2.2.6 U N I Q U E C A S E O R I E N T A T I O N 35

2.2.7

E M P A T H I C N E U T R A L I T Y 37

2.2.8 CONTEXT S E N S I T I V IT Y 39

2.2.9 D E S I G N F L E X I B IL I T Y 39

2.3 E T H N O G R A P H Y , C A S E S T U D Y , F I E L D W O R K

O R

H I S T O R Y ? 40

2.3.1 D E F I N I N G THE T Y P E OF R E S E A R C H 40

2. 3. 2 EXAMINING THE

M A J O R F E A T U R E S

O F

T H E R E S E A R C H

42

2.3.2.1 C on t e m por a r y phe nom e na 42

2.3.2.1 Deta i led examina t ion in real- life context 43

2.3.2.3

P he nom e na e m be dde d incontext 45

2.3.2.4

M ult iple sources of data 46

2.3.2.5

Lon gitudin al analys is 47

2.3.2.6 Tr iangula t ion

47

2.4

T H E O R Y - M E T H O D LlNKAGE 49

2.4.1 G R O U N D E D THEORY 50

2.4.2 T H E M E DEVELOPMENT 51

vn


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2.4.3 HERMENEUTICS 52

2.4.4 E T H N O M E T H O D O L O G Y 53

2 5

C O N C L U D I N G C O M M E N T

54

C H A P T E R 3 P R O L O G U E : T H E B E G I N N I N G OF T H E R E S E A R C H 56

3 1

I N T R O D U C T I O N

56

3.1.1

D A Y - T O - D A Y

FINANCIAL

M A N A G E M E N T 57

3.1.2 BROADERFINANCIAL M A N A G E M E N T 58

3 2 ASSOCIATION

M A N A G E M E N T S E S S I O N S 62

3.2.1 S E S S I O N 1: IDENTIFYING C O N C E R N S

6

3.2.1.1 Considerat ion of

thetrend

chart

62

3.2.1.2 Considerat ion

of

current cash assets

63

3.2.1.3 Considerationofexpenditurechart 64

3.2.1.4 Consequences of cash decl ine 65

3.2 .2 SE SSI 0N 2: IDENTIFYING SlGNIFICANT COSTDRIVERS 65

3.2.2.1

Identifícation of expend i ture i tems 65

3.2.2.2

Division of items into

m u s t s

& w a n t s 66

3.2.3

S E S S I 0 N 3 : G E N E R A T I N G A L T E R N A T I V E S

67

3.2 .4 SE SSI 0N 4: EVALUATING

A L T E R N A T I V E S 68

2.2.5 S E S S I 0 N 5 : M A K I N G D E C I S I 0 N S 70

3 3

P R O P O S E D

A C T I O N S R E V I S I T E D 74

3.3.1 E X P E N D I T U R E R E D U C T I O N 74

3.3.2 I N C O M E G E N E R A T I O N 76

3 4

T H E O P E N D O O R

80

3 5

C O N C L U D I N G C O M M E N T

81

C H A P T E R 4 : T H E H I S T O R Y OF T H E O R G A N I S A T I O N 83

4 1 SCOUTS 84

4.1.1 T H E F O U N D E R 84

4.1.2 T H E F O U N D A T I O N 90

4.1.3 CONCLUSION

94

4.2 G U I D E S

IN

E N G L A N D 96

4.2.1 B E G I N N I N G S 96

4.2.2 C R Y S T A L P A L A C E R A L L Y 97

4.2.3 E A R L Y D A Y S 99

4.2.4 CONCLUSION 105

4 3 GUIDES Dí AUSTRALIA 107

4.3.1 N E W Z E A L A N D 111

4.3.2 T A S M A N I A 112

4.3.3 QUEENSLAND

114

4.3.4 SOUTH

A U S T R A L I A 116

4.3.5 V I C T O R I A 117

4.3.6 W E S T E R N A U S T R A L I A 120

4.3.7 N E W SOUTH W A L E S

121

4.3.8 C O N C L U S I O N 126

4 4 GUIDES IN NS W 127

4.4.1 T H E B E G I N N I N G 127

4.4.2 E A R L Y M E E T I N G S 128


4 5 CONCLUDING COMMENT 132

CH PTER

5 T H E C O N T R I B U T I O N

OF

T H E

E RLY

L E A D E R S 133

5 1 INTRODUCTION 133

5 2 FIRST FINANCIAL

D E C I S I O N S

137

viu


12/15

5.3 T H E FI RS T W O M E N 139

5.3.1 BRI TIS H HE RI TA GE 139

5.3.2

FlNANCIAL

AND BUSINESS

EXPOSURE

141

5.3.3

FEMINIST

ISSUES 144


5.4 T H E FI RS T CH AI RP ER SO NS 148

5.4.1 LAD Y MA RG AR ET DA VI DS ON 148

5.4.2 LADY LlLY CULLEN 150

5.4.3 LADY ALICIA KEL SO KlNG 152

5.4.4 LA DY CARO LE^E DA VI D 153

5.4.5 L A D Y E V A JULIUS 157


5.5 T H E FI RS T TRE AS UR ERS 160

5.5.1 MISS M

ETHEL TROUTON

161

5.5.2 MISS

JESSIE HELL ICA R

163

5.5.3 MRSNOELLE E. BR EN NA N 165

5.5.4 MlSSMAUDE F . WA TS ON 167

5.5.5 MRS L. O ' M A L L E Y WOOD 175


5.6 CONCLUDING COMMENT 190

CHAPTER

6 ACC OUNT S, AC CO UN TI NG AND ACCOUNT ABILIT Y: 192

6.1 INTRODUCTION 192

6.2 T H E INTERNAL NE ED FO R ACC OUN TAB ILI TY 194

6.2.1 B Y ORG ANIS ATIO NS IN GE NE RA L 194

6.2.2 B Y N O N P R O F I T O R G A N I S A T I O N S I N P A R T I C U L A R 196

6.3 T H E EXTER NAL DE MA ND FO R ACC OUNT ABIL ITY 199

6.4 T H E DEV ELO PME NT OF ACC OUN TAB ILI TY ME ASU RE S 201

6.4.1 BA NK AC CO UN TS 202

6.4.1.1 State Headquar ters Accounts 203

6.4.1.2 CampA ccou nt 209

6.4.1.3 Glengarry Account 210

6.4.1.4 Unit and District Accounts 214

6.4.2 INSURANCE 215

6.4.2.1

Property Insu rance 216

6.4.2.2 Employees Insurance 217

6.4.2.3 Public Risk Insurance 218

6.4.2.4 Acc ide nta nd Sickness Insurance 219

6.4.3 CONTROL OF C A S H 220

6.4.3.1 Receipts 221

6.4.3.2 Pett yCas h 222

6.4.3.3 Ord erBoo ks and Accounts 223

6.4.3.4 Daily Banking and Mail Clearance 225

6.4.4 INVESTMENT ININVENTORIES 226

6.4.5 AUDITORS 232

6.4.6

FlRST FlNANCIAL CRISIS

234

6.4.7 ANN UAL RE PO RT S 236

6.4.7.1 First Annual Report 237

6.4.7.2 First

Financial

Repor t 238

6.5 C O N C L U D I N G COMMENT 241

CH AP T ER 7 : MISSI ON AND FEVANCIAL VULN ERAB ILI TY 244


7.2 MISSION 245

IX


13/15

7.2.1 CHANGING EXPRESSIONS OF MISSION 245

7.2.2 FlNANCIAL SUPPORT FOR MISSION 248

7.3 OVERVIEW OF ANNUAL FINANCIAL RESULTS 257

7.4 A MODEL OF FlNANCIAL VULNERABILITY 26 3

7.4.1 EQU ITY BA LAN CES 266

7.4.2 R E V E N U E CONCENTRATION 268

7.4.3 ADMINISTRATIVE

COSTS

269

7.4.4 OPERATING MA RG INS 271

7.5 A P P L I C A T I O N O F T H E M O D E L 2 72

7.5.1 VA LUE S FOR OPERATION AL CRITE RIA 275

7.5.1.1 Equity Balances 275

7.5.1.2 Revenue Concentration 276

7.5.1.3 Adm inistrative Cos ts 279

7.5.1.4 Operating Margins 281

7.5.1.5 Conclusion 284

7.5.2 COMPARISON WITH AT RISK NONPROFITS 286

7.6 CONCLUDING C O M M E N T 288

CHAPTER 8 FINANCIAL P E R F OR M A NC E AND T HE S UP P OR T OF M I S S I ON 2 89


8.2 F I N A N C I A L R A T I O A N A L Y S I S A N D M I S S I O N 2 92

8.3 LlMITATIONS OF FlNANCUL R A T I O A N A L Y S I S 294

8.4 A M O D E L

O F

FINANCL\L P E R F O R M A N C E A N A L Y S I S 2 98

8.4.1 AR E FINANCIAL RESOU RCES SUFFICIENT TO SUPPORT THE MI SSI ON ? 300

8 .4 .2 WH AT FINANCIAL RESOURCES ARE AV AILA BLE TO SUPPORT THE MIS SIO N? . . . . 301

8.4.3 HOW ARE FINAN CIAL RES OU RCE S U SE D TO SUPPO RT THE M ISS IO N? 303

8.4.4 AR E FINAN CIAL RES OUR CES APP LIED EFFICIENTLY AND EF FECTIVE LY TO

SUPPORT THE M I S S I O N ? 304

8.5 A P P L I C A T I O N O F T H E M O D E L 3 08

8.5.1 AR E FINANCIAL RESOU RCES SUFFICIENT TO SUPPORT THE MI SSI ON ? 308

8.5.1.1 Retum on Net Assets Ratio 309

8.5.1.2 Viability Ratio 310

8.5.1.3 Primary Reserve Ratio 312

8.5.1.4 Net Income Ratio 313

8 .5 .2 WH AT FINANCIAL RESOURCES ARE AVAILABLE TO SUPPORT THE MIS SIO N?. . . . 315

8.5.2.1

Operating Income Ratio 315

8.5.2.2

Contributed Incom e Ratio 317

8.5.2.3 Capital Financing Ratios 319

8.5.3 HOW ARE FlNANCIAL R E S O U R C E S U S E D T O S U PP O R T TH E M I S S I O N ? 319

8.5.4 ARE FINANCL\L RESOUR CES APPL IED EFFICIENTLY AND EFFECTIVELY TO

SUPPORT THE MLSSION? 3 2 1

8.5.4.1 Quality 322

8.5.4.2 Mem bership Satisfaction and Retention 324

8.5.4.3 Productivity 326


CHAPTER 9 C ONC L US I ON: WH E R E T O F R O M HE R E ? 3 33

9.1 T H E E N D

O F

P L A Y N O T T H E E N D

O F

T H E G AM E 333

9.2 T H E TH ES IS EN DS 333

9.3 T H E G A M E C O N T I N U E S 3 36

9.3.1

F O R T H E S O C I A L C O N S T R U C T I O N O F K N O W L E D G E

336

9.3.2 F O R G U I D E S N S W 3 39

9 .3 .3 FOR THE RESE ARC HER 343

BIBLIOGRAPHY 345


14/15

Table of ígures

Figure L l The division between the sacre d

andthe

secular 20

Figure L2 Embedded organisation framework 22

Figure

2.1

My 4 periods of personal involvem ent with the organisation 44

Figure 3.2 Guides NS W - Asse ts consum ed by operations 62

Figure 3.3 Guides NS W - Expen diture items 64

Figure 3.4 Gridof expenditurereductionoptions 70

Figure 3.5 Grid of income generation options 71

Figure 4.1 The Guide promise and law 106

Figure 4.2 The beginnings of Guide s in AustraHan and New Zealand 110

Figure 6.1 The managem ent

accoimting

proce ss 195

Figure 6.2 Statewide reporting structure of GuidesNSW 202

Figure 6.3 Guides NS W - First balance sheet 239

Figure 6.4 Guides NS W - First income and expen diture statement 240

Figure 7.1 G uid esN SW : Net operating results for 1924-1997 259

Figure 7.2 Guides NS W : Incom e and expen diture for 1924-1965 260

Figure 7.3

GuidesNSW:

Incom e and expen diture for 1966-1997 261

Figure 7.4 Gu idesN SW : Mem bership

figures

for 1924-1997 262

Figure 7.5 A model of the fínancial health of an organisation in relation to four

operational criteria 265

Figure 7.6 Ratio of net assets to total incom e for 1924-1998 276

Figure 7.7 Changes in revenue concentra tion index for 1924 - 1998 277

Figure 7.8 Ratio of annual adm inistration costs to total costs for 1924 - 1998 280

Figure 7.9 Ratio of operating m argin to total incom e for 1924 - 1998 281

Figure 7.10

Ratio of operating margin to total incom e for 1978 - 1998 283

Figure 8.1 Model of financial perfo rmance in

relationto

mission 293

Figure 8.2 Retum on net assets ratio for Guid es N SW for 1986-1997 310

Figure 8.3 Viability ratio for Gu ides NSW for 1986-1997 311

Figure 8.4 Primary reserve ratio for Gu ides N SW for 1986-1997 313

Figure 8.5 Ne t income ratio for Guides N SW for 1986-1997 314

Figure 8.6 Operating income ratio for Gu ides NSW for 1986-1997 316

Figure 8.7 Mem bership of Guides NS W for 1986-1997 317

Figure 8.8 Contributed income ratio for Gu ides N SW for 1986-1997 318

Figure 8.9 Membership services and supp ort ratios for 1986 -1997 321

FigureS.lO Girlsperleadertatios forGuidesNSWfor 1986-1997 322

Figure

8.11

Mem bership trends ratios for Gu ides N SW for 1986-1997 324

Figure 8.12 Financial productivity for Guides N SW for 1986-1997 327

Figure 8.13 Annual chang e in girl me mb ership for Guides NSW for 1986-1997 327

X


15/15

Table of Tables

Table 1.1 Characteristics of nonprofit organ isations that affect accou nting 5

Table

1.2

Typesof nonprofitorganisations 6

Table

1.3

Volimteering and giving to nonprofit organisations in Australia 10

Table 2.1 Qualitative research themes 32

Table 2.2 Major features of this case study 42

Table2.3 Multiple sourcesof datausedinthis study 46

Table3.1 Key figures for Guides NSW 63

Table 3.3 Summary income and expenditure figures 64

Table 3.3 Conseq uences of cash decline 65

Table 3.4 Expenditure:

musts

versus

wants

66

Table 3.5 Expenditure reduc ing ideas 67

Table

3.6 Revenue generating ideas 68

Table 3.7 Expenditure reduc tion scores 69

Table 3.8 Income generation scores 69

Table 3.9 Proposed actions to decrease expenditure 72

Table 3.10 Proposed actions to generate income 73

Table

6.1

Examples

of nonprofit fraud 197

Table 7.1 Financial characteristics of nonprofit organ isations 264

Table 7.2 Comparison of ratios for Guides NS W and Tuckman & Chang (19 91)..286

Table 8.1 Role of financial ratios in financial analys is 295

Table 8.2 Ratios that indicate whether financial resources are sufficient to support

mission 301

Table 8.3 Ratios that indicate wha t financial resource s are available to support

mission 302

Table

8.4 Ratios that indicate how fmancial resources are used to suppo rt

mission303

Table 8.5 Ratios that indicate whether financial resources are applied efficiently

and effectively to support mission 307

Table 8.6 Ratios for Guides N SW for 1986-1997 that indicate whether fmancial

resources are sufficientto support its miss ion 309

Table

8.7 Ratios for Guides NSW for

1986-1997

that indicate what fmancial

resources are available to support its mission 315

Table 8.8 Ratios for Guides

NSW

for

1986-1997

that indicate how financial

resources are used to support its mission 320

Table 8.9a Ratios for Guides NSW for 1986-1997 that indicate whether financial

resources are applied efficiently and effectively to support its mission ..323

Table

8.9b

Ratios for Guides NS W for 1986-1997 that indicate whether financial

resources are applied efficiently and effectively to support its mission ..323

the development of financial management practices as a necessary

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