Contemporary issue and theoretical context
Financial constraints within the not for profit sector: APHEDA case study
A review of the literature demonstrates that financial pressures in the form of financing activities are one of the most prevalent management challenger’s faced by not for-profit (NFP) organization. This is caused by challengers in securing funds and operating within the constraints of the 60:40 ratios (in which operational costs must not exceed 40% of budgets with 60% of funds used in projects). As is summarized in Figure 1 although a range of issues (symptoms) were identified during the interview with management the origins of the problem lies with the manner in which financial systems are managed. Furthermore the financial constraints placed are increased with the manner in which programs are financed (Birchfield 2012). This is because funders devote financial aid to short-term programs which results in a reduction of growth or sustainability of the organization by providing disincentives for good management practice (Birchfield 2012). Sustainable management practices for public and not for profit (NFP) organizations in the twenty-first century is a must (Guthrie, Ball & Farneti 2010). A review of the SEAR literature has recognised accounting and accountability as key processes in advancing sustainability in public services have and will serve the focus of this report (Guthrie, Ball & Farneti 2010).
Manageralism also referred to as ‘the new public management ‘is an approach based co the principle that advocates the allocation of performance measures in the management of resources, to allow transparency and efficiency when reporting to citizens and stakeholders on program results (Lindgren 2001). A review of APHEDA’s systems demonstrates an absence of these measures. An important place to start in remediation of the issue critical dialogue on social accounting and audit in public management are an important starting point (Birchfield 2012; Katz 2005). The current system dominating public sector practice centres on profits (money spend on projects) and losses (operating costs), with a focus for public services on their economy and efficiency (Birchfield 2012). However this is often to the exclusion of their effectiveness and equity (Broadbent and Laughlin 2008). The traditional approach described however has been challenged following the recent global financial crises (Birchfield 2012). Furthermore the complexity of public governance, the fragmentation and the endurance involved makes traditional financial accounting models redundant (Broadbent and Laughlin 2008). Thus a more result a more sustainable approach to accountability than ‘simple’ profit and loss accounts is required (Broadbent and Laughlin 2008).
In order to operate effectively within these financial constraints, immediate solutions implemented by APEDA and other NPO often involve the review of cost structures, spending practices, operational efficiencies, and financial reporting and management structures (Birchfield 2012). However these are short term solutions with attention to its accounting and funding models needing a review. In addition the implementation of performance measures is indicative of an administrative culture centered on the achievement of results (Lindgren 2001). Accordingly there is a necessity for the implementation of social, environmental and economic sustainability and alternate management and accounting in public services (Broadbent and Laughlin 2008). Although there is ample evidence to suggest that there is ‘the performance management movement’ this is absent in APHEDA (Lindgren 2001). However in this endeavour there are several limitations faced when applied private sector principles to not for profit organisations caused by the complexity in needing to manage quality across a network of non-profits as a result of multidimensional layers with different stakeholders across multiple levels (Broadbent and Laughlin 2008).
As stated by Lindgren (2001) goal displacement is one of the limitations faced in the implementation of new systems and involves the divergence of the values of both the measurement systems and programs in which emphasis is placed on the wrong activities (Lindgren 2001). The second limitation is the transferability of private sector practices to not for profit organizational settings (Lindgren 2001). The first is the assumption that economy, efficiency, and cost-effectiveness and quality can be improved simultaneously (Lindgren 2001). In addition the integration of borrowed values is difficult as they do not conform to public and not for profit sector culture (Lindgren 2001). Thus effective introduction of such systems will require effective personal, interpersonal and group skills by management.
Question: What are or could be the Analysis and Implications for managerial skills according or against the Contemporary issue?
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