Chapter 19
Not-for-profit Organisations
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Objectives
After studying this topic you should be able
to:
 Defining not-for-profit organisations;
 The importance of this sector within
hospitality, tourism and events;
 Management accounting techniques of
particular use within these organisations;
and
 How the not-for-profit nature influences
accounting orientation and importance.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Defining not-for-profit
organisation
A not-for-profit organisation is one whose key focus is not on
generating profits.
Types of Organisation include:
charitable organisations and governmental bodies of all shapes and
sizes.
Just like ‘for profit’ organisations these vary in sizes from a local
village based charity to large international charities which are
multimillion pound operations.
Governmental bodies again can range from local government, to
national government to international bodies. This can include police
forces, national health services, and social care facilities. The full
range of the community, social and voluntary organisations are
endless.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
International Classification
of Non-Profit Organisations
(ICNPO) part 1
Classification
Culture and
recreation
Includes
Arts, performing arts, sports, zoos, aquariums, sports
clubs, recreation & social clubs
Education and
research
Schools, further education, higher education, universities,
adult education, research bodies, medical research, social
science research, policy studies
Health
Hospitals, nursing homes, hospices, mental health
services, health education services
Child services, including day care and welfare, youth
services, family services, services for the elderly and
services for the disabled, disaster and emergency
prevention and control, refugee assistance
Social services
Environment
Animal protection and welfare, wildlife preservation and
protection, pollution assessment and control,
environmental management
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
International Classification
of Non-Profit Organisations
(ICNPO) part 2
Classification
Housing and
development
Includes
Community and housing projects, housing associations,
job training projects, community furniture projects
Law, politics and
advocacy
Civil rights organisations, ethnic associations, victim
support, offender rehabilitation, political parties and
associations
Philanthropic
intermediaries
and voluntarism
promotion
Grant-making foundations, fund raising organisations and
promotion of volunteering organisations
International
Exchange and cultural programmes, international disaster
and relief organisations, international human rights and
peace organisations
Religion
Churches, synagogues, mosques, monasteries, religious
associations
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
International Classification
of Non-Profit Organisations
(ICNPO) part 3
Classification
Includes
Business
associations,
professional
bodies and trade
unions
Professional organisations, labour/trade unions, business
associations that promote or advise businesses
Not classified
elsewhere
Cooperative schemes, non-profit manufacturers &
retailers
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Their significance to the
hospitality, tourism &
events sectors
The impact of the not-for-profit sector on the
hospitality, tourism and events sector can be separated
into two key groups:
 Not-for-profit organisations working in providing
hospitality, tourism and event based services;
 Not-for-profit organisations that use hospitality,
tourism and events organisations, particularly in
relation to fund raising opportunities.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Hospitality and the NFP
sector
Includes:
 Catering in hospitals, prisons, care
homes, schools, universities,
museums, ‘meals-on-wheels’, staff
canteens
 Commercial venues running or
sponsoring charity events e.g.
charity balls
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Tourism and the NFP sector
Includes:
 International and national charity
challenge event running by tour
operators
 Providing specialist holidays for
disadvantaged groups of children,
those that are sick or disabled
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Events and the NFP sector
Includes:
 Major importance to the events industry,
employing many events staff
 Events range from small local school or
sporting events to major international
charity events.
 Examples include:
 Band Aid (www.bandaid.org.uk)
 Oxjam (www.oxfam.org.uk/oxjam)
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
The implications for
management accounting
approaches (1)

Issues of accountability – commercial organisations
report to shareholders and lenders, NFP organisations
have added scrutiny and public accountability, ensure
grants and donated funds are not ‘wasted’ and morally
obtained. This makes for being risk adverse and
committee involvement in decision making.

Cost control and budgeting – Budgeting and strict cost
control are essential, this can lead to inflexibility and an
inability to quickly respond to change. Often a traditional
approach to the use of these techniques.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
The implications for
management accounting
approaches (2)

Decision making
Goes beyond financial imperatives can
be bureaucratic process to eliminate risk
which slow down decision making, so
alternative ‘emergency response’
mechanisms needed to deal with
response to specific crisis situations.
Long-term decision can use investment
appraisal techniques (ARR, PBP, NPV, or
IRR), but the evaluation may not have a
financial imperative .
Cost-benefit analysis can be useful as it
goes beyond pure financial analysis.
(see expenditure on a road example)
COSTS
BENEFITS
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
The implications for
management accounting
approaches (3)
 Pricing –
This is important to NFP organisations, whether it
be selling merchandise to add surplus funds, or
ensuring charity event registration fees cover
costs. There is also a further consideration of
‘social inclusion’ in pricing, for example a local
authority run museum or leisure facility where the
price can encourage all groups of society.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
The implications for
management accounting
approaches (4)

Performance analysis – quite often this goes beyond
financial considerations – often monetary value is just a
‘means to an end’ and not the target – see examples
Example
organisation
A cancer based
charity
Suitable measure
Success will be measured in research developments that impact on survival rates, so a
reduction in deaths for particular cancers would be a performance indicator. Some research
could take many years, so this is looking at the medium to long term, not short-term ‘returns’.
Awareness campaigns can be measured by the number of people asking for information, or
having initial cancer screenings.
A human aid
charity
These will be measuring how many people have been aided. For example numbers supplied
with fresh drinking water, anti-malaria treatments given, reduction in infant deaths.
Local authority /
government
The key here is quality of the service provided, so measures related to service delivery is key.
Rating of local schools, roads, waste services, libraries, etc all providing key information, as
does usage statistics.
Such a service can be measured relating to the number of calls taken / people assisted in a
given period.
A telephone advice
line
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
The implications for
management accounting
approaches (5)

Strategic management Accounting – Given the strategic nature
of SMA and its inclusion of non-financial considerations it is well
suited for use in NFP situations, with examples of use relating to
the balanced scorecard and CSFs in particular.
 Environmental management accounting –
There are two imperatives:
1. Where there is grant, public or charitable funding involved the
‘wasting’ of resources will be under scrutiny, whether it is recycling,
minimising fuel usage, or running a ‘paperless’ office to aid the
environment.
2. The charity or government organisation may have a specific remit
related to people and/or the planet. When this is the case they
morally have a duty to run their own organisation by means of
‘best practice’.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers
Summary





Not-for-profit organisations are a major sector of the economy
that needs to use management accounting tools to maximise
returns and control costs.
Public accountability can led to ‘conservative’, low risk taking
decision making, that often takes a long time through a
committee process.
ICNPO identifies the range of not-for-profit sectors that exist,
many are in, or work with hospitality, tourism and events
organisations.
Management accounting in NFP organisations needs to reflect
the fact profits are not their ultimate goal; money is a means to
an end, not the final output in many cases.
Strategic management accounting techniques can be important
as they integrate non-financial information and goals.
© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers