Performance Evaluation Parameters for Projects and Non-Profits

8/10/2019 Performance Evaluation Parameters for Projects and Non-Profits

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Introduction

Performance evaluation provides a solid foundation for predicting outcomes ofschedules in the early stages, simplifies spotting cost and schedule problems for

projects further along, and helps managers establish benchmarks and long-term

goals.

In short, as long as measuring project performance does not take too much time

away from core project work, the information gained will contribute to success.Some of the most appropriate financial and non financial performance measures

that not-for-profit organizations use for measuring and evaluating financial

performance are fund accounting, governance, product pricing, strategic planning

and budgeting etc.


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4.1 Performance Evaluation of Projects:

A) Parameters forPerformance Evaluation of Project:

Finish Compliance

Start Compliance

Start / Finish Variance

Start / Finish Discrepancy

Accelerated

Started Ahead

Schedule Overrun

Took Longer than Planned


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A ) Parameters forPerformance Evaluation of Project:

1) Took Longer than Planned:

An interesting check that not many project managers focus on is the number of activities thattook longer than planned. An activity may start, or finish as planned, but due to a late start or

finish still have a longer duration than planned. This is useful insight for future planning.

2) Schedule Overrun:

Identifying which activities are delayed, and calculating the number of days of total delay on

each activity is useful in identifying poor planning during early execution. If caught soon

enough, the metric can help to identify how much acceleration is needed to finish on time, orprovide insight into exactly how delayed a project finish will be.

3) Started Ahead:

Evaluating performance should look at what is going wrong, but also note areas that are going

better than planned. Identifying activities that have started ahead of schedule (or finished

ahead of schedule) is another useful way to track performance and better forecast.

4) Accelerated:To find accelerated activities, look for any activity that started after its planned start date, but

finished before or on the planned finish date. This measure indicates improving execution

performance and also helps to pinpoint opportunities for future acceleration.


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B) Project Control Process:

Control is the process of comparing actual performance against ph to identify deviations,

evaluate possible alternative courses of actions, and take appropriate corrective action. The

project control steps for measuring and evaluating project performance are presented

below.

Step 1: Setting Base Line Plan

Step 2: Measuring Progressand Performance

Step 3: Comparing Planagainst Actual

Step 4: Taking Action


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Step 1: Setting Base Line Plan:

The baseline plan provides us with the elements for measuring performance. The

baseline is derived from the cost and duration information found in the work breakdown

structure (WBS) database and time-sequence data from the network and resource

scheduling decisions. From the WBS the project resource schedule is used to time-phase

all work, resources, and budgets into a baseline plan. The baseline process, while a key

to project control, is often misunderstood. A baseline is defined as the original plan for a

project, a work package, or an activity, plus or minus approved changes. A modifier(Project Budget Estimate schedule baseline, performance measurement baseline) is

usually included. A baseline provides the "ruler" that a project can be evaluated with.

Baseline changes are significant events and should not be made without consideration

of their impact.

Step 2: Measuring Progress and Performance:Time and budgets are quantitative measures of performance that readily fit into the

integrated information system. Qualitative measures such as meeting customer

technical specifications and product function are most frequently determined by on-site

inspection or actual use. This chapter is limited to quantitative measures of time and

budget. Measurement of time performance is relatively easy and obvious.


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Step 3: Comparing Plan against Actual:

Because plans seldom materialize as expected, it becomes imperative to measure

deviations from plan to determine if action is necessary. Periodic monitoring and

measuring the status of the project allow for comparisons of actual versus expected

plans. It is crucial that the timing of status reports be frequent enough to allow for early

detection of variations from plan and early correction of causes. Usually status reports

should take place every one to four weeks to be useful and allow for proactive

correction.

Step 4: Taking Action:

If deviations from plans are significant, corrective action will be needed to bring the

project back in line with the original or revised plan. In some cases, conditions or scope

can change, which, in turn, will require a change in the in base line plan to recognize

new information.


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C) Methods of Variance Analysis:

Control is one of the most neglected areas of project management. Unfortunately, it is not

uncommon to find resistance to control processes. In essence, those who minimize the

importance of control are passing up a great opportunity to be effective managers and,

perhaps, allow the organization to gain a competitive edge. Neglecting control in

organizations with multiple projects is even more serious. For effective control, the project

manager needs a single information system to collect data and report progress on cost,

schedule, and specifications. Generally the method for measuring accomplishments centers

on two key computations:1) Comparing earned value with the expected schedule value.

2) Comparing earned value with the actual costs.

These comparisons can be made at the project level or down to the cost account level.

Project status can be determined for the latest period, all periods to date, and estimated to

the end of the project. Assessing the current status of a project using the earned valuecost/schedule system requires three data elementsplanned cost of the work scheduled

(PV), budgeted cost of the work completed (EV), and actual cost of the work completed (AC).

From these data the schedule variance (SV) and cost variance (CV) are computed each

reporting period. A positive variance indicates a desirable condition, while a negative

variance suggests problem; or changes that have taken place.


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Fig : Cost and Schedule Graph


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1) Scheduled Variance (Time Overruns):

A major goal of progress reporting is to catch any negative variances from plan as early as possible

to determine if corrective action is necessary. Fortunately, monitoring schedule performance is

relatively easy.

a) Meaning ofSchedule Variance (SV) :

Schedule variance presents an overall assessment of all work packages in the project scheduled to

date. It is important to note schedule variance contains no critical path information. Schedule

variance measures progress in dollars rather than time limits. Therefore, it is unlikely that any

translation of dollars to time will yield accurate information telling if any milestone or critical path isearly, on time, or late (even if the project occurs exactly as planned).

b) Attributes of Schedule Variance:

The only accurate method for determining the true time progress of the project is to compare the

project network schedule against the actual network schedule to measure if the project is on time.

However, SV is very useful in assessing the direction all the work in the project is takingafter 20 or

more percent of the project has been completed. The project network schedule, derived from theWBS/OBS, serves as the baseline to compare against actual performance. Attributes of Schedule

Control include:

i. Determining that the schedule has changed.

ii. Managing the actual changes when and as they occur.


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1) Scheduled Variance (Time Overruns):

c) Different Aspects of Schedule Control:

i. Affected by any Number of Issues :

Schedule Control is one of the most difficult but important activities within project control.

The project schedule can be affected by any number of issues from resources to funding,

vendors, weather, and anything in between. The ability of a Project Manager to manage the

schedule of a project and deliver it on time is a high-visibility concern for project success

from a customer point of view.ii. Come from a Variety of Sources :

Schedule issues, as stated previously, come from a variety of sources; however, there should

be a single, focused method for dealing with schedule changes. If a potential schedule

problem is discovered, the problem must be investigated and the cause uncovered as soon

as possible. Once the problem is discovered, a plan should be created for correcting the

problem in the shortest allowable time with the least impact. It is also advisable to bringforward alternatives of varying costs.

iii. Managed at Project Planning Level :

Schedule Control is something that typically is managed at the project level by the Project

Manager; however, it is very important to make the customer aware that a schedule change

has occurred. Furthermore, the customer needs to be made aware of what is being done to

fix the issue and the impact it will have on the project's time line, performance anddeliverable.


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2) Project Cost Variance (Cost Overrun):

Projects may fail to control cost, or go over budget, for many reasons. Often it is not a single

problem but a series of small problems that combined permit cost control to be sacrificed

and prevent the project from being completed successfully. Cost control contains the

following attributes:

1) Determine if the Project Budget Estimate has changed.

2) Manage the actual change and take corrective action.

3) Inform appropriate stakeholders of authorized changes

a) Meaning of Cost Variance:

Cost variance tells us if the work accomplished costs more or less than was planned at any

point over the life of the project. If labor and materials have not been separated, cost

variance should be reviewed carefully to isolate the cause to either labor or materials or to

both.


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2) Project Cost Variance (Cost Overrun):

b) Steps to overcome Cost Variances:

i) Cost control is not simply a reporting process. It includes the searching out of the "why" for

both positive and negative variances between the scheduled and actual costs. It must be

thoroughly integrated with the other control processes. For example, inappropriate responses

to cost variances can cause quality or schedule problems or produce an unacceptable level of

risk later in the project.

ii) Consistent and Regular basis for Evaluation :

To be effective, all tools require the reporting of actual performance on a consistent and

regular basis for evaluation against project budget estimates. To prevent significant labor

overhead for the maintenance of cost information during a project, the source and methods

of reporting costs must be addressed in the initial phases of project planning and may be

addressed in the Project Budget Estimate.


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4.2 Performance Evaluation of Non Profit Organisations

Many different terms and definitions have been used to describe organizations operating in

neither private sector nor public sector, sometimes referred to as the nonprofit sector or the

third sector. Some of the most frequently used are; voluntary organizations, nongovernmental

organizations (NGOs), civil society organizations, charitable organizations and nonprofit

organizations.

A) Meaning of Non-Profit Organisation:

Nonprofit organizations, also known as charitable organizations, non-governmental

organizations, or tax-exempt organizations, are organizations, or corporate entities, that areformed for the purpose of fulfilling a mission to improve the common good of society rather

than to acquire and distribute profits. . Nonprofit organizations exist in some form in every

country in the world (commonly called nongovernmental organizations, or NGOs). Nonprofit

organizations provide a vehicle for people to do things that they cannot do apart, in which

they are engaged in communities.


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B) Features of Non-Profit Organisation:

Passion forMission

Atmosphere of"Scarcity"

Bias towardInformality,

Participation andConsensus

Dual BottomLines: Missionand Financial

ProgramOutcomes are

Difficult to

Assess

Governing Boardhas both

Oversight andSupporting Roles

Individualshave MixedSkill Levels

Participationof Volunteers


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B) Features of Non-Profit Organisation:

The basic features of Not-for-Profit Organisation are:

5) ProgramOutcomes are Difficult to Assess:

Most nonprofit organizations have limited program evaluation capacity. This is partially

caused by the absence of standardized program outcomes in most fields. In child care for

example, standards for adult-child ratios exist, but little is standardized in terms of the quality

of care delivered.

6) Governing Board has both Oversight and Supporting Roles:

The governing board of a nonprofit has dual roles: it is responsible for ensuring that thepublic interest is served by the organization, and--unlike private sector boards of directors or

government boards and commissions--is expected to help the organization be successful. The

first role is analogous to protecting the interest of stockholders or voters.

7) Individuals have Mixed Skill Levels:

As a function of passion for the mission, limited financial resources, and a shallow pool of

candidates, nonprofit organizations often hire managers with limited management trainingand program staff with little program experience.

8) Participation of Volunteers:

Many nonprofit organizations rely on the active participation of volunteers. Members of the

Board of Directors are normally not paid for their work, and individuals contribute

considerable time and effort in delivering services and providing administrative support. The

contribution that volunteers make to the nonprofit sector is significant; indeed withoutvolunteerism many needed social services would not be available to the public.


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C) Performance Evaluation Parameter for Non Profit Organisation:

b) Non-Financial Performance Measures:

Many not-forprofit organizations have been developing new performance measurement

models and performance measures to track their non-financial performance. This reflects

organizational attempts to be more responsive to the need to measure performance against

the strategy and social- and/or member- focused mission of the organization. This not-for-

profit organization uses various performance metrics to measure success and guide strategy

in pursuit of financial excellence. These performance measures are then complemented by a

set of non-financial performance measures that attempt to capture the organizationssuccess in improving its clientseconomic, social, and spiritual life. To measure whether the

strategy is working, the Opportunity International performance measurement system

contains:

1) Indicators of economic performance, which measure the impact that micro lending has

on clients;

2) Indicators of social performance, which help understand whether the poor are betteroff in more fundamental ways after they became clients and

3) Indicators of spiritual dimension, which is at the core of the organization's mission.

The chosen metrics reveal that Opportunity International tries to monitor its success all the

way up to its social impacts.


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c) Other Performance Measures :

Evidently researchers have identified that there are reasons for implementing performance

measurement even in nonprofits; the question now is what to measure? Performance

indicators are inputs, outputs, throughputs, outcomes and impact. These indicators derive

from the private sector but are applicable and used by nonprofits as well.

1) Inputs:

Inputs are defined as everything that is needed to carry out a mission or a certain project,

such as staff, volunteers, physical capital, material, income etc. It is of great interest fornonprofits to optimize all inputs.

2) Output:

Output is defined as the quantity of work performed or delivered services. Examples of

output measures are number of people attending workshops or training classes and numbers

of shelters provided during a disaster.

3) Throughputs :Throughputs include both efficiency and effectiveness measures and are linked to the

organizations activities. The reason for measuring different activities and processes within

the organization is to make it possible to evaluate organizational capacity.


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c) Other Performance Measures :

4) Outcomes:

Outcomes are very closely related to the organizationsmission. Measuring outcomes and

evaluating effectiveness make it possible to see to what degree the organization achieve its

mission and goals. There are numerous ways of measuring outcomes, for example measuring

participant satisfaction or changing attitudes and behavior among participants. As an

alternative to measure outcomes several researchers suggest measuring impact on mission.

5) Impact:Impact is defined as all, even unintended, changes that are the result of the organizations

activities. The measured impact can be long-term or short-term, as well as positive or

negative. Measuring impact on mission is difficult. As one anonymous nonprofit manager

expressed; Measuring mission success is like the Holy Grail for nonprofit much sought

after, but never found.


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D) Fund Accounting:

Tracking externally restricted contributions and internally restricted net assets is an

important task for management. A common method of doing so is the use of fund

accounting.

a) Meaning:

Fund accounting is based on the formal creation of individual funds (i.e., pots of assets

segregated for accounting purposes). A not-for-profit organization may formally establish a

number of funds, reflecting the variety of restrictions placed on them, either externally or

internally. Fund accounting groups together transactions and accounts related to similarlyrestricted activities.


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D) Fund Accounting:

b) Statement of Operations and Fund Balances:

For reporting purposes, particularly external reporting, these many different funds are often

combined into a small number of similar funds, typically reflecting endowments (where the

capital cannot be spent at all, but the income derived from it can be used), restricted funds

(which can be spent, but only on certain activities), and unrestricted funds (which the

organization may use for any purpose). Sometimes, an additional distinction is made

between externally-restricted funds (i.e., by donors) and internally-restricted funds (i.e., by

the board). The Statement of Operations and Fund Balances shows, for each category offund, the revenues, the expenditures, the excess (or deficiency) of revenues over

expenditures, and the resultant change in the fund balance. In equation form, the year-end

fund balance is calculated this way:

Opening Fund Balance + Excess of Revenues over Expenditures = Closing Fund Balance

For each of the selected fund categories, the Statement of Financial Position shows the

assets, the liabilities and the fund balance. In equation form:Fund Balance = AssetsLiabilities

There can be transfers from unrestricted funds to internally restricted funds; these would be

shown by a reduction in the net fund balance of the former and an equal addition in the

latter. Any transfers between funds usually require the approval of the board.


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D) Fund Accounting:

c) The Choice of Accounting Method for Recording Contributions under Fund Accounting:

A not-for-profit organization that is not using fund accounting is obliged to use the Deferral

Method of accounting for contributions, as was shown in the main body of this Guide. On

that basis, contributions for operations received in the current year that are not used in the

current year are reported as deferred contributions. Smaller organizations that do not

receive restricted contributions or receive infrequent and small contributions may find this

method less complex, as it does not involve fund accounting.

However, once an NPO has opted for fund accounting, it can choose between the two

methods of accounting for contributions for operations:

1) Deferral Method :

It can use the Deferral Method of matching revenues with expenditures in the period in

which those expenditures are incurred for all its funds, with unused contributions in each

fund showing as deferred contributions on the Statement of Financial Position. The main

body of the Guide and Appendix 1 used the Deferral Method.2) Restricted Fund Method :

It can use the Restricted Fund Method of accounting, which takes a restricted contribution

to a fund into revenue immediately in the year in which it is recorded, thereby

immediately increasing the net assets of that fund. When there are expenditures from the

fund, the net asset balance is reduced. When using the Restricted Fund Method with fund

accounting, the organisation must have an unrestricted fund usually called an OperatingFund (or General Fund) which is accounted for using the Deferral Method.


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D) Fund Accounting:

d) Sample Statements Using Fund Accounting:

Most NPOs that choose fund accounting use the Restricted Fund Method of accounting for

restricted contributions. Accordingly, the following sample statements are presented in that

way. Under fund accounting, as the net assets are shown as fund balances included on the

Statement of Operations, there are only three financial statements:

1) Statement of Financial Position;

2) Statement of Operations and Changes in Fund Balances; and

3) Statement of Cash Flows.

1) Operating Fund :

An Operating Fund (a fund which holds the accumulated operating surpluses on an

unrestricted basis, available for the NPOs future use, and holds internally restricted funds, in

this example for special projects, and holds restricted amounts for which there is no

applicable restricted fund);

2) Capital Asset Fund :A Capital Asset Fund (an externally restricted fund related to capital assets); and

3) Endowment Fund :

An Endowment Fund (an externally restricted fund reflecting endowment contributions from

donors).

The three sample statements that follow are based on the same financial information already

presented for the NPO used for illustrative purposes.


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D) Fund Accounting:

f) Guidelines for the Statement of Operations and Fund Balances:

1) Deferred contributions appear only in the Operating Fund, as the accounting treatment in

that fund is based on the Deferral Method whereas the other funds use the Restricted

Fund Method which does not defer contributions.

2) The organization has decided to create a Capital Asset Fund. Restricted contributions for

capital purposes received during the year are included as revenue in the Capital Asset

Fund, as the organization is utilizing the Restricted Fund Method.

3) Total revenues across all funds are higher than the total revenues reported previously,

due to recognizing contributions, both for capital and for endowment, as revenues in the

cur-rent period under the Restricted Fund Method, instead of deferring the contributions

as had been done previously under the Deferral Method.

4) The total expenditure figure across all funds is identical to the amount reported

previously on the Statement of Operations.5) As total revenues are higher and total expenditures are the same, the total excess of

revenues over expenditures for the organization is higher than previously reported.


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E) Governance of Non Profit Organisations:

c) The Core Responsibilities of the Board:

Much has been written on the core responsibilities of the nonprofit board, and no one list is

universally applicable to all nonprofit organizations. The following summary reflects the list of

the board responsibilities articulated: It is the boards responsibility to:

1) Determine and articulate the organization's mission, vision, and core values.

2) Recruit and select the organization's chief executive.

3) Support and assess the performance of the organization's chief executive.

4) Ensure that the organization engages in planning for its future.

5) Determine the set of programs that the organization will deliver to implement its

strategies and accomplish its goals, and to monitor the performance of these programs

to assess their value.

6) Ensure that the organization has financial and other resources adequate to implement

its plans.

7) Ensure the effective management and use of the organization's financial and otherresources.

8) Enhance the organization's credibility and public image.

9) Ensure organizational integrity and accountability.

10) Assess and develop the board's own effectiveness.


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F) Product Pricing for Non Profit Organisations:

Too often nonprofit organisations have thought of marketing as only promotion. However to

develop marketing strategy means also considering the pricing of the product. Of course,

pricing is complicated for non-profit organisations because they also rely on funding from

additional sources other than from customers.

a) Different Pricing Bases:

A non-profit organisation may be planning to launch a new service and would like to set the

price on a basis other than 'what the market will bear'. Or it may be already in the market

and wondering if they are under pricing or over pricing their product. In either case it is

important to have an appreciation for the various pricing bases that can be considered:

Full Cost

Pricing

Full Cost

Plus as Basis

Market-

basedPricing

Inducement

Pricing


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F) Product Pricing for Non Profit Organisations:

a) Different Pricing Bases:

1) Full Cost Pricing:

Many nom-profit organisations use full cost as a basis of setting the norm for prices. The

rationale is fairly simple. Non-profit organization is not set-up to make a profit or a surplus.

Therefore, there is no reason to price the products/services at more than full cost.

2) Full Cost Plus as Basis:

Many mm-profit organisations find themselves compelled to set prices to include an

element of profit or surplus over full cost. The surplus is what adds to the equity or funding.

Such addition to the equity enables the organisation to replace assets and/or provide for

additional working capital.

3) Market-based Pricing:

Medical and educational services are examples of areas where market price may be a

consideration, but not a determining factor. Many of them will have a semi-monopolistic

position due to location, specialization in product offered, quality, etc., optimum pricing callsfor very careful examination of all these factors.

4) Inducement Pricing:

There could be situations in which a non-profit organisation purposely sets a price in order

`to induce the other suppliers to reduce their prices. In the case of the essential drug

project, the promoters were clear from the beginning that their intention was not to force

market prices down, but only to supply to select hospitals and medical centers for passing onthe benefit to the poor patients.


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G) Strategic Planning for Non Profit Organisations:

Most of us know that planning is a way of looking toward the future and deciding what the

organization will do in the future. Strategic planning involves choosing the highest priority

achievements that an organization is prepared to commit to over a period of three to five

years. The process of planning emphasizes conscious, thoughtful choices. If an organization is

in crisis or if the Board and/or management are spending most of their time reacting to tense

or uncertain present circumstances then the organization is not in a good place to begin the

planning process.

a) Meaning:

Strategic planning is a disciplined effort to produce decisions and actions that guide and

shape what the organization is, what it does, and why it does it. Both strategic planning and

long range planning cover several years. However, strategic planning requires the

organization to examine what it is and the environment in which it is working. Strategic

planning also helps the organization to focus its attention on the crucial issues and

challenges. It, therefore, helps the organization's leaders decide what to do about thoseissues and challenges. In short, as a result of a strategic planning process, an organization will

have a clearer idea of what it is, what it does, and what challenges it faces. If it follows the

plan, it will also enjoy enhanced performance and responsiveness to its environment.


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b) ImportanceofStrategic Planning in Non Profit Organisations:

It Guides Future Resource Developmentand Deployment

Builds Commitment

Helps to Set Priorities

Bring Clarity and Agreement on Missionand Vision

Help Organizations Prepare for the Future

Improve the Decision-Making Processes:

Promote Effective Stewardship:

Align the Board and Staff

Provide an Opportunity to Recommit to the

Cause

Identify Existing Strengths in the Organization

Help Organizations Anticipate and Manage

Change

Provide an Opportunity to Analyze theOrganizations Systems and Processes

Reinforce the Need to Commit to Continuous

Improvement

Importance of

Strategic

Planning in

Non Profit

Organisations


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4) Bring Clarity and Agreement on Mission and Vision:

Agreement on mission (the organizations purpose) is paramount. Without this agreement,

an organization cannot be effective. The strategic planning process can provide an invaluable

opportunity for dialogue and consensus among staff, board, and volunteers.

5) Help Organizations Prepare for the Future:

A strategic plan outlines the steps to achieve a desired future for an organization. It is

comforting for board, staff, and volunteers to have a roadmap to follow. The planning process

prioritizes the work to be done. Strategic planning facilitates making short-term decisions

based on long-term implications.

6) Help Organizations Anticipate and Manage Change:

Planning allows an organization to anticipate change and prepare for it. Planning also helps

an organization deal with dramatic changes in its environment. In fact, by anticipating and

planning for change, instead of just reacting to it, an organization can determine how to dealwith the change.

7) Improve the Decision-Making Processes:

With a strategic plan in place, day-to-day decision making and problem solving will be

directly related to long-range and short-term goals. Planning reduces stress by making

decisions easier.


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8) Promote Effective Stewardship:

Practicing good stewardship means being accountable to others. In the case of charitable

organizations, clients and funders of a nonprofit organization assume they will pay for

services or donate money, respectively, to the organization, which will re-invest the

revenues to address the social need.

9) Align the Board and Staff:

When there is shared purpose and direction (wereall in the same boat,)there is the basis

of a high-performance team. When individuals are focused on the same goal or outcome,

they feel a certain amount of synergy and often set aside differences, help each other, and

become invested in a common purpose.

10 ) Provide an Opportunity to Recommit to the Cause:

Focus on the future work of the organization can bring the board, staff, and other

stakeholders into alignment around the mission group interaction around a cause oftenfuels individual commitment.

11) Identify Existing Strengths in the Organization:

Constituent feedback conducted in conjunction with the plan indicates how well the

organization is meeting expectations. It can also show where the efforts are paying off and

what to celebrate.


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12) Provide an Opportunity to Analyze the OrganizationsSystems and Processes:

It is valuable to conduct a critical review of the organizations processes and how it

operates. A review provides an opportunity to analyze different systems and processes and

make changes to improve them. Pay particular attention to communication channels and

cross-functional operations.

13) Reinforce the Need to Commit to Continuous Improvement:

Planning allows an organization to anticipate and prepare for change. An organization

without an effective strategic plan may react in a hurried, scattered way to unanticipated

circumstances.

A well wrought strategic plan helps to set priorities and acquire and allocate the resources

needed to achieve goals.


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H) Budget Preparation for Non Profit Organisations:

b) Role of Budgeting for Nonprofit Organisations:

4) Helps to Choose most efficient Measures for Raising Money :

The budget plays a key role, forcing the organization to prioritize its activities so as to

determine those that are most critical for fulfilling its mission. In addition to deciding on how

to spend their revenue, a budget provides the documentation that helps nonprofits choose

the most efficient measures for raising money.

5) It Gives Structure and Substance to the OrganizationsPlans. :

A budget gives structure and substance to the organizations plans. The budget makes a

strong statement about the groups intentions as it indicates what the nonprofit expects to

tackle in the coming year, or years. As importantly, it provides a way to monitor progress.

When an item is accounted for in the budget, it becomes a tangible representation of the

organizationsgoals and an acknowledgment that resources will be expended to support it. It

demonstrates a proactive, thoughtful, deliberate approach to critical decision-making instead

of a less formalized process that is forced to react to every new idea without the benefit of

having planned for the circumstance.


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c) Guidelines to Prepare a Budget:

Realistic

Consistent

Measurable

The Budget should not be Written in Isolation

Budget should be Flexible

Highly Educated Assertions are Needed:

Budgets must be Timely and Accurate:

Budgets must be provided in Advance

Common Sense and Good Judgment are Essential

Historical Data can be obtained from the Books and Records.


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1) Realistic :

If a budget is to serve as a guide for fundraising efforts and program activities in the comingyear, it must be well-reasoned and reflect current conditions. Unsubstantiated revenue

projections and wild guess cost estimates will render a budget ineffective as a

management tool.

2) Consistent :

A budget must be consistent with short- and long-term strategic plans, and remain in line

with the organizationsmission.

3) Measurable:

The basis on which the budget is created should be the same basis on which the books are

maintained.

4) The Budget should not be Written in Isolation :

The budget should not be written in isolation, but rather, it will be more effective if taken

into consideration along with other planning tools and management information.


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5) Budget should be Flexible:

Nothing could be further from the truth. The budget is a constantly changing document, andone that must be referred to, and reflected on, regularly. It is a good approach to be as

flexible as possible. Rather than abandon a sound budget plan when an unforeseen situation

arises, the organization should instead be able to handle the change within the structure of

the budget

6) Highly Educated Assertions are Needed:

By going through the process of writing a budget, the organization will be faced with making

some tough decisions.

7) Budgets must be Timely and Accurate:

They are prepared with a lot of thought, time and effort and the approved budget must then

be reviewed throughout the year. The organization as a whole must agree to the budget cycle

and the priorities and goals of the organization as reflected in financial terms in the annual

budget.

8) Budgets must be provided in Advance:

The approved budget forms the basis for action. The draft budget should be provided to the

board members in advance of the board meeting so they have ample time to review. Once

the budget has been approved, it is usually passed over to the senior staff person for

management and implementation.


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9) Common Sense and Good Judgment are Essential :

Common sense and good judgment are essential to the preparation of a well thought outbudget. Always keep good notes on facts and assumptions to make. This information will be

invaluable when prepare subsequent budgets. Be familiar with the prior years data and

events that occurred during the year.

10) Historical Data can be obtained from the Books and Records. :

Historical data can be obtained from the books and records. However, if managers are using

accounting software make sure that all transactions have been recorded and that the user of

the software understands accounting practices and terminology. Budgets have been

prepared based on good data only to find out later that someones interpretation was

incorrect.


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4.3 Social Audit

C) Principlesof Social Audit :

Principlesof Social

Audit

MultiPerspective /

Polyvocal

Comprehensive

Participatory

MultidirectionalRegular

Comparative

Verification

Disclosure

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4.3 Social Audit


The foremost principle of Social Audit is to achieve continuously improved performances

Relation to the chosen social objectives. Eight specific key principles have been identified

from Social Auditing practices around the world. They are:1) MultiPerspective / Polyvocal:

Aims to reflect the views (voices) of all those people (stakeholders) involved with or

affected by the organisation/department/programme.

2) Comprehensive:

Aims to (eventually) report on all aspects of the organisations work and performance.

3) Participatory:

Encourages participation of stakeholders and sharing of their value

4) Multidirectional:

Stakeholders share and give feedback on multiple aspects.

5) Regular:

Aims to produce social accounts on a regular basis so that the concept and the practice

become embedded in the culture of the organisation covering all the activities.

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4.3 Social Audit


6) Comparative:

Provides a means, whereby, the organisation can compare its own performance each

year and against appropriate external norms or benchmarks; and provide forcomparisons with organisations doing similar work and reporting in similar fashion.

7) Verification.

It ensures that the social accounts are audited by a suitably experienced person or

agency with no vested interest in the organisation.

8) Disclosure:

Ensures that the audited accounts are disclosed to stakeholders and the wider

community in the interests of accountability and transparency.

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4.3 Social Audit

D) Advantages of Social Audit :

Method ofMeasurement

ImpartialAppraisal

Improvementin Future

SocialStandards

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4.3 Social Audit

D) Advantages of Social Audit :

1) Method of Measurement:

Social audit provides a recognised method for bringing social point of view to the attention of

management.2) Impartial Appraisal:

As the appraisal of the individual corporations would be made by an impartial outside

agency, the assessment is reliable.

3) Improvement in Future:

The report of the social audit is made available to the company. This would be useful for the

organisations in the future. This in turn benefits the society.

4) Social Standards:

Social audit creates recognised social standards. These standards are useful for the

companies in the society. Companies can activate themselves on the basis of these

standards.

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4.3 Social Audit

E) Difficulties in Social Audit :

Difficultiesin Social

Audit

Lack ofUniversal

Scale

Collection ofData

Complicationsin Conversion

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4.3 Social Audit

Difficulties in Social Audit :

1) Lack of Universal Scale:

The major difficulty is lack of universal scale for measuring social performance. Every

business feels that they have done sufficient. Nobody knows the depth to which the socialactions need to be embraced e.g. cost alone cannot be an adequate measure. It does not

indicate the results of social involvement.

2) Collection of Data:

Data collection and their presentation is not possible in such a way that it will reflect

accurately the social involvement of business.

3) Complications in Conversion:

Converting social action into quantitative terms complicates the matter more.

Thus, Social Audit is publication of social responsibilities performed by the company. In fact if

a company is ethical and wants to do something for the society, it will not wait for a perfect

model of social audit.

Documents

Performance Evaluation Parameters for Projects and Non-Profits