Financial Management in Non-Profit Organisations: An Exploratory Study

Abstract

The recent financial crisis resulted in a sharp decline in donor funding that caused severe financial difficulties for many non-profit organisations (NPO). This study examined whether or not NPOs employed sound financial management practices and whether the use of financial management practices has affected non-profit organisations’ ability to survive the difficult economic climate. A survey was conducted of a sample of NPOs located in Pietermaritzburg. The study found that the majority of NPOs surveyed utilised recommended financial management principles but that there was no statistical relationship between their use and the experience of financial distress. It was found that having sufficient reserves and the existence of a separate finance committee were significant aspects related to the absence of financial distress. Further, evidence was found to suggest that the size and age of the NPO, as well as the experience of its financial manager, were significant factors in whether or not financial distress was experienced.

DOI: 10.5901/mjss.2014.v5n15p55