PES UNIVERSITY

DEPARTMENT OF MBA

Analysis of Financial performance of reputed NGOs

Authors: Prof. G V M Sharma & Prof. K V Sridhar

Concept Paper
Introduction:

A non-governmental organization (NGO) is the term commonly

used for an organization that is neither a part of a government nor a
conventional for profit business. Usually set up by ordinary citizens, NGOs
may be funded by governments, foundations, businesses, or private
persons. Some avoid formal funding altogether and are run primarily by
volunteers. NGOs are highly diverse groups of organizations engaged in a
wide range of activities, and take different forms in different parts of the
world. Some may have charitable status, while others may be registered
for tax exemption based on recognition of social purposes. NGOs are
difficult to define, and the term 'NGO' is rarely used consistently.

One characteristic these diverse organizations share is that their

non-profit status means they are not hindered by short-term financial
objectives. Accordingly, they are able to devote themselves to issues
which occur across longer time horizons, such as climate change, malaria
prevention or a global ban on landmines and rehabilitation of certain
aspects in the society.

NGO/GRO (governmental related organizations) types can be understood

by their orientation and level of operation.

There are seven principles* of financial management for NGOs. They

provide a high-level guide for trustees and senior managers, to help them
make sure that their organisation is using funds effectively and that staff
are working appropriately. They also provide a useful checklist when
deciding whether to fund other NGOs. These seven principles are
Stewardship, Accountability, Transparency, Integrity, Viability, Accounting
Standards and Consistency
* Darith Khun, ACCA (2011), NGO in Financial Management, Professional
Accountants, Strengthening the Capacity of Professional Accountants

Purpose

Terry Lewis (2012) in his hand book **A Financial Management Essentials-
Handbook for NGOs summarises the impact of non-implementing the
financial Management practices in NGOs. Non-profit decision makers
seeking to understand their organizations financial situation usually start
by reviewing the financial reports. Understanding the financial information
is the building block of any financial discussion. Beyond understanding the
reports, much can be learned from analysis of the information and
interpretation of what it explains. The basic analysis includes comparing
financial reports to a benchmark such as the budget or the financial report
from the previous year.

For a more technical financial analysis, ratios can be used to deepen

understanding and interpretation. Financial ratios are an established tool
for businesses and non-profits. While there are dozens of ratios that can
be calculated, most non-profits can use a handful of them to learn more
about their financial condition. This report provides a description and
calculation of relevant ratios suitable to NGOs. However Individual non-
profits must decide for themselves which calculations are valuable to their
NGOs and in that particular circumstance.

**Terry Lewis (2012), A Financial Management Essentials- Handbook for

NGOs, Revised August 2012, Mango (Management Accounting for Non-
governmental Organisations) publication. Pages: 119

Project Description
The NGO Financial performance describes whether the NGO is utilising the
funds effectively? Whether the relevant ratios are up to the mark?, Will
the decision maker of an NGO will get the proper financial information for
further plan of action etc.,

Goals and Objectives/Research Questions

The objectives of the present project study are set from the view point of
both NGO Management as well as Government and Society. They are,

1. To understand the current Financial status of NGOs and to assess

whether the funds collected by the NGOs are utilized effectively
and reach to the beneficiaries.
2. To understand the involvement of Corporate and Non-corporate
Donors to the NGOs and frequency of funds rising.
3. To assess the potentiality of NGOs to utilizes their services for the
Government Projects
 4. To understand the financial strengths and weaknesses of the NGOs
for its recognition

The present study will be very much useful to the decision makers.

Methodology and Timelines

The present study identifies 4 reputed NGOs such as Akshaya Pathra,
Naandhi Foundation, CRY and Helpage India for the purpose of study. The
last 5 years financial data are considered for the purpose of assessing
financial performance. The secondary data research method has been
adopted for the purpose of project study and the relevant data are
collecting through the Audited financial reports from the respective NGOs
websites. It is also planned to collect Experts opinion through the
interaction with the NGOs officials and staff.
Tools for data analysis: Certain Ratios relevant to NGOs are indentified
to analyse the financial status. Such as, Reliance Ratio, Self sufficiency
Ratio, Personnel cost to total income ratio etc., . Descriptive statistics are
also used for the purpose of data analysis which includes Mean, Standard
Deviation, correlation, Trend analysis etc.,
Time schedule:
Month Week Proposed Plan
May 3&4 Research proposal :Title finalization and submission of
synopsis
June 1,2,3&4 Review of literature on finalized topic
July 1,2 &3 Indentifying the research gap Preparation of Research
design,
July 4 Collection of both Primary as well as Secondary data-
Aug 1,2,3,4 Visits the indentified NGOs, Meet the experts
Sept 12,3,4
Oct 1,2,3,4 Data analysis
Nov 1,2,3,4
Writing of Article
Dec 1,2 Fine tuning the article
Dec 3,4 Finalization and forwarding for publication

Benefits/Anticipated Outcomes
Basically Decision makers of NGOs and Government and the society in
general are the beneficiaries of this project study. The study gives the real
financial status, in turn the decision makers and the Government can
change the strategy for the further development of NGOs.
Limitations:
1. The present study considers only 4 NGOs for the purpose of analysis
2. Only last 5 years financial statements are collected for the data
analysis
 3. Out of large number of Ratios, only relevant ratios fit in to NGOs are
applied
Contact Information - Name, Contact info, e-mail, telephone, website
Prof GVM Sharma, Associate Professor, gvmsharma@pes.edu,
9900128837
Prof Sridhar, Assistant professor, cmasridharkv@gmail.com, 9945185796