| Summary: |
This chapter discusses how the value of economic efficiency,
which is typically associated with private business
accounting and operations, is increasingly being used to
measure private nonprofit accounting and operations financial
performance. Since the mid-1990s, private nonprofit
organizations under the Financial Standards
Accounting Board (FASB) have begun to follow the full
cost accrual and consolidation model that is associated with
measuring economic efficiency. This change suggests that
the public choice philosophy (business efficiency in
government and nonprofits) has cast its shadow over the
traditional progressive philosophy (social mission) that
historically was the model of operations in private nonprofit
organizations. Specifically, the use of full costing for
every project, taking a hard look at projects that are not
‘‘breaking even,’’ obtaining more outputs for less input,
and putting extra emphasis on ‘‘earned income’’ in the
form of donations are now all associated with the new
nonprofit environment. Whether the pendulum will swing
back to having social mission instead of economic
efficiency being the primary criteria by which private
nonprofits are judged is a critical question given the
importance of the work that nonprofits undertake. With
issues like environmental degradation, poverty, and international
unrest in the forefront of the news, more pressure
is placed on private nonprofit organizations to address
these issues. How should the increasingly important private
nonprofit sector account, measure, and report success?
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