Good governance to strengthen the financial stability of non-profit social service providers
The financial stability of non-profit organisations providing social services is important for all stakeholders: Organisations naturally have an interest in their continued existence. Clients need reliable and stable services. Staff need secure jobs. Funders, especially government funders, demand reliable service delivery. At the same time, public funding is limited by the principles of economy, efficiency and expediency. These requirements are also scrutinised by the Courts of Audit. The growing need for funding of social services increases the pressure on government funding agencies in this respect.
This tension raises questions about the appropriate relationship between funders and social service providers. The funder must not jeopardise the financial stability of the service provider, but should avoid over-funding. The search for an answer is complicated by the fact that there is no consensus on appropriate metrics to measure 'financial stability'. This is also due to the fact that ratios must always be seen in the context of the overall conditions of an organisation, and that financial stability can be achieved in different ways (e.g. as an individual organisation or as a corporation, with or without real estate assets).
Moreover, financial stability cannot simply be demanded from the outside, but is essentially ensured by the NPOs themselves, more or less in cooperation with funders. This brings the instruments and structures of organisational and public governance into focus, as well as the question of which forms of governance are conducive to financial stability. For the funding agency, the question of what organisational governance requirements it can impose on its contractual partners is just as important as the question of the measurability of financial stability. The question of which forms of public governance (i.e. which forms of control and communication in the context of the government funding relationship) are conducive to the financial stability of the contracting parties also provides room for manoeuvre. However, there is a lack of reliable knowledge on how the financial stability of non-profit organisations can be promoted through the use of appropriate governance structures and instruments.
This research project therefore aims to answer the following two questions
1. How can the financial stability of non-profit social service providers be measured, and what target values can be recommended to these organisations and their funders?
The aim is to identify a focused but meaningful set of metrics that can adequately reflect the 'financial stability' of nonprofit social service providers, including configurations and ranges of desirable values. In particular, we will explore how external accounting-based metrics relate to more complex indicators of financial stability such as organisational slack.
2. How are financial stability and governance related?
The aim is to identify governance structures and instruments that are conducive to the financial stability of non-profit social service providers. Based on this, recommendations will be made to these organisations and their funders to further improve their governance structures.
The research project was initiated by the NPO research team at WU. It is conducted in cooperation with the FSW (Fonds Soziales Wien). The role of the FSW is to provide administrative data, subject to the consent of the NPOs. Upon request, NPOs are involved more deeply in the project in the form of qualitative interviews and a participation event. In addition, a quantitative survey of NPOs will be conducted. The results of the study will be published in an open access format, respecting the privacy of the individual participating and non-participating organizations. Only aggregated and anonymized results will be published.