Charities financial position
September 23, 2008 9:36am CST
Hello mylotting friends!!!!I need your opinions. I am conducting a debate called "Are charities financially effective?" I am on the side of those against the fact that charities are finacially effective. However I need to raise some points to sustain my argument. Would you help me please. By charities I mine those organisations that don't exist for a prodfit making purpose.
23 Sep 08
Hmm, well, it really depends on how you define financially effective. One of the major factors that most stakeholders consider in evaluating the performance and financial position of such not-for-profit organizations (NPOs) is how well such organizations manage their funds, both restricted and unrestricted. Such funds are the equivalent of "Capital", "Owner's Equity", or "Capital Stock" in entities established for pecuniary purposes. As for financial performance, it is true that most NPOs post deficiencies of revenue over expenses and those that do post an excess of revenue over expenses (i.e. net income) don't present as much as for-profit entities. This is because, in order to qualify for classification as a not-for-profit organization (and, as such, avail of certain tax exemptions), in our country, for example, it is required that the major part of the revenue raised by such NPOs should be used in promoting the primary purposes for which they have been established (e.g. doing charity projects for charitable institutions). As such, it isn't really surprising that "net losses" or low "net incomes" are posted by NPOs. As long as they use such revenues in the implementation of projects to promote their primary goals, then, their stakeholders (e.g. donors, members, etc.) will be satisfied. In conclusion, I'd say that it is not safe to generalize and say that "charities are financially effective" or "charities are not financially ineffective". I guess you could only definitively say that if you choose a particular charity and then, based on how they manage their funds and how they spend the revenue they earn, you can determine if they are "financially effective" or not. =)