Performance Evaluation Parameters For Projects and Non-Profits

4.
1 Performance Evaluation Parameter for Projects

4.2 Performance Evaluation Parameter for Non Profits
4.3 Social Audit
Introduction
Performance evaluation provides a solid foundation for predicting outcomes of
schedules in the early stages, simplifies spotting cost and schedule problems for
projects further along, and helps managers establish benchmarks and long-term
goals.
In short, as long as measuring project performance does not take too much time
away from core project work, the information gained will contribute to success.
Some of the most appropriate financial and non financial performance measures
that not-for-profit organizations use for measuring and evaluating financial
performance are fund accounting, governance, product pricing, strategic planning
and budgeting etc.
4.1 Performance Evaluation of Projects:

Evaluation and control are part of every project managers job. Every project manager has a
vested interest in optimizing performance. Tracking project performance over time is a
crucial part of building a project that weathers changing objectives without stretching time,
budget, and scope. Each organization must take the time to establish what is most
important to evaluate. Control by "wandering around" and/or involvement" can overcome
most problems in small projects. But large projects need some form of formal control.
Control holds people accountable, prevents small problems from mushrooming into large
problems, and keeps focus. Except for accounting controls, project control is not performed
well in most organizations.

A) Parameters for Performance Evaluation of Project:
Took Longer than Planned
Schedule Overrun
Started Ahead
Accelerated
Start / Finish Discrepancy
Start / Finish Variance

Start Compliance
Finish Compliance

A ) Parameters for Performance Evaluation of Project:
1) Took Longer than Planned:
An interesting check that not many project managers focus on is the number of activities that
took longer than planned. An activity may start, or finish as planned, but due to a late start or
finish still have a longer duration than planned. This is useful insight for future planning.
2) Schedule Overrun:
Identifying which activities are delayed, and calculating the number of days of total delay on
each activity is useful in identifying poor planning during early execution. If caught soon
enough, the metric can help to identify how much acceleration is needed to finish on time, or
provide insight into exactly how delayed a project finish will be.
3) Started Ahead:
Evaluating performance should look at what is going wrong, but also note areas that are going
better than planned. Identifying activities that have started ahead of schedule (or finished
ahead of schedule) is another useful way to track performance and better forecast.
4) Accelerated:
To find accelerated activities, look for any activity that started after its planned start date, but
finished before or on the planned finish date. This measure indicates improving execution
performance and also helps to pinpoint opportunities for future acceleration.

A) Parameters for Performance Evaluation of Project:
5) Start / Finish Discrepancy:
Gain insight into probability of finishing on schedule by calculating the variance between total
days started early and total days started late. The smaller the number the better chance one
has of finishing as planned.
6) Start / Finish Variance:
This calculation is similar to discrepancy but on an activity level. Look at the number of days
variance between the planned start or finish date and the actual start date or finish date of
activities. This will give a good indication of poorly performing areas of the schedule.
7) Start Compliance:
Looking at activity start compliance, a measure of how many activities started on time relative
to a given baseline, helps to measures the knock-on effect of previous delays. If start
compliance is low, then few activities are able to start on time due to their predecessors
causing delay.
8) Finish Compliance:
Conversely, finish compliance, a measure of how many activities finished on time relative to a
given baseline, gives an indication of how well the project is performing. Plotting this across
time, to look at finish compliance on a per period basis, provides insight into overall project
performance and helps in identify performance trends.

B) Project Control Process:
Control is the process of comparing actual performance against ph to identify deviations,
evaluate possible alternative courses of actions, and take appropriate corrective action. The
project control steps for measuring and evaluating project performance are presented
below.
Step 1: Setting Base Line Plan

Step 2: Measuring Progress
and Performance
Step 3: Comparing Plan

against Actual
Step 4: Taking Action

Step 1: Setting Base Line Plan:
The baseline plan provides us with the elements for measuring performance. The
baseline is derived from the cost and duration information found in the work breakdown
structure (WBS) database and time-sequence data from the network and resource
scheduling decisions. From the WBS the project resource schedule is used to time-phase
all work, resources, and budgets into a baseline plan. The baseline process, while a key
to project control, is often misunderstood. A baseline is defined as the original plan for a
project, a work package, or an activity, plus or minus approved changes. A modifier
(Project Budget Estimate schedule baseline, performance measurement baseline) is
usually included. A baseline provides the "ruler" that a project can be evaluated with.
Baseline changes are significant events and should not be made without consideration
of their impact.
Step 2: Measuring Progress and Performance:
Time and budgets are quantitative measures of performance that readily fit into the
integrated information system. Qualitative measures such as meeting customer
technical specifications and product function are most frequently determined by on-site
inspection or actual use. This chapter is limited to quantitative measures of time and
budget. Measurement of time performance is relatively easy and obvious.

Step 3: Comparing Plan against Actual:
Because plans seldom materialize as expected, it becomes imperative to measure
deviations from plan to determine if action is necessary. Periodic monitoring and
measuring the status of the project allow for comparisons of actual versus expected
plans. It is crucial that the timing of status reports be frequent enough to allow for early
detection of variations from plan and early correction of causes. Usually status reports
should take place every one to four weeks to be useful and allow for proactive
correction.
Step 4: Taking Action:

If deviations from plans are significant, corrective action will be needed to bring the
project back in line with the original or revised plan. In some cases, conditions or scope
can change, which, in turn, will require a change in the in base line plan to recognize
new information.

C) Methods of Variance Analysis:
Control is one of the most neglected areas of project management. Unfortunately, it is not
uncommon to find resistance to control processes. In essence, those who minimize the
importance of control are passing up a great opportunity to be effective managers and,
perhaps, allow the organization to gain a competitive edge. Neglecting control in
organizations with multiple projects is even more serious. For effective control, the project
manager needs a single information system to collect data and report progress on cost,
schedule, and specifications. Generally the method for measuring accomplishments centers
on two key computations:
1) Comparing earned value with the expected schedule value.
2) Comparing earned value with the actual costs.
These comparisons can be made at the project level or down to the cost account level.
Project status can be determined for the latest period, all periods to date, and estimated to
the end of the project. Assessing the current status of a project using the earned value
cost/schedule system requires three data elementsplanned cost of the work scheduled
(PV), budgeted cost of the work completed (EV), and actual cost of the work completed (AC).
From these data the schedule variance (SV) and cost variance (CV) are computed each
reporting period. A positive variance indicates a desirable condition, while a negative
variance suggests problem; or changes that have taken place.

Fig : Cost and Schedule Graph

1) Scheduled Variance (Time Overruns):
A major goal of progress reporting is to catch any negative variances from plan as early as possible
to determine if corrective action is necessary. Fortunately, monitoring schedule performance is
relatively easy.
a) Meaning of Schedule Variance (SV) :
Schedule variance presents an overall assessment of all work packages in the project scheduled to
date. It is important to note schedule variance contains no critical path information. Schedule
variance measures progress in dollars rather than time limits. Therefore, it is unlikely that any
translation of dollars to time will yield accurate information telling if any milestone or critical path is
early, on time, or late (even if the project occurs exactly as planned).
b) Attributes of Schedule Variance:
The only accurate method for determining the true time progress of the project is to compare the
project network schedule against the actual network schedule to measure if the project is on time.
However, SV is very useful in assessing the direction all the work in the project is takingafter 20 or
more percent of the project has been completed. The project network schedule, derived from the
WBS/OBS, serves as the baseline to compare against actual performance. Attributes of Schedule
Control include:
i. Determining that the schedule has changed.
ii. Managing the actual changes when and as they occur.

1) Scheduled Variance (Time Overruns):
c) Different Aspects of Schedule Control:
i. Affected by any Number of Issues :
Schedule Control is one of the most difficult but important activities within project control.
The project schedule can be affected by any number of issues from resources to funding,
vendors, weather, and anything in between. The ability of a Project Manager to manage the
schedule of a project and deliver it on time is a high-visibility concern for project success
from a customer point of view.
ii. Come from a Variety of Sources :
Schedule issues, as stated previously, come from a variety of sources; however, there should
be a single, focused method for dealing with schedule changes. If a potential schedule
problem is discovered, the problem must be investigated and the cause uncovered as soon
as possible. Once the problem is discovered, a plan should be created for correcting the
problem in the shortest allowable time with the least impact. It is also advisable to bring
forward alternatives of varying costs.
iii. Managed at Project Planning Level :
Schedule Control is something that typically is managed at the project level by the Project
Manager; however, it is very important to make the customer aware that a schedule change
has occurred. Furthermore, the customer needs to be made aware of what is being done to
fix the issue and the impact it will have on the project's time line, performance and
deliverable.

2) Project Cost Variance (Cost Overrun):
Projects may fail to control cost, or go over budget, for many reasons. Often it is not a single
problem but a series of small problems that combined permit cost control to be sacrificed
and prevent the project from being completed successfully. Cost control contains the
following attributes:
1) Determine if the Project Budget Estimate has changed.
2) Manage the actual change and take corrective action.
3) Inform appropriate stakeholders of authorized changes
a) Meaning of Cost Variance:

Cost variance tells us if the work accomplished costs more or less than was planned at any
point over the life of the project. If labor and materials have not been separated, cost
variance should be reviewed carefully to isolate the cause to either labor or materials or to
both.

2) Project Cost Variance (Cost Overrun):
b) Steps to overcome Cost Variances:
i) Cost control is not simply a reporting process. It includes the searching out of the "why" for
both positive and negative variances between the scheduled and actual costs. It must be
thoroughly integrated with the other control processes. For example, inappropriate responses
to cost variances can cause quality or schedule problems or produce an unacceptable level of
risk later in the project.
ii) Consistent and Regular basis for Evaluation :
To be effective, all tools require the reporting of actual performance on a consistent and
regular basis for evaluation against project budget estimates. To prevent significant labor
overhead for the maintenance of cost information during a project, the source and methods
of reporting costs must be addressed in the initial phases of project planning and may be
addressed in the Project Budget Estimate.
4.2 Performance Evaluation of Non Profit Organisations

Many different terms and definitions have been used to describe organizations operating in
neither private sector nor public sector, sometimes referred to as the nonprofit sector or the
third sector. Some of the most frequently used are; voluntary organizations, nongovernmental
organizations (NGOs), civil society organizations, charitable organizations and nonprofit
organizations.
A) Meaning of Non-Profit Organisation:
Nonprofit organizations, also known as charitable organizations, non-governmental
organizations, or tax-exempt organizations, are organizations, or corporate entities, that are
formed for the purpose of fulfilling a mission to improve the common good of society rather
than to acquire and distribute profits. . Nonprofit organizations exist in some form in every
country in the world (commonly called nongovernmental organizations, or NGOs). Nonprofit
organizations provide a vehicle for people to do things that they cannot do apart, in which
they are engaged in communities.

B) Features of Non-Profit Organisation:
Passion for
Mission
Participation
of Volunteers
Atmosphere of
"Scarcity"
Bias toward
Informality,
Participation and
Consensus
Individuals
have Mixed
Skill Levels
Governing Board
has both
Oversight and
Supporting Roles
Dual Bottom
Lines: Mission
and Financial
Program
Outcomes are
Difficult to
Assess

The basic features of Not-for-Profit Organisation are:
1) Passion for Mission:
The passion for mission is a great source of strength for nonprofit organizations. The
institutionalized impulse to "change the world" has brought about much important
advancement in American society. As strength, the passion for mission taps incredible
creativity, energy and dedication for the work of an organization.
2) Atmosphere of "Scarcity":
There are factual and perceptual components to scarcity in nonprofits. Most nonprofit
leaders could do more work if they had more money, more access to decision making, more
talented board members, etc. They are often, in fact, "under-resourced".
3) Bias toward Informality, Participation and Consensus:
A sense of friendliness and welcoming atmosphere with little attention to hierarchy are often
described as attractive dimensions of nonprofit culture. Taken too far, informality can limit
the appropriate exercise of authority, over-participation can inhibit appropriate division of
labor and the tendency toward consensus can bog down decision making.
4) Dual Bottom Lines: Mission and Financial:
Tension between mission and financial results is fundamental for nonprofit organizations.
(One can debate to what extent this is unique. For-profit organizations have increasingly
focused on the importance of mission, relative to the priority of return on investment.

The basic features of Not-for-Profit Organisation are:
5) Program Outcomes are Difficult to Assess:
Most nonprofit organizations have limited program evaluation capacity. This is partially
caused by the absence of standardized program outcomes in most fields. In child care for
example, standards for adult-child ratios exist, but little is standardized in terms of the quality
of care delivered.
6) Governing Board has both Oversight and Supporting Roles:
The governing board of a nonprofit has dual roles: it is responsible for ensuring that the
public interest is served by the organization, and--unlike private sector boards of directors or
government boards and commissions--is expected to help the organization be successful. The
first role is analogous to protecting the interest of stockholders or voters.
7) Individuals have Mixed Skill Levels:
As a function of passion for the mission, limited financial resources, and a shallow pool of
candidates, nonprofit organizations often hire managers with limited management training
and program staff with little program experience.
8) Participation of Volunteers:
Many nonprofit organizations rely on the active participation of volunteers. Members of the
Board of Directors are normally not paid for their work, and individuals contribute
considerable time and effort in delivering services and providing administrative support. The
contribution that volunteers make to the nonprofit sector is significant; indeed without
volunteerism many needed social services would not be available to the public.

C) Performance Evaluation Parameter for Non Profit Organisation:
The participation of business leaders actively managing or sitting on Boards of not- for-profit
organizations has continued to increase in recent years. What they have found is that unlike forprofit organizations, not-for-profits often have difficulty staying focused on the mission and
measuring performance due to multiple and, at times, conflicting objectives as members and
donors of these organizations often have far more diverse interests than shareholders in for-profit
organizations.
a) Financial Performance Measures :

Currently, funders, donors, managers, and others primarily use financial data to evaluate
performance of not-for-profit organizations. Although these financial indicators are very
important, they alone cannot provide comprehensive information on organizational performance.
Financial performance measures are important for managers of not-for-profit organizations and
donors, but not just because they are readily available. They provide important information on (a)
the efficiency of spending valuable resources, (b) costs incurred, (c) growth in revenues, and (d)
how financially successful the organizations various programs are. Two broad areas of financial
health are evaluated:
1) Organizational efficiency is analyzed in four performance categories: (a) program expenses divided
by total functional expenses, (b) administrative expenses divided by total functional expenses, (c)
fundraising expenses divided by total
2) Organizational capacity, on the other hand, is analyzed by three performance categories:
(a) primary revenue growth over four years, (b) program expenses growth over four years, and (c)
working capital ratio, that is, working capital divided by total expenses.

b) Non-Financial Performance Measures:
Many not-forprofit organizations have been developing new performance measurement
models and performance measures to track their non-financial performance. This reflects
organizational attempts to be more responsive to the need to measure performance against
the strategy and social- and/or member- focused mission of the organization. This not-forprofit organization uses various performance metrics to measure success and guide strategy
in pursuit of financial excellence. These performance measures are then complemented by a
set of non-financial performance measures that attempt to capture the organizations
success in improving its clients economic, social, and spiritual life. To measure whether the
strategy is working, the Opportunity International performance measurement system
contains:
1) Indicators of economic performance, which measure the impact that micro lending has
on clients;
2) Indicators of social performance, which help understand whether the poor are better
off in more fundamental ways after they became clients and
3) Indicators of spiritual dimension, which is at the core of the organization's mission.
The chosen metrics reveal that Opportunity International tries to monitor its success all the
way up to its social impacts.

c) Other Performance Measures :
Evidently researchers have identified that there are reasons for implementing performance
measurement even in nonprofits; the question now is what to measure? Performance
indicators are inputs, outputs, throughputs, outcomes and impact. These indicators derive
from the private sector but are applicable and used by nonprofits as well.
1) Inputs:
Inputs are defined as everything that is needed to carry out a mission or a certain project,
such as staff, volunteers, physical capital, material, income etc. It is of great interest for
nonprofits to optimize all inputs.
2) Output:
Output is defined as the quantity of work performed or delivered services. Examples of
output measures are number of people attending workshops or training classes and numbers
of shelters provided during a disaster.
3) Throughputs :
Throughputs include both efficiency and effectiveness measures and are linked to the
organizations activities. The reason for measuring different activities and processes within
the organization is to make it possible to evaluate organizational capacity.

c) Other Performance Measures :
4) Outcomes:
Outcomes are very closely related to the organizations mission. Measuring outcomes and
evaluating effectiveness make it possible to see to what degree the organization achieve its
mission and goals. There are numerous ways of measuring outcomes, for example measuring
participant satisfaction or changing attitudes and behavior among participants. As an
alternative to measure outcomes several researchers suggest measuring impact on mission.
5) Impact:
Impact is defined as all, even unintended, changes that are the result of the organizations
activities. The measured impact can be long-term or short-term, as well as positive or
negative. Measuring impact on mission is difficult. As one anonymous nonprofit manager
expressed; Measuring mission success is like the Holy Grail for nonprofit much sought
after, but never found.

D) Fund Accounting :
Tracking externally restricted contributions and internally restricted net assets is an
important task for management. A common method of doing so is the use of fund
accounting.
a) Meaning:
Fund accounting is based on the formal creation of individual funds (i.e., pots of assets
segregated for accounting purposes). A not-for-profit organization may formally establish a
number of funds, reflecting the variety of restrictions placed on them, either externally or
internally. Fund accounting groups together transactions and accounts related to similarly
restricted activities.

b) Statement of Operations and Fund Balances:
For reporting purposes, particularly external reporting, these many different funds are often
combined into a small number of similar funds, typically reflecting endowments (where the
capital cannot be spent at all, but the income derived from it can be used), restricted funds
(which can be spent, but only on certain activities), and unrestricted funds (which the
organization may use for any purpose). Sometimes, an additional distinction is made
between externally-restricted funds (i.e., by donors) and internally-restricted funds (i.e., by
the board). The Statement of Operations and Fund Balances shows, for each category of
fund, the revenues, the expenditures, the excess (or deficiency) of revenues over
expenditures, and the resultant change in the fund balance. In equation form, the year-end
fund balance is calculated this way:
Opening Fund Balance + Excess of Revenues over Expenditures = Closing Fund Balance
For each of the selected fund categories, the Statement of Financial Position shows the
assets, the liabilities and the fund balance. In equation form:
Fund Balance = Assets Liabilities
There can be transfers from unrestricted funds to internally restricted funds; these would be
shown by a reduction in the net fund balance of the former and an equal addition in the
latter. Any transfers between funds usually require the approval of the board.

c) The Choice of Accounting Method for Recording Contributions under Fund Accounting:
A not-for-profit organization that is not using fund accounting is obliged to use the Deferral
Method of accounting for contributions, as was shown in the main body of this Guide. On
that basis, contributions for operations received in the current year that are not used in the
current year are reported as deferred contributions. Smaller organizations that do not
receive restricted contributions or receive infrequent and small contributions may find this
method less complex, as it does not involve fund accounting.
However, once an NPO has opted for fund accounting, it can choose between the two
methods of accounting for contributions for operations:
1) Deferral Method :
It can use the Deferral Method of matching revenues with expenditures in the period in
which those expenditures are incurred for all its funds, with unused contributions in each
fund showing as deferred contributions on the Statement of Financial Position. The main
body of the Guide and Appendix 1 used the Deferral Method.
2) Restricted Fund Method :
It can use the Restricted Fund Method of accounting, which takes a restricted contribution
to a fund into revenue immediately in the year in which it is recorded, thereby
immediately increasing the net assets of that fund. When there are expenditures from the
fund, the net asset balance is reduced. When using the Restricted Fund Method with fund
accounting, the organisation must have an unrestricted fund usually called an Operating
Fund (or General Fund) which is accounted for using the Deferral Method.

d) Sample Statements Using Fund Accounting:
Most NPOs that choose fund accounting use the Restricted Fund Method of accounting for
restricted contributions. Accordingly, the following sample statements are presented in that
way. Under fund accounting, as the net assets are shown as fund balances included on the
Statement of Operations, there are only three financial statements:
1) Statement of Financial Position;
2) Statement of Operations and Changes in Fund Balances; and
3) Statement of Cash Flows.
1) Operating Fund :
An Operating Fund (a fund which holds the accumulated operating surpluses on an
unrestricted basis, available for the NPOs future use, and holds internally restricted funds, in
this example for special projects, and holds restricted amounts for which there is no
applicable restricted fund);
2) Capital Asset Fund :
A Capital Asset Fund (an externally restricted fund related to capital assets); and
3) Endowment Fund :
An Endowment Fund (an externally restricted fund reflecting endowment contributions from
donors).
The three sample statements that follow are based on the same financial information already
presented for the NPO used for illustrative purposes.

e) Guidelines for the Statement of Financial Position:
1) For each fund, the column delineates how assets are held, the liabilities outstanding and the
associated fund balance.
2) Although total assets and the total liabilities plus fund balances are identical to the total
assets and total liabilities plus net assets shown previously in the main body of the Guide,
the presentation here differs, as various amounts are allocated to the three funds, as shown
across the rows.
3) There is a difference between the total fund balance and the total of net assets reported
previously, arising from the recognition of contributions. Under the Restricted Fund Method,
contributions may be recognized in the immediate period if there is an appropriate
restricted fund (as in this case) thereby enhancing the fund balances, whereas under the
Deferral Method, contributions are deferred to the period in which they are used.

f) Guidelines for the Statement of Operations and Fund Balances:
1) Deferred contributions appear only in the Operating Fund, as the accounting treatment in
that fund is based on the Deferral Method whereas the other funds use the Restricted
Fund Method which does not defer contributions.
2) The organization has decided to create a Capital Asset Fund. Restricted contributions for
capital purposes received during the year are included as revenue in the Capital Asset
Fund, as the organization is utilizing the Restricted Fund Method.
3) Total revenues across all funds are higher than the total revenues reported previously,
due to recognizing contributions, both for capital and for endowment, as revenues in the
cur-rent period under the Restricted Fund Method, instead of deferring the contributions
as had been done previously under the Deferral Method.
4) The total expenditure figure across all funds is identical to the amount reported
previously on the Statement of Operations.
5) As total revenues are higher and total expenditures are the same, the total excess of
revenues over expenditures for the organization is higher than previously reported.

E) Governance of Non Profit Organisations:
Nonprofit governance is primarily the province of an organizations governing board, often
known as a board of directors or board of trustees.
a) Meaning:
Governance is the process of providing strategic leadership to a nonprofit organization. It
entails the functions of setting direction, making policy and strategy decisions, overseeing and
monitoring organizational performance, and ensuring overall accountability. Nonprofit
governance is a political and organizational process involving multiple functions and engaging
multiple stakeholders. The meaning of governance is relatively different for nonprofit and
governmental settings.
b) Boards of Directors :
The board of directors (sometimes known as the board of trustees or governing board) is the
primary group of people entrusted with and accountable for the leadership and governance
of the nonprofit corporation. For example, it is common for boards and their members to
also serve as:
1) Ambassadors who build relationships and generate good will;
2) Sponsors and representatives who advocate on behalf of the organization;
3) Trusted advisors and consultants who offer guidance and serve as sounding boards for
the chief executive and staff; and
4) Resource developers who help the organization secure essential resources.

c) The Core Responsibilities of the Board:
Much has been written on the core responsibilities of the nonprofit board, and no one list is
universally applicable to all nonprofit organizations. The following summary reflects the list of
the board responsibilities articulated: It is the boards responsibility to:
1) Determine and articulate the organization's mission, vision, and core values.
2) Recruit and select the organization's chief executive.
3) Support and assess the performance of the organization's chief executive.
4) Ensure that the organization engages in planning for its future.
5) Determine the set of programs that the organization will deliver to implement its
strategies and accomplish its goals, and to monitor the performance of these programs
to assess their value.
6) Ensure that the organization has financial and other resources adequate to implement
its plans.
7) Ensure the effective management and use of the organization's financial and other
resources.
8) Enhance the organization's credibility and public image.
9) Ensure organizational integrity and accountability.
10) Assess and develop the board's own effectiveness.

d) Service on Nonprofit Boards:
Many people who accept an invitation to serve on a nonprofit board do not consider the
governing aspect of the job. Their focus is on:
1) Fund-raising programs
2) Promotion of activities
3) Cheerleading the operation
4) Philanthropic motives
5) Prestige and self-gratification
6) Spokesperson for organization
All of these activities are important but are not the be all and end all of a trustees
responsibilities. Focusing attention on the above suits the paid staff because they often look
upon board members as:
1) Annoying legal requirement
2) Celebrity name to attract interest
3) Free labor at events
4) Rubber stamp for staff proposals
5) Substantial financial donor
6) Contacts with funding sources

e) Governance, Strategy, and Leadership:
Effective governance is integral to the success of the nonprofit organization. Governance is
essentially a decision process grounded in the assumption that organizations can cause
desired results to occur by choosing appropriate courses of action.
1) It makes informed Organizational Choices :
Fundamentally, governance and strategic leadership are about making informed
organizational choices: choices about why were here, what we want to accomplish, and the
best ways to achieve those results, the resources well need to do these things and how we
will secure them, and how we will know whether we are making a difference.
2) Integral to the Sustainability and Long-Term Effectiveness:
Effective governance and strategy are integral to the sustainability and long-term
effectiveness of a nonprofit operating in todays complex and competitive world. To succeed,
nonprofits (like all organizations) must continuously renew the link between what they do
and the needs and interests of the community they serve.

F) Product Pricing for Non Profit Organisations:
Too often nonprofit organisations have thought of marketing as only promotion. However to
develop marketing strategy means also considering the pricing of the product. Of course,
pricing is complicated for non-profit organisations because they also rely on funding from
additional sources other than from customers.
a) Different Pricing Bases:
A non-profit organisation may be planning to launch a new service and would like to set the
price on a basis other than 'what the market will bear'. Or it may be already in the market
and wondering if they are under pricing or over pricing their product. In either case it is
important to have an appreciation for the various pricing bases that can be considered:
Full Cost
Pricing
Full Cost
Plus as Basis
Marketbased
Pricing
Inducement
Pricing

a) Different Pricing Bases:
1) Full Cost Pricing:
Many nom-profit organisations use full cost as a basis of setting the norm for prices. The
rationale is fairly simple. Non-profit organization is not set-up to make a profit or a surplus.
Therefore, there is no reason to price the products/services at more than full cost.
2) Full Cost Plus as Basis:
Many mm-profit organisations find themselves compelled to set prices to include an
element of profit or surplus over full cost. The surplus is what adds to the equity or funding.
Such addition to the equity enables the organisation to replace assets and/or provide for
additional working capital.
3) Market-based Pricing:
Medical and educational services are examples of areas where market price may be a
consideration, but not a determining factor. Many of them will have a semi-monopolistic
position due to location, specialization in product offered, quality, etc., optimum pricing calls
for very careful examination of all these factors.
4) Inducement Pricing:
There could be situations in which a non-profit organisation purposely sets a price in order
`to induce the other suppliers to reduce their prices. In the case of the essential drug
project, the promoters were clear from the beginning that their intention was not to force
market prices down, but only to supply to select hospitals and medical centers for passing on
the benefit to the poor patients.

b) Some Usual Problems:
1) Complex Subject:
When it comes to nonprofits, price is a more complex subject than it is for most for
profits. The role of the pricing for profit sector is typically fairly clear: to recover all or
most costs of an offer and enable the firm to make a profit.
2) Nonfinancial Objectives Constrains:
For non-profit, however, the idea of charging or increasing a monetary price for one or
more offers may seem inappropriate. By definition, nonprofits have nonfinancial
objectives rather than financial ones and exist to fulfill a mission that involves a charitable,
educational, scientific, or literary purpose recognized by federal law.
3) Need to follow Objectives of Affordability:
Non-profit organisations do not as a general rule price their services or products in such a
way as to maximize the net return. On the other hand, their pricing may be targeted
towards what the poorest of users can afford. Sometimes they are based on an external
subsidy, which has been promised conditional to the product being priced at a certain
level.

G) Strategic Planning for Non Profit Organisations:
Most of us know that planning is a way of looking toward the future and deciding what the
organization will do in the future. Strategic planning involves choosing the highest priority
achievements that an organization is prepared to commit to over a period of three to five
years. The process of planning emphasizes conscious, thoughtful choices. If an organization is
in crisis or if the Board and/or management are spending most of their time reacting to tense
or uncertain present circumstances then the organization is not in a good place to begin the
planning process.
a) Meaning:
Strategic planning is a disciplined effort to produce decisions and actions that guide and
shape what the organization is, what it does, and why it does it. Both strategic planning and
long range planning cover several years. However, strategic planning requires the
organization to examine what it is and the environment in which it is working. Strategic
planning also helps the organization to focus its attention on the crucial issues and
challenges. It, therefore, helps the organization's leaders decide what to do about those
issues and challenges. In short, as a result of a strategic planning process, an organization will
have a clearer idea of what it is, what it does, and what challenges it faces. If it follows the
plan, it will also enjoy enhanced performance and responsiveness to its environment.

b) Importance of Strategic Planning in Non Profit Organisations:
Promote Effective Stewardship:
It Guides Future Resource Development

and Deployment
Align the Board and Staff
Builds Commitment
Helps to Set Priorities
Bring Clarity and Agreement on Mission

and Vision
Help Organizations Prepare for the Future
Improve the Decision-Making Processes:
Importance of
Strategic
Planning in
Non Profit
Organisations
Provide an Opportunity to Recommit to the

Cause
Identify Existing Strengths in the Organization
Help Organizations Anticipate and Manage

Change
Provide an Opportunity to Analyze the
Organizations Systems and Processes
Reinforce the Need to Commit to Continuous

Improvement

Each organization needs to decide for itself when the time is right for a strategic plan. It is
sometimes easier to describe when the time is not right than when it is. For example, when
the roof has blown off the building, an organization should replace it, not start strategic
planning.
1) It Guides Future Resource Development and Deployment :
Strategic plans do not predict the future. The strategic plan proposes future action steps but
cannot predict exact implementation activities out into the future. The plan will, however,
take into account the business elements of operating a nimble nonprofit and help guide
future resource development and deployment.
2) Builds Commitment:
Strategic planning builds commitment so it is very important for all levels of the organization
to be involved.
3) Helps to Set Priorities:
A well wrought strategic plan helps to set priorities and acquire and allocate the resources
needed to achieve goals. It provides a framework for analyzing and quickly adapting to future
challenges. And it helps all board and staff members focus more clearly on organization's
priorities, while building commitment and promoting cooperation and innovation

4) Bring Clarity and Agreement on Mission and Vision:
Agreement on mission (the organizations purpose) is paramount. Without this agreement,
an organization cannot be effective. The strategic planning process can provide an invaluable
opportunity for dialogue and consensus among staff, board, and volunteers.
5) Help Organizations Prepare for the Future:
A strategic plan outlines the steps to achieve a desired future for an organization. It is
comforting for board, staff, and volunteers to have a roadmap to follow. The planning process
prioritizes the work to be done. Strategic planning facilitates making short-term decisions
based on long-term implications.
6) Help Organizations Anticipate and Manage Change:
Planning allows an organization to anticipate change and prepare for it. Planning also helps
an organization deal with dramatic changes in its environment. In fact, by anticipating and
planning for change, instead of just reacting to it, an organization can determine how to deal
with the change.
7) Improve the Decision-Making Processes:
With a strategic plan in place, day-to-day decision making and problem solving will be
directly related to long-range and short-term goals. Planning reduces stress by making
decisions easier.

8) Promote Effective Stewardship:
Practicing good stewardship means being accountable to others. In the case of charitable
organizations, clients and funders of a nonprofit organization assume they will pay for
services or donate money, respectively, to the organization, which will re-invest the
revenues to address the social need.
9) Align the Board and Staff:
When there is shared purpose and direction (were all in the same boat,) there is the basis
of a high-performance team. When individuals are focused on the same goal or outcome,
they feel a certain amount of synergy and often set aside differences, help each other, and
become invested in a common purpose.
10 ) Provide an Opportunity to Recommit to the Cause:
Focus on the future work of the organization can bring the board, staff, and other
stakeholders into alignment around the mission group interaction around a cause often
fuels individual commitment.
11) Identify Existing Strengths in the Organization:
Constituent feedback conducted in conjunction with the plan indicates how well the
organization is meeting expectations. It can also show where the efforts are paying off and
what to celebrate.

12) Provide an Opportunity to Analyze the Organizations Systems and Processes:
It is valuable to conduct a critical review of the organizations processes and how it
operates. A review provides an opportunity to analyze different systems and processes and
make changes to improve them. Pay particular attention to communication channels and
cross-functional operations.
13) Reinforce the Need to Commit to Continuous Improvement:
Planning allows an organization to anticipate and prepare for change. An organization
without an effective strategic plan may react in a hurried, scattered way to unanticipated
circumstances.
A well wrought strategic plan helps to set priorities and acquire and allocate the resources
needed to achieve goals.

H) Budget Preparation for Non Profit Organisations:
A common denominator in every successful nonprofit organization is planning. A budget is
simply a financial plan that serves as a guide for month-to-month operations. It generally tells
where the organization has been, where it is going, and how it is expected to reach its goals
from a financial perspective. Creating an effective budget is a difficult task, especially for small
organizations that may not have the necessary financial expertise, experience and resources.
And yet a well-thought-out budget is one of the keys to financial stability, growth and
fulfillment of an organizations mission.
a) Meaning:
Budget is simply, the breakdown of a spending plan, a sum of money allocated for a
particular purpose and a summary of intended expenditures along with proposals for how to
meet them.
b) Role of Budgeting for Nonprofit Organisations:
Every nonprofit organization has a crucial mission and an important purpose in the
community. But it may never be able to achieve its lofty objectives without a well-defined
action plan, including timelines for implementation and a budget.

Focus on
Short- and
Long-Term
Strategic Goals
It Gives
Structure and
Substance to
the
Organizations
Plans.
Helps to
Choose most
efficient
Measures for
Raising Money
Role of
Budgeting for
Nonprofit
Organisations
Provide an
Oversight of
Operations
Provide
Financial
Control

Every nonprofit organization has a crucial mission and an important purpose in the community.
But it may never be able to achieve its lofty objectives without a well-defined action plan,
including timelines for implementation and a budget.
1) Focus on Short- and Long-Term Strategic Goals :
First, a budget helps an organization focus on short- and long-term strategic goals, which are
generally connected to the availability and timing of financial resources.
2) Provide an Oversight of Operations:
In addition, the organizations board uses the budget in its oversight of operations. When the
board approves a budget, it is approving the use of resources for specific purposes.
3) Provide Financial Control :
A budget is also a financial control that sets spending limits and attempts to keep costs in line
with revenues. Even if an organizations board and administrators choose not to develop a
budget for their own purposes, there are third-party stakeholders who require a formal
budget before considering grant applications, making pledges, gifts and bequests, and
extending credit. To these stakeholders, a budget provides a measure of accountability,
transparency and good faith.

4) Helps to Choose most efficient Measures for Raising Money :
The budget plays a key role, forcing the organization to prioritize its activities so as to
determine those that are most critical for fulfilling its mission. In addition to deciding on how
to spend their revenue, a budget provides the documentation that helps nonprofits choose
the most efficient measures for raising money.
5) It Gives Structure and Substance to the Organizations Plans. :
A budget gives structure and substance to the organizations plans. The budget makes a
strong statement about the groups intentions as it indicates what the nonprofit expects to
tackle in the coming year, or years. As importantly, it provides a way to monitor progress.
When an item is accounted for in the budget, it becomes a tangible representation of the
organizations goals and an acknowledgment that resources will be expended to support it. It
demonstrates a proactive, thoughtful, deliberate approach to critical decision-making instead
of a less formalized process that is forced to react to every new idea without the benefit of
having planned for the circumstance.

c) Guidelines to Prepare a Budget:
Realistic
Consistent
Measurable
The Budget should not be Written in Isolation
Budget should be Flexible
Highly Educated Assertions are Needed:
Budgets must be Timely and Accurate:
Budgets must be provided in Advance
Common Sense and Good Judgment are Essential
Historical Data can be obtained from the Books and Records.

1) Realistic :
If a budget is to serve as a guide for fundraising efforts and program activities in the coming
year, it must be well-reasoned and reflect current conditions. Unsubstantiated revenue
projections and wild guess cost estimates will render a budget ineffective as a
management tool.
2) Consistent :
A budget must be consistent with short- and long-term strategic plans, and remain in line
with the organizations mission.
3) Measurable:
The basis on which the budget is created should be the same basis on which the books are
maintained.
4) The Budget should not be Written in Isolation :
The budget should not be written in isolation, but rather, it will be more effective if taken
into consideration along with other planning tools and management information.

5) Budget should be Flexible:
Nothing could be further from the truth. The budget is a constantly changing document, and
one that must be referred to, and reflected on, regularly. It is a good approach to be as
flexible as possible. Rather than abandon a sound budget plan when an unforeseen situation
arises, the organization should instead be able to handle the change within the structure of
the budget
6) Highly Educated Assertions are Needed:
By going through the process of writing a budget, the organization will be faced with making
some tough decisions.
7) Budgets must be Timely and Accurate:
They are prepared with a lot of thought, time and effort and the approved budget must then
be reviewed throughout the year. The organization as a whole must agree to the budget cycle
and the priorities and goals of the organization as reflected in financial terms in the annual
budget.
8) Budgets must be provided in Advance:
The approved budget forms the basis for action. The draft budget should be provided to the
board members in advance of the board meeting so they have ample time to review. Once
the budget has been approved, it is usually passed over to the senior staff person for
management and implementation.

9) Common Sense and Good Judgment are Essential :
Common sense and good judgment are essential to the preparation of a well thought out
budget. Always keep good notes on facts and assumptions to make. This information will be
invaluable when prepare subsequent budgets. Be familiar with the prior years data and
events that occurred during the year.
10) Historical Data can be obtained from the Books and Records. :
Historical data can be obtained from the books and records. However, if managers are using
accounting software make sure that all transactions have been recorded and that the user of
the software understands accounting practices and terminology. Budgets have been
prepared based on good data only to find out later that someones interpretation was
incorrect.
4.3 Social Audit

Every business has the objective of earning profits and maximising investors wealth. While
fulfilling the objectives of business, businessmen are obligated to perform business ethics and
social responsibilities. It can be classified in three general categories as social obligation, social
reaction and social responsibilities. Social Audit is the mechanism to improve social
responsiveness of the business organisations.
A) Meaning :
Social Audit is a system which evaluates performing of the responsibilities of a business. It is
the rating system for the companies to see how well they measure their social responsibility.
It is a step forward taken by business to issue public documents for explaining their policies
on social issues.
B) Definition:
Howard R. Bowen:
It is defined as a commitment to systematic assessment of and reporting on some meaningful
definable domain of the companys activities that have social impact.
4.3 Social Audit

C) Principles of Social Audit :
Multidirectional
Regular
Participatory
Comparative
Comprehensive
Multi
Perspective /
Polyvocal
Verification
Principles
of Social
Audit
Disclosure
4.3 Social Audit

The foremost principle of Social Audit is to achieve continuously improved performances
Relation to the chosen social objectives. Eight specific key principles have been identified
from Social Auditing practices around the world. They are:
1) MultiPerspective / Polyvocal:
Aims to reflect the views (voices) of all those people (stakeholders) involved with or
affected by the organisation/department/programme.
2) Comprehensive:
Aims to (eventually) report on all aspects of the organisations work and performance.
3) Participatory:
Encourages participation of stakeholders and sharing of their value
4) Multidirectional:
Stakeholders share and give feedback on multiple aspects.
5) Regular:
Aims to produce social accounts on a regular basis so that the concept and the practice
become embedded in the culture of the organisation covering all the activities.
4.3 Social Audit

6) Comparative:
Provides a means, whereby, the organisation can compare its own performance each
year and against appropriate external norms or benchmarks; and provide for
comparisons with organisations doing similar work and reporting in similar fashion.
7) Verification.
It ensures that the social accounts are audited by a suitably experienced person or
agency with no vested interest in the organisation.
8) Disclosure:
Ensures that the audited accounts are disclosed to stakeholders and the wider
community in the interests of accountability and transparency.
4.3 Social Audit

D) Advantages of Social Audit :
Method of
Measurement
Impartial
Appraisal
Improvement
in Future
Social
Standards
4.3 Social Audit

D) Advantages of Social Audit :
1) Method of Measurement:
Social audit provides a recognised method for bringing social point of view to the attention of
management.
2) Impartial Appraisal:
As the appraisal of the individual corporations would be made by an impartial outside
agency, the assessment is reliable.
3) Improvement in Future:
The report of the social audit is made available to the company. This would be useful for the
organisations in the future. This in turn benefits the society.
4) Social Standards:
Social audit creates recognised social standards. These standards are useful for the
companies in the society. Companies can activate themselves on the basis of these
standards.
4.3 Social Audit

E) Difficulties in Social Audit :
Lack of
Universal
Scale
Difficulties
in Social
Audit
Complications
in Conversion
Collection of
Data
4.3 Social Audit

Difficulties in Social Audit :
1) Lack of Universal Scale:
The major difficulty is lack of universal scale for measuring social performance. Every
business feels that they have done sufficient. Nobody knows the depth to which the social
actions need to be embraced e.g. cost alone cannot be an adequate measure. It does not
indicate the results of social involvement.
2) Collection of Data:
Data collection and their presentation is not possible in such a way that it will reflect
accurately the social involvement of business.
3) Complications in Conversion:
Converting social action into quantitative terms complicates the matter more.
Thus, Social Audit is publication of social responsibilities performed by the company. In fact if
a company is ethical and wants to do something for the society, it will not wait for a perfect
model of social audit.

Performance Evaluation Parameters For Projects and Non-Profits

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4.

1 Performance Evaluation Parameter for Projects

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

Start / Finish Variance

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

Step 1: Setting Base Line Plan

Step 3: Comparing Plan

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

Step 4: Taking Action:

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

Fig : Cost and Schedule Graph

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

4.1 Performance Evaluation of Projects:

a) Meaning of Cost Variance:

4.1 Performance Evaluation of Projects:

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

a) Financial Performance Measures :

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

It Guides Future Resource Development

Align the Board and Staff

Helps to Set Priorities

Bring Clarity and Agreement on Mission

Help Organizations Prepare for the Future

Improve the Decision-Making Processes:

Provide an Opportunity to Recommit to the

Identify Existing Strengths in the Organization

Help Organizations Anticipate and Manage

Reinforce the Need to Commit to Continuous

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations

4.2 Performance Evaluation of Non Profit Organisations