of strategy implementation that management control systems are essential. Since constituents
scrutinize management over their allocation of resources, management has incentive to distort
and manipulate results, specifically over the completeness of expenses and existence of funds, to
ensure a balanced budget year over year (Refer to Figure 1 for a list of constituents for a NFPO).
Managers can make biased assumptions, apply aggressive accounting policies and estimates, or
manipulate activities using real terms such as not investing in research and development activities to avoid the immediate expense. These manipulations will be detrimental to the organization’s long-term success (e.g. suboptimization) and will misinform constituents about the organization’s true financial and operational position. Additionally, if employees have lack of direcFigure 1
KEY
CONSTITUENTS
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members,
donors, potential
donors, & sponsors
funding agencies,
users & beneficiaries of services,
employees/ volunteers,
creditors,
alumni,
media,
community, and
general public
tion on how to fulfill their duties, motivational problems due to their
self-interest, and personal limitations due to lack of skill or aptitude,
their actions will not align with the company’s strategy.2 Therefore,
the primary function of performance measurement is to influence
employee behaviours in a desirable way to increase the probability
that objectives of the organization will be achieved. The measures
must be future-oriented, objectives-driven, internally focused, and
designed to control employee action, personnel selection, organizational culture, and results, as will be discussed in the “What To
Measure” section of the report.
Since the overarching goal of not-for-profit organizations, including
government agencies, is to deliver on its mandate and stated purpose, all the resources acquired must be used to promote this pur-
pose. As such, the performance measure and controls must be designed to align employees’ actions with this stated purpose.
Demand for CPA Profession
Not-for-profit organizations and public sector agencies typically do not serve one authority group,
such as shareholders. Instead, various external constituents (as noted in Figure 1) have high societal expectations of the organization, as many provide valuable social services to the public. The
constituents want to make informed decisions about which services they will use and which charity to donate to. As such, the organization must provide high quality, relevant information to the
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