Encyclopedia of Sustainable Management

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Accountability in Nonprofit Sector

  • Renato CivitilloEmail author
Living reference work entry
DOI: https://doi.org/10.1007/978-3-030-02006-4_704-1
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Synonyms

Definition

Accountability in nonprofit sector concerns an articulated assessment of global and overall consistency inherent in the following key elements:
  1. (a)

    Transparent use of financial and nonfinancial resources.

     
  2. (b)

    Correctness of management and governance.

     
  3. (c)

    Adequacy and conformity between actions and objectives.

     
  4. (d)

    Clear communication of the results achieved.

     

In essence, it is intended to refer to the application of the concept of accountability to the nonprofit sector. If the generic term accountability is very multifaceted, as it is highly debated and chameleon-like (Mulgan 2000; Messner 2009), it is even more complex and profound when referring to nonprofit institutions (NPIs) (Rademacher and Remus 2017). In fact, it presents an evident versatility, being able to represent a principle, a duty, a system, a process, a mechanism, a set of tools and techniques (Ricci 2019): it describes the need to report, responsibly, the work of NPIs towards all stakeholders regarding the use of the resources, the correctness of the management, the correspondence and the consistency of the activities with respect to the programmed objectives (Ricci 2016). The final aim is to allow the correct demonstration of social value (Campbell 2002) and public value (Moore 1995; Esposito and Ricci 2015) generated by NPIs, which are necessary to guarantee their success (Krisch and Grabner-Kräuter 2017).

Introduction

As argued by literature, a fundamental aspect of the management of any economic institution is represented by the processes involved in evaluating performance (Speckbacher 2003). Nonetheless, it must be stressed that this statement, although valid from a theoretical-general point of view, cannot be abstractly referred to any type of organization, and with the same modalities of application.

In this perspective, the nonprofit sector constitutes a very particular area of economic organizations characterized by three peculiarities (Anheier 2000; Civitillo 2016):
  1. 1.

    The absence of the profit purpose.

     
  2. 2.

    The difficulty of using reliable financial parameters and criteria.

     
  3. 3.

    The mission is strongly influenced by the set of values pursued with its activities.

     

These elements give to NPIs characteristics of hybridity which make it very difficult to identify models, principles, criteria and tools useful for the correct management of these economic organizations.

Furthermore, since NPIs do not find their main management driver in profit, a further consequence is that performance assessment in these particular entities is extremely ambiguous, mainly due to their value system which is vast, unclear, vague, imprecise, heterogeneous and difficult to express with measures.

It is clear that the value system of NPIs (e.g., politics, religion, health, environment, ethics, morals, voluntarism, philanthropy, compassion, etc.) affects the set of programmed objectives and the ways in which these are achieved (Najam 1996; Porter and Kramer 1999; Moore 2000; Putnam 2001; Speckbacher 2003; Toepler and Anheier 2004).

This means that in NPIs the connection between their organization and their value system is so close that the mission takes an enormous importance, also in relation to the organization and management of these institutions (Moore 2000; Smith 2008). In this sense, the mission of NPIs can be useful to define the value system to which NPIs are intended (Moore 2000).

Many theories have tried to correctly interpret the existence of NPIs, most of which are relatively recent (DiMaggio and Anheier 1990; Hansmann 1996; Rose-Ackerman 1996; Salamon and Sokolowski 2004). In essence, they seem to pose a crucial question: whether market economies are aimed at profit, why are there some organizations that decide not to foresee profit as a priority of their system of values?

To answer this question, a very useful starting point could be the identification of the main characteristics of NPIs (Salamon and Anheier 1996; Anheier 2014).

In this sense, it is very interesting to highlight that NPIs could (or probably should) be more correctly considered as “nonprofit-distributing” organizations rather than as “nonprofit-making” entities (Anheier 2014), mainly because NPIs are structurally conceived as economic organizations in which the incoming monetary flows are destined to the exercise of their institutional activities and, therefore, to their mission; on the contrary, it is not foreseen that incoming resources can be distributed, in any way, to the different governing bodies of the same organizations.

All this means that any financial resources generated by the action of this particular type of organization are mainly reinvested or, in any case, destined for the declared mission of it.

This first argument would lead to the following conclusions:
  1. (a)

    NPIs, unlike private companies, are extraneous to the generation of profits or, in general, of positive financial results.

     
  2. (b)

    The acquisition of resources (financial and nonfinancial) in NPIs is very sensitive to levels of efficiency and effectiveness in the pursuit of the aforementioned institutional needs, with obvious management consequences.

     

The second statement is particularly useful to highlight that the management of NPIs can never allow the abandonment of the basic economic paradigms typical of any economic organization, regardless of whether it is of the “profit” or “nonprofit” type. In both cases, managerial processes and patterns are substantially similar, to diverge only for aspects related to the specific purposes: “profit” or “nonprofit” goals (Civitillo 2016).

Accountability in Nonprofit Institutions

In the context just described, a very important concept is represented by profit, which can be conceived as a sort of fuzzy and multiform concept: if it is indisputable that it cannot be assumed as a possible absolute indicator of the capacity to create value of any type of economic organization (Ricci and Civitillo 2019), this is particularly true for NPIs which are not institutionally prearranged for profit (Moore 2000; Dees 2001).

In this sense, the real and concrete value attributable to NPIs could be identified in the construction of social relations with communities and citizens of a certain territory (Porter and Kramer 1999; Putnam 2001; Tenbensel et al. 2014): in some fields, nonprofit sector is able to generate indisputable advantages in terms of social value production, such as the creation of networks to exchange information from/to the communities or social and professional networking (Porter and Kramer 1999; Wondolleck and Yaffee 2000; Smith 2008).

However, it should be noted that nonprofit sector and its institutions have also been subject to a complex process of importing business-type methodologies and tools, similarly to what happened for the Public Administration with the typical approaches of New Public Management. This has led to a progressive loss of their civic-engagement characteristic, resulting in a decrease in their degree of representativeness and democracy (Smith 2010; Skocpol 2013).

All this has meant that NPIs, up to now, have been considered as organizational entities whose objective of optimizing and maximizing performance levels do not appear compatible with the pursuit of the civic-engagement objectives that characterize their value system.

In truth, however, it is possible to identify a sort of complementary element to the performance objectives: it is the accountability concept which, in this perspective, does not represent an obstacle to the performance objectives of NPIs but, on the contrary, a process that is able to improve the overall management of these organizations (Boris and Steuerle 2006; Ricci and Civitillo 2017, 2018). NPIs increasingly emphasize the notions of performance measurement and accountability as the same assessment of the organization’s ability to properly fulfill its mission is effective only in the presence of an efficient information level of performance. On the other hand, the absence or even the limitedness of information lead to inevitable unfortunate consequences, as well as a series of negative externalities such as the reduction of the level of public trust in NPIs which, obviously, can seriously compromise the same survival of these organizations, as well as their development (Speckbacher 2003).

It is therefore evident that, in this context, accountability plays a fundamental role (Dubnick 2011), as it implies the duty to act in a responsible way and to be accountable to others for one’s actions, in order to maintain effective and logical links between planning, deciding, action, and verification (Ricci 2016). Although accountability represents “a complex and chameleon-like term” (Mulgan 2000, p. 555), recently, it has significantly expanded its relevance, becoming a fundamental factor for various aspects of citizens’ lives.

According to Mulgan (2000), accountability can take on at least four meanings:
  1. 1.

    Accountability as a sense of responsibility for the public interest expected of public employees (professional and personal accountability).

     
  2. 2.

    Accountability as a democratic control system of government actions (accountability as control).

     
  3. 3.

    Accountability as a criterion for pursuing the desires or needs of communities (accountability as responsiveness).

     
  4. 4.

    Accountability as a form of public dialogue for citizens (accountability as dialogue).

     

All this implies that accountability, with specific reference to NPIs, refers to the need to make the use of financial and nonfinancial resources transparent, but also about the correctness of the management capacity, the adequacy and conformity between actions and objectives, and the clear reporting of results achieved by the organization (Rosenfield 1974; Behn 2001). This determines that clear representation of policies and rules relating to the political, social, cultural context in which NPIs operate appears today a fundamental requirement to guarantee the achievement of their planned objectives and, therefore, their success. Consequently, despite a physiological reciprocal link, performance measurement and accountability remain different, especially regarding the objectives pursued: accountability necessarily implies the complete, systematic and transparent reporting of the multifaceted organizational structure of an economic organization, both financial and (or, perhaps, above all) nonfinancial nature (Civitillo 2016). In this sense, for example, accountability may be able to demonstrate the efficient and effective use of money in the organization and the level of goods and services produced. It is only in this way that the user is able to know the public value generated (Moore 1995; Esposito and Ricci 2015).

In this context, NPIs are able to generate high level of social value goods and services (Campbell 2002) which, very often, are not actually supplied either by Market or by Public Administrations since they do not fall within their respective productive or strategic advantages: consequently, accountability can be the ideal tool also to increase the visibility of these organizations, which is a particularly relevant aspect (Krisch and Grabner-Kräuter 2017).

Notwithstanding the scientific literature shows how the studies have always focused almost exclusively in relation to the for-profit institutions (Habisch et al. 2005; Barth and Wolff 2009; Idowu et al. 2015), it is essential to point out that accountability is a prerequisite for NPIs because it allows them to demonstrate to the stakeholders the effective ability of the organization to pursue the objectives set by its mission (Nardo and Siboni 2018).

In the current era, the objectives of NPIs include a far too wide range of activities, such as education, healthcare, charity, religion or culture, just to give a few examples: these are activities intimately connected to citizens and, in general, to the civilian community and which, above all, presuppose a high degree of confidence and trust.

As a result, anything that is capable of harming this trust relationship – even if only potentially – may have enormous repercussions on the financial resources of NPIs.

This means that today, maintaining an adequate level of trust in the nonprofit sector is no longer a mere alternative of growth development but rather:
  • A real need, in order to improve the management of NPIs.

  • A moral or ethical duty or obligation, in consideration of the institutional goals of the organizations in this sector.

What has just been highlighted assumes even greater importance in consideration of the development of the SDGs and the 2030 Agenda for Sustainable Development by the United Nations which, in fact, have made the role of the Nonprofit sector even more relevant for the pursuit of the general objective of sustainability of the global economy:

“All countries and all stakeholders, acting in collaborative partnership, will implement this plan. We are resolved to free the human race from the tyranny of poverty and want and to heal and secure our planet. We are determined to take the bold and transformative steps which are urgently needed to shift the world on to a sustainable and resilient path. As we embark on this collective journey, we pledge that no one will be left behind” (United Nations 2015, p. 3).

Following the program envisaged by the SDGs, all the actors of civil society are called to contribute to reach a concept of sustainability:
  • Authentic, trying to overcome the traditional notion of development through the broader concept of prosperity.

  • Multifaceted, as it includes the multitude of social actors and the numerous aspects of sustainability such as efficiency, responsiveness, innovation, etc.

  • Dynamic, as it should not be a static conceptual goal, but rather a dynamic balance, able to absorb and react to the different changes in the external environmental context.

Summary

Accountability in nonprofit sector concerns an articulated assessment of global and overall consistency inherent numerous key elements such as: transparency, correctness, adequacy, conformity, coherence and communication about nonprofit institutions (NPIs).

Nonprofit sector constitutes a very particular area of economic organizations characterized by some peculiarities which attribute to NPIs characteristics of hybridity and make it very difficult to identify models, principles, criteria and tools useful for the correct management of these economic organizations.

It is clear that the value system of NPIs (e.g., politics, religion, health, environment, ethics, morals, voluntarism, philanthropy, compassion, etc.) affects the set of programmed objectives and the ways in which these are achieved (Najam 1996; Porter and Kramer 1999; Moore 2000; Putnam 2001; Speckbacher 2003; Toepler and Anheier 2004).

In this perspective, accountability represents the duty to report, responsibly, the work of NPIs towards all stakeholders regarding the use of the resources, the correctness of the management, the correspondence and the consistency of the activities with respect to the programmed objectives (Ricci 2016). The final aim is to allow the correct demonstration of social value (Campbell 2002) and public value (Moore 1995; Esposito and Ricci 2015) generated by NPIs.

Cross-References

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Department of Political Science (DISP)University of Naples Federico IINaplesItaly

Section editors and affiliations

  • Eila Jeronen
    • 1
    • 2
    • 3
  1. 1.Faculty of EducationUniversity of OuluOuluFinland
  2. 2.Faculty of Educational SciencesUniversity of HelsinkiHelsinkiFinland
  3. 3.Faculty of EducationUniversity of LaplandRovaniemiFinland