Financial Vulnerability, Risk Management and Accountability of Non-Profit Organisations

Abstract

The purpose of this study is to examine the relationships between financial vulnerability and accountability of non-profit organizations in Malaysia. Managing the risks associated with financial vulnerability can potentially enhance organizational ability in delivering its social objective and other accountability responsibilities. Information on financial vulnerability and accountability are obtained from the content analysis of annual reports of 130 societies registered with Companies Commission of Malaysia for the financial period 2011. Financial vulnerability indicators are efficiency, stability, solvency and margin while the extent of accountability is based on strategic accountability, fiduciary accountability, financial accountability, procedural accountability and best practice accountability. Results of this study revealed two important findings. First, the financial vulnerability indicators indicate that most NPOs in the sample are financially vulnerable. This in turn reduces their resources in fulfilling the various accountability responsibilities. Second, the only significant relationship between financial vulnerability measure, STABILITY and the extent of accountability indicate that the financial vulnerability model can be used by board members and management of NPOs in their decision making. Overall, findings in this study indicate that this model can be a useful tool that can facilitate screening, monitoring, and decision making processes for various stakeholders.

Keywords: Financial Vulnerability, Risk Management, Accountability, Non-profit organisations.