FINANCIAL MANAGEMENT

Financial Management

ABSTRACT

There is an assumption that inadequate financial management practices are contributors to turbulence in the charity and private sector; yet there have been few investigations into the factors that influence an owner-manager's approach and the processes involved in the evolution of strategy and associated learning in this area. Previous studies have adopted a comparative static approach that is survey-based; we argue that these studies can only give limited insights. We adopt a comparative case study methodology to develop an evolutionary process view of financial management in charity & private firms. Despite the increased attention paid to owner-managers in the charity & private firms sector, we know comparatively little about the process of financial management and how charity & private firms learn and adjust strategy and decision-making in this area. In this paper, we attempt to shed some light on the process issues within charity & private firms from qualitative evidence collected as part of a programme of case study research with entrepreneurs and owner-managers. We discuss case evidence and focus on how owner-managers reach financial management decisions, how they learn and adjust behaviour within the entrepreneurship process.

Table of Contents

ABSTRACT2

CHAPTER I: INTRODUCTION4

Background7

Charity Firms Accountability12

Defining civil society17

Defining and locating the charity and private firms22

Outline30

Research Hypothesis31

CHAPTER II: LITERATURE REVIEW32

Previous literature and research on charity & private firms and financial management32

Private Sector Involvement38

Charity Accounts Presentation-A Financial Management Approach42

Prior relevant research42

Charity and Private Firms & Private Sector Accountability50

Power, interest and the charity and private firms sector56

In what way and to what extent are charity and private firms accountable?64

CHAPTER III: METHODOLOGY70

Research methods70

CHAPTER IV: DISCUSSION74

Summary85

The principles of accountability85

The form of charity and private firms accountability?90

CHAPTER V: CONCLUSIONS95

Conclusion95

Research Implications99

Managerial and policy implications101

REFERENCES103

APPENDIX129

CHAPTER I: INTRODUCTION

This paper adopts a case study approach to financial management practices in charity & private firms and this approach was used to examine the way that decision-making by the charity and private owner-manager evolves over time. Discussion of evidence is placed in the light of previous studies on financial management practices in charity & private firms. Most previous studies have been static and survey-based, which provides only limited insights into financial management practices. It will also be argued that more dynamic approaches that allow for dynamic elements, including innovation, learning and the influence of the environment, should be adopted for application in charity & private firms. The potential of one model, the balanced scorecard model, is examined in the light of evidence; however the study reported in this paper did not set out to apply this model, rather results were used to examine the potential applicability of the model.

The importance of small (less than 50 employees) and micro-firms (less than ten employees) for future economic development has been reflected in a number of recent policy papers which have focused attention on the role of entrepreneurship, owner-managers and the charity and private sector, at the European, UK and regional policy levels. Examples include recent policy papers from the Prodi Commission (EC, 1999a); EU policy on sustainability (EC, 1999b); the Competitiveness White Paper (DTI, 1998); ...