Key performance indicators in Maltese not-for-profit organisations

Abstract

The voluntary sector plays a significant role in Malta, with various NFPOs operating in different spheres. In light of this, the introduction of the Voluntary Organisations Act back in 2007 was aimed at regulating the Maltese voluntary sector. This sector involves various stakeholders, thus making the issue of accountability pivotal, which is why management accounting, through the use of performance measurement and KPIs, may play a significant role. Purpose - This study aims to assess the current use of KPIs in Maltese NFPOs, along with any related benefits and drawbacks which they may offer. The role of the professional accountant in this process is also taken into consideration. Value - Given the growing nature of the Maltese not-for-profit sector, this research seeks to add value in respect of whether, and if applicable how, KPIs may be further used in order to have more efficient, effective and transparent NFPOs. Design - A qualitative methodology was adopted during the course of this study, with a total of 9 interviews carried out: 8 with selected NFPOs and another interview with a highranking official from the Office of the CVO. Findings - All of the interviewed organisations measure their performance, albeit in different ways. When it comes to financial performance measurement, all of the organisations submit some sort of financial accounts to the CVO. In most instances, a professional accountant is consulted. Most of these organisations also compile a number of financial KPIs. On the other hand, not all the interviewed organisations measure nonfinancial performance. In the case where this is measured, KPIs are commonly used, given that they offer more advantages than disadvantages. Some have formal indicators in place, while others make use of informal systems. The way in which these indicators are operated and their results analysed, varies from one organisation to another. Conclusions - Although the use of KPIs may be extended within a number of Maltese NFPOs, there are certain obstacles which prevent this, such as the need for more resources. Mandatory KPIs may, therefore, prove to be a burden for small NFPOs. This may be solved through the introduction of a threshold which, if exceeded, would oblige the organisation to disclose KPIs.