What Counts: Social Accounting for NonProfits and Cooperatives

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9780130463050: What Counts: Social Accounting for NonProfits and Cooperatives

Social accounting focuses on the effects of an organization on its communities of interest—this book specifically focuses on non-profit firms and cooperatives. Quarter/Mook/Richmond look at how nonprofits and cooperatives create value and how they can measure their social performance. The book makes extensive use of models that can be applied by nonprofits and cooperatives. The models are explained in detail and there is a how-to chapter that is oriented towards managers and directors of nonprofits and cooperatives. These models include volunteer contributions and other social inputs that normally are not given a monetary value within financial statements. For anyone who «keeps the books» for nonprofit organizations and cooperatives.

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From the Back Cover:

How do nonprofit organizations add value to communities? How can they create social capital out of the dollars invested in them? Can nonprofits and cooperatives measure their social performance and make their business case? How can nonprofits justify the public's trust in them? How can nonprofits measure their outputs with more accuracy?

What Counts: Social Accounting for Nonprofits and Cooperatives answers these questions and more. Jack Quarter, Laurie Mook, and Betty Jane Richmond from the University of Toronto go beyond traditional accounting and tell the story of nonprofit and cooperative performance.

Touted by many sector leaders, both domestically and internationally, this book will appeal to:

  • Nonprofit and Cooperative Managers, Members, Staff, and Boards
  • Instructors in Nonprofit Management, Business, Public Administration, Community Development, Cooperative Studies, and Accounting
  • Volunteer Coordinators
  • Government Funders, Donors, Foundations
  • Social Researchers and Policy-Makers

What Counts: Social Accounting for Nonprofits and Cooperatives starts where accounting leaves off, with methods for calculating

  • Outputs
  • Volunteer Value
  • Social Return on Investment
  • Value Added

Learn how social accounting has evolved and how it is used today. How can social accounting include social indicators and add to the full performance story for social organizations? Go no further. Quarter, Mook, and Richmond provide answers and insight to this emerging field.

Excerpt. © Reprinted by permission. All rights reserved.:

Accounting statements for nonprofits and cooperatives miss an important feature of their activities—these are organizations with a social mission and, as such, their social impact is a vital part of their performance story. In addition, nonprofits rely in varying degrees on volunteers, yet ironically the value of this service normally is excluded from accounting statements. In other words, for organizations with a social mission conventional accounting misses critical aspects of their operations. This book begins the process of rectifying this oversight by including within accounting statements the contribution of volunteers and other forms of unpaid labor (unpaid member contributions in a cooperative and nonprofit mutual association) and social outputs that normally are not exchanged in the market. This is a challenging task because it involves making appropriate market comparisons for items normally not involving any market exchange. We locate this work in the emerging field of social accounting, which attempts to broaden the domain of accounting by analyzing the impact of the organization on society and the natural environment. In this book we define social accounting as a systematic analysis of the effects of an organization on its communities of interest or stakeholders, with stakeholder input as part of the data that are analyzed for the accounting statement. This definition is developed in detail in Chapter 3.

The predominant tradition in social accounting is the creation of qualitative reports that systematically organize feedback from stakeholders on how well the organization is meeting its mission. In general, social accounting has bypassed financial statements and limited itself to supplementary reports, also referred to as social or ethical audits. We depart from this tradition and utilize actual accounting statements but with a difference—we broaden the domain that is considered and attempt to tell a more complete story of the organization's performance.

Three social accounting statements are presented in this book:

  • the Socioeconomic Impact Statement, an adaptation of an income statement;
  • the Socioeconomic Resource Statement, an adaptation of a balance sheet; and
  • the Expanded Value Added Statement, an adaptation of a Value Added Statement.

In addition, a fourth approach—the Community Social Return on Investment model—was created specifically to measure the social impact of nonprofits. While not a formal accounting statement in the same sense the Socioeconomic Impact Statement, the Socioeconomic Resource Statement, and the Expanded Value Added Statement, the Community Social Return on Investment model is a relatively simple framework that social organizations can use to measure their social impact.

With each of these approaches, volunteer contributions and other forms of unpaid labor are included as are some social outputs that are not exchanged on the market. These approaches are applied to seven different organizations—nonprofits and one student-housing cooperative. For each application, there are illustrations and detailed explanations of how the calculations were arrived at. In addition, one chapter presents the data collection devices used in the book—these are useful for preparing social accounting statements and for organizations wanting to systematize their record keeping of volunteers and social impacts and to place a market value on them.

We view the book primarily as a supplementary text for persons in such programs as nonprofit management, cooperative management, and accounting. However, we feel that it is written in such a way as to be of use to managers of nonprofits and cooperatives in such activities as:

  • annual reports, to more accurately reflect to supporters, members, donors, and other audiences the value the organization returns to the community;
  • volunteer recognition programs, to demonstrate to volunteers their value to the organization and to those served by the organization;
  • funding proposals and in reports to funders, to show how the impact of funder dollars was stretched by voluntary efforts; and
  • to demonstrate to policymakers the value of investing in community-based organizations.

This book is an outgrowth of each of our diverse but related experiences. Betty Jane Richmond (B.J.) has served in management and on the board of directors with various nonprofits. Through this experience, she began to realize that the ways of evaluating how well a nonprofit organization is doing are limited and unbalanced. The costs of nonprofits are all too evident, but the value they contribute to the community is not easily assessed. She concluded that the evaluative mechanisms for nonprofits, including the accounting systems, are missing something critical—the impact of their services on their clients and the community.

For her doctoral thesis (under the supervision of Jack Quarter) at the Ontario Institute for Studies in Education (University of Toronto), Richmond developed the Community Social Return on Investment model and applied it to a community-based training agency for people on social assistance because of various forms of disability. That framework looked at part of the social return that these organizations create. She later applied this framework to the study of five additional community-based training organizations, a project that was coordinated by the Ontario Network of Employment Skills Training Projects (ONESTEP) and funded by Human Resources Development Canada. Within this work, Richmond utilized the social economy framework that had been developed in Western Europe and had been applied to a Canadian context by Quarter, and written up in his book, Canada's Social Economy, and subsequent research. Unlike most frameworks for nonprofits, the social economy casts a broader net and includes all types of organizations formed primarily for a social purpose, including nonprofits oriented to the public and often with a charitable status, nonprofit mutual associations serving a membership, and cooperatives. All of these are referred to as social organizations. Richmond won the outstanding dissertation award for 1999 from ARNOVA (Association for Research on Nonprofit Organizations and Voluntary Associations). ARNOVA, based at the University of Indiana, is the major international association for researchers of nonprofits.

Through a fortuitous contact, Richmond met Laurie Mook, and together they began extending this work. With funding from the Canadian Cooperative Association (CCA), Ontario Region, they conducted research into how a student-run housing cooperative participated in the social and economic life of its community. In this research, they adapted a Value Added Statement to illustrate both the social labor 'contributed by members to the cooperative and the effects of the organization on an array of stakeholders. This adaptation, named an Expanded Value Added Statement (EVAS), was designed primarily by Mook, a researcher who completed a Certified General Accountant's degree and who has a related set of social interests that led to degrees in International Development and in Educational Policy Studies. She is currently starting her Ph.D. at the University of Toronto with the support of a prestigious doctoral fellowship from the Social Sciences and Humanities Research Foundation of Canada (SSHRC). She too is working with Jack Quarter and plans to extend further the work on social accounting for nonprofits.

After the completion of the project with the student housing cooperative in 2000, the three of us were fortunate to receive an International Year of the Volunteer grant from Human Resources Development Canada and the Canadian Centre for Philanthropy, the apex organization for nonprofits in Canada. The International Year of the Volunteer project with the Canadian Red Cross, Toronto Region, Canadian Breast Cancer Foundation, Ontario Chapter, Canadian Crossroads International, and the Jane/Finch Community and Family Centre, as well as a related project with the Junior Achievement program in Rochester, New York, allowed us to apply the Expanded Value Added Statement in different contexts. The project also permitted us to address more specifically the issues of attributing a comparative market value to nonmonetary items, including volunteer contributions, within such a statement. As part of the work with Junior Achievement of Rochester, an income statement has been adapted to a Socioeconomic Impact Statement and a balance sheet to a Socioeconomic Resource Statement. These adaptations better suit the social purpose of this organization and take into consideration its important stock of intellectual capital.

In writing the book, it was also important for us to make accessible knowledge about suitable approaches to accounting for nonprofits and cooperatives to current and future managers and directors of these organizations. Through the International Year of the Volunteer project, we developed hands-on experience in how to help nonprofits track their volunteer tasks, hours, and nonreimbursed out-of-pocket expenses, and how to research the skills that they develop from volunteering. This experience can be found in our how-to chapter, which includes actual items that can be used to track such information.

This book represents our work to date, but we view the models that are presented here as a beginning rather than a final point. As will become apparent from our discussion in the chapters that follow, developing appropriate accounting systems for social organizations requires creating practical and replicable procedures for measuring the effects on key stakeholders, including society. Doing this requires time-consuming research on the creation of appropriate benchmarks or social indicators that become the standards for interpretation and also requires general agreement among professionals who account for the performance of social organizations. For example, measuring the contributions of volunteers is a complex labor-intensive process that social organizations often are reluctant to become involved with, in part because of a lack' of human resources. Part of the solution is practical (establishing the know-how) and part is political (establishing the agreement of the profession about standards that should be applied for estimating the dollar value of particular volunteer tasks).

In addition to the financial support already mentioned, some of the research flowing into this manuscript was supported by a grant from the Kahanoff Foundation, 1998-99, through the Queen's University School of Policy Studies, that permitted some development of the social economy framework. We are also indebted to a number of people with whom we have worked with these models. These are the staff and board of directors of the Waterloo Co-op Residence Incorporated (WCRI); Cathy Lang, former Ontario Regional Director of the Canadian Cooperative Association; Kunle Akingbola, Manager of Employee and Volunteer Resources and Maria Harlick, Director, Service Support & Development Services, at the Canadian Red Cross, Toronto Region; Margarita Mendez, Executive Coordinator, and Clare Blythe, Volunteer Coordinator, at the Jane/Finch Community and Family Centre; Karen Takacs, Executive Director, Ian McNeil, Director of Finance, and Mario Gagnon, National Program Manager, at Canadian Crossroads International; Sharon Wood, Ontario Chapter Executive Director, and Beth Easton, the Ontario Community Programs Director, of the Canadian Breast Cancer Foundation; and Andrew Portanova, President, and Rebecca Sherman, Program Manager, of the Junior Achievement program of Rochester, New York.

To undertake this research, we were fortunate to have the assistance of some highly skilled and motivated graduate students: Dorothy Aaron, Anne Dimito, Michelle Hamilton-Page, Jorge Sousa, and Shannon Wall. Jorge also put together the index of the book and generously assisted with formatting. His support was invaluable in making the manuscript camera ready.

Professor Daniel Schugurensky helped us to formulate the discussion questions at the end of each chapter and Hugh Oliver gave generously of his unique skill in the use of the English language. We would like to thank those who have commented on earlier versions of this manuscript, and in so doing have provided feedback that has helped us to move the ideas forward: Professors Thomasina Borkman and Patricia Lewis of Nonprofit Management Studies at George Mason University; Professor Roger Lohmann of West Virginia University; Professor Ian MacPherson, University of Victoria; Professor Leslie Brown of Mount St. Vincent University; Professor Emeritus Hugh Oliver of the Ontario Institute for Studies in Education; and Bill Benet, Director of the Rochester Council on Occupational Safety and Health (ROCOSH).

We give a special word of thanks to Thomas Sigel, the Acquisitions Editor, Accounting, of Prentice Hall, who has patiently shepherded us from beginning to end and who has been willing to take a chance on this project. We thank Thomas for having faith in us. We are grateful to Renata Butera, Prentice Hall's Senior Production Editor, for guiding us through the production process, for promptly and patiently answering our many questions, and for even being good humored about it. Donna Mulder, our copyeditor, displayed an eagle's eye in helping to catch unintended slips and helping us to polish the wording. We would also like to thank Beth Toland, Prentice Hall's wonderful and capable marketing manager; Samantha Scully, Senior Acquisitions Editor, Pearson Education Canada, who passed on the manuscript to Thomas Sigel; Professor Femida Handy of York University and Michelle Goulbourne of the Canadian Centre for Philanthropy for sharing their insights from research on a parallel initiative on estimating the value of volunteers; Sue Ellis and Kathy Gaskin for passing on their work on the Volunteer Investment and Value Audit (VIVA); Michael Hall, Vice-President of Research for the Canadian Centre for Philanthropy for his ongoing support; and Bill Reinhard for his words of encouragement early on.

On a personal level, we would like to thank Daniel Schugurensky, who went well above and beyond the call of parenthood while Laurie worked on the manuscript, Robert Paskoff along with B.J.'s family and friends for their support while her many duties called, and Dale Willows, who was there at all times for Jack.

Jack Quarter
Laurie Mook
B. J. Richmond

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