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Performance Measurement and ControlNot-For-ProfitValue for MoneyBalanced ScorecardSyllabus Area E

ACCA · Question 31 · Performance Measurement and Control

Section C

AquaVitae Foundation is a global Non-Governmental Organization (NGO) dedicated to providing clean drinking water in developing nations. They rely entirely on donor funding.

Historically, AquaVitae has struggled to quantify its success. Management has decided to evaluate performance using the 'Value for Money' framework (the 3 Es).

Recent project data for the 'Desert Wells' initiative:

  • Budgeted cost per well: $5,000. Actual cost per well: $4,800.
  • Budgeted time to dig one well: 14 days. Actual time: 12 days.
  • Target: Provide clean water to 10,000 villagers. Actual villagers reached: 8,500 (due to several wells drying up faster than anticipated).

Furthermore, the Board wants to implement a Balanced Scorecard adapted for Not-For-Profit organizations.

Required:
(a) Analyze the performance of the 'Desert Wells' initiative using the 3 Es (Economy, Efficiency, Effectiveness). (10 marks)
(b) Evaluate how the four perspectives of the traditional Balanced Scorecard must be adapted to suit AquaVitae Foundation, providing one specific KPI for each adapted perspective. (10 marks)

How to approach this question

For part (a), define each 'E' and apply the specific numbers from the scenario. For part (b), explain how an NGO's primary goal is its mission, not profit, and adjust the top of the scorecard accordingly. Invent realistic KPIs.

Full Answer

Performance measurement in NFPs is difficult because there is no profit figure to use as a catch-all metric. The 3 Es provide a framework to ensure funds are not wasted (Economy), processes are smooth (Efficiency), and the mission is achieved (Effectiveness). The Balanced Scorecard must be adapted because the Financial perspective is a constraint/enabler in an NGO, whereas the Customer (Beneficiary) perspective sits at the top as the ultimate objective.

Common mistakes

Confusing Efficiency and Effectiveness. Digging a well fast is efficient; the well actually providing water to people is effective.
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