1. Social Accounting Statements Laurie Mook December 13, 2004

2. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Agenda: December 13, 2004 10:00 - 10:30EVAS presentations 10:30 – 10:45Discussion on volunteer tracking software 10:45 – 12:00Social Accounting Statements/ Discussion 12:00 – 1:30Lunch 1:30 – 4:00Room 11-200

3. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Overview of Presentation  A critical perspective of accounting statements  Social accounting statements that integrate financial and social data  Case study: Junior Achievement of Rochester, New York Area, Inc.

4. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Critical Accounting  From this perspective, the financial accounts of an organization do not just describe or communicate information about an organisation, but they define its boundaries and shape behaviour

5. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Critical Accounting  In conventional accounting, it is presumed that profit reflects and promotes the optimal distribution of limited resources  Thus profits, and in turn shareholder returns, are a measure of success, and the resulting behaviour is that profit organisations try to maximize them

6. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Critical Accounting  On the other hand, the goal of a human service organisation is to maximize its return to society  Showing a ‘profit’ is not an objective; in fact, it could mean that the organisation is not fully achieving its mission because it is not using all the resources it should be to maximize the services or goods it provides

7. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Critical Accounting  The very act of “counting” certain things and excluding others shapes a particular interpretation of social reality, which in turn has policy implications  For example, what should "assets" and "liabilities" include/exclude?  The answers to questions such as these define the "size," "health," "structure" and "performance" of an organisation

8. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS

9. Critical Accounting  What behaviours are promoted in current accounting models for non- profits and why?  In designing new accounting models, what behaviours do we want to promote/change?

10. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Case Study

11. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Case Study Junior Achievement of Rochester, New York Area, Inc. 1. Balance Sheet 2. Income Statement 3. Expanded Value Added Statement 4. Socioeconomic Impact Statement 5. Socioeconomic Resource Statement

12. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS As you look at the statements, think about: 1.What do the various accounting statements show about the organization? 2.What behaviours might change in the organization from each statement? 3.What isn't yet accounted for and how might we account for that?

13. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Case Study  Junior Achievement of Rochester, N.Y. Area, Inc. Established 1968 Runs over 750 programs yearly to teach youth about business in 60 elementary, middle and high schools

14. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Balance Sheet (p. 104)

15. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Income Statement (p. 93)

16. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Key Findings  636 core volunteers contributed an estimated 12,005 hours in the year of the study, or 5.8 full-time equivalents (FTE)  The volunteer contributions represented over 51 percent of the total activity hours  Comparative market value $345,606

17. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Key Findings

18. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Key Findings

19. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Key Findings  The volunteers contributed $12,530 in non-reimbursed out-of-pocket expenses  The estimated market value for volunteers’ personal growth and development was $24,232

20. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Expanded Value Added Statement

21. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Expanded Value Added Statement  Can also look at value added by function, i.e. fundraising/special events, programs

22. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS

23. Other Social Accounting Models  Socioeconomic Impact Statement Shows the flow of resources between the social economy, private sector, and public sector, by stakeholder

24. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Market- Based Coops and Nonprofits (A) Public Sector Nonprofits (B) Social Economy (A), (B), (C) Public Sector Private Sector Civil Society Organization s (C) Social Economy

25. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Impact Statement  Social economy – employees, volunteers, donors, other non-profits and co-operatives  Private sector – suppliers, banks, and other profit-oriented businesses  Public sector – public school system, public health care organizations, different levels of government

26. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Impact Statement  Inflows – resources flowing to a particular stakeholder  Outflows – resources flowing from a particular stakeholder  Net inflow/outflow – the difference between the amount that flows in and the amount that flows out

27. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Impact Statement  What Counts, page 91

28. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Impact Statement (p. 94)

29. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Other Social Accounting Models  Socioeconomic Resource Statement Reports the resources the organisation has to create value in the future Shows economic capital and intellectual capital (human resources, organisational capital, and relational capital)

30. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement  What is capital? associated with the creation of wealth, most commonly financial and physical capital now also associated with intangible items referred to as ‘intellectual capital’

31. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement  Intellectual capital includes three different forms of knowledge-based capital: Human capital Organisational capital Relational capital

32. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement  Human capital Consists of the know-how, capabilities, skills and expertise of an organisation’s employees and volunteers

33. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement  Organisational capital Refers to items within the organisation such as its culture, management philosophy, information systems, copyrights, and patents

34. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement  Relational capital Refers to items outside of the organisation, including client loyalty, distribution channels, perceptions due to brands, and relations with clients, suppliers and the local community

35. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement  Human capital The skills and know-how of employees and volunteers  Organisational capital The knowledge and expertise embedded in the Junior Achievement system  Relational capital The value of relationships with the schools that Junior Achievement serves  What Counts, page 100

36. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Socioeconomic Resource Statement (p. 98)

37. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Discussion 1. Any questions about the presentations? 2. Discussion Questions: Can you think of any ways that accounting statements (or other types of reporting) have influenced behaviour in your organization?

38. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS References  Hines, R. D. (1988). Financial accounting: In communicating reality, we construct reality. Accounting, Organizations and Society, 13(3), 251-261.  Quarter, J., L. Mook, & B.J. Richmond (2003). What counts: Social accounting for nonprofits and cooperatives. Upper Saddle River, NJ: Prentice Hall.

39. WHAT COUNTS: SOCIAL ACCOUNTING FOR NONPROFITS Thank You!