Non-Profit Organisations and Financial Objectives | 2022 Paper1 Q19

If profit isn't their main aim, why do non-profit organisations such as charities set financial objectives? That was the question posed in this 9-mark past exam question for AQA A-Level Business.

Possible response

One reason is to control costs. Non-profit organisations such as Cancer Research UK or the National Trust have a range of objectives to help them meet their wider societal aims and these will include financial objectives to help them manage the organisation effectively. For example, a charity’s management and supporters would want to know that donations are being spent on charitable purposes and not wasted. Accordingly, financial objectives based on cost budgets are likely to be set, with actual spend on charitable activities matched against the budgeted cost and significant adverse variances investigated. By setting and monitoring these cost objectives, a non-profit organisation is better able to ensure that charitable income is spent in the correct way.