Measuring Effectiveness of Aid Agencies: The Effect of Recipient Participation on Goal Achievement

Abstract

One of the functions of accounting is to measure performance, effectiveness, and efficiency of organizational systems. In for profit entities the tools and metrics used to measure performance include the income statement, as well as measures of return on investment. Measuring performance in not-for-profit (NFP) entities, where income maximization is not the ultimate goal, can be accomplished using different or additional metrics. In the specific NFP arena of developmental aid agencies, measuring effective goal achievement is an under explored research area. This current research paper examines the relationship between donations to developmental countries for education and the school enrollment rates in those countries. Country Programmable Aid (CPA), donations to developing countries over which the recipient has some say in how the funds are utilized, has been tracked for the last decade. Expectancy theory, used extensively in participative budgeting research, provides the theoretical framework for predicting a relationship between recipient participation and goal achievement. Just as manager participation in the budgeting process may lead to improved performance, recipient participation in the operationalization of the developmental program is expected to lead to improved performance. Participation is measured by the dollar amount of Country Programmable Aid. Performance is measured by the enrollment rates in primary and secondary education within educationally impoverished countries. Thirty-six countries with low initial enrollment rates were included in the analysis. Significant explanatory power was found in only a few instances. Small sample size, cultural effects, and mediating variables in the participative budgeting model may explain the weak results. Addressing each of these weaknesses are areas for future research.