A methodology to improve third sector investment strategies: the development and application of a Western Cape based financial resource allocation decision making model
Smit, Andre de Villiers
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Please cite this item using this persistent URLhttp://hdl.handle.net/10019.1/1075
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South Africa has high levels of social need which are steadily growing. While the third sector is large and contributes substantially to social service provision, it together with government is seemingly incapable of providing adequate social services, particularly in the more poverty-stricken rural areas of the country. Among other, at the root of the third sector’s inability to adequately serve the needy, is a lack of funding caused by poor funding policies and uninformed financial resource allocation decision making. As such, this study set out to develop an automated financial resource allocation decision making model that would provide extensive organised data to better inform the allocation decision making process – the first component of the study. It was also purposed to provide a range of otherwise lacking empirical data on the third sector to determine service and staffing norms, patterns of funding and to assess financial management of this sector. In so doing the Community Chest of the Western Cape was selected to serve as the locus of the study – their existing manual allocation approach was analysed and a new more sophisticated automated model was developed. Data generated by the model pointed to a further research need, that of a better understanding of the funding and financial management practices of the third sector. This gave rise to the third component of the study, a survey of 232 beneficiary organisations of the Community Chest. An analysis of the data generated by the model and collected from the survey highlighted yet another need, the poor financial management acumen of the sector. In order to address this need and hence the efficacy of the model, a survey of 207 University of Cape Town management accounting students was conducted to determine the feasibility of using their financial management knowledge and skills to support financially and IT-illiterate organisations – the fourth component of the study. The study primarily adopted a quantitative research paradigm; the research design was exploratory-descriptive and used a primary data design with limited secondary data analysis. Data was captured in MS Access and analysed using Statistica and MS Excel. Results indicated that the country’s funding policies were wanting and that the allocation of state and state-controlled funding agency resources were not being allocated in concert with adopted policy. In almost all cases the poorer rural areas had and received fewer resources. Most organisations surveyed were not financially secured and their ability to fundraise was very limited. Their financial management ability was not good. Fortunately a substantial number of accounting students indicated a willingness to improve the financial management ability of such needy organisations. The study concludes by recommending further development of the model, utilisation of accounting students and calls for a major assessment of third sector needs, its funding and financial management. It also recommends the formulation of new funding policies.
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