Budgeting the Non-Profit Organization: An Agency Theoretic Approach

摘要

The paper studies the relation between the government and the non-profit organization from an agency theoretic perspective. Contracting out the production to the non-profit organization, makes it necessary to the government to provide incentives for the non-profit organization to make choices which will maximize the government's utility. The agency theory stresses the role of the budget structure in the relation between these two parties. The consequences of different forms of budgeting to the maximization process of the government are both described and modelled. The latter is done by postulating a utility function for the government. The optimization of the utility function, subject to the utility function of the bureaucrats of the non-profit organization, will be studied both for the case in which the government has perfect foresight, as well as the case in which the government has imperfect foresight.