Nonprofit Governance and Financial Stability: A Study of Government-Funded Social Services

Nonprofit social service providers are essential in delivering vital services, often with public funding. This study adopts a contingency perspective to explore the relationship between organizational governance and financial stability in publicly funded nonprofit organizations. We use a combination of comparative multilevel analysis (CMA) and fuzzy set qualitative comparative analysis (fsQCA) on a sample of 56 nonprofit social service providers in Vienna, drawing on multiple data sources, namely financial records, website data, an organizational survey, and expert assessments from public funding officials. Our exploratory analysis suggests that a variety of governance mechanisms – metrics routines, board independence, transparency, and formal representation of stakeholders – promote financial stability. In line with key tenets of contingency theory, the appropriate combination of these mechanisms varies according to organizational size. We therefore formulate two propositions regarding which relatively simple governance mechanisms are sufficient for small organizations, and which more complex ones are sufficient for larger ones.