Revenue Structure, Financial Stability and Financial Performance of NPOs in Developing Countries: Does Revenue Diversity Lead to Better Performance?

The revenue structure of nonprofit organizations is crucial to their continued existence and growth. This study investigates the accounting information system's role in identifying funding sources. It examines the extent to which the revenue structure influences the financial performance of Iraqi nonprofits. In addition, this study investigates the impact of revenue streams on the total annual revenue, financial performance, and financial stability of nonprofit organizations. This paper presents a quantitative model for identifying revenue streams that substantially impact nonprofit organizations’ financial performance. It determines if the funding structure influences nonprofit organizations’ financial performance. The study sample comprises 135 Iraqi organizations registered with the NPO section of the Secretariat of the Iraqi Council of Ministers from 2014 to 2020. Results indicate that nonprofit organizations with greater revenue concentration are more likely to have superior financial performance. It is also more probable that nonprofit organizations will have solid financial performance ratios if program revenue is increased. In addition, Iraqi NGOs rely predominantly on external revenue sources, as it is more likely that NGOs will have more excellent financial stability if they receive more donations from abroad. Such outcomes could also assist nonprofit administrators in securing long-term funding sources for their organizations. This study contributes to accounting literature by examining the effect of revenue diversity on the financial performance of nonprofit organizations in developing nations. It also explains why local nonprofits rely on foreign donations rather than local grants.