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The size effect in the administration costs of charities

K�hler, J�rgen; Sargeant, Adrian


J�rgen K�hler

Adrian Sargeant


© 2002, Copyright Taylor & Francis Group, LLC. There has been considerable interest of late in the issue of the efficiency of voluntary organizations with authors such as Wise (1997) and Hyndman and McKillop (1999) noting appreciable economies of scale across the size categories investigated. In this article we develop this analysis, fitting different functional forms to the relationship between size and the ratio of administration costs to total expenditures (ACE). We show that an inverse function provides a simple, plausible and adequate representation of this relationship. We apply the estimated inverse function to derive a size-adjusted benchmark for the comparison of ACE ratios between charities. This adjusted benchmark can replace the traditional practice of comparing administration cost ratios to the sector average when assessing managerial efficiency.


Kähler, J., & Sargeant, A. (2002). The size effect in the administration costs of charities. European Accounting Review, 11(2), 215-243.

Journal Article Type Article
Publication Date Jul 1, 2002
Journal European Accounting Review
Print ISSN 0963-8180
Electronic ISSN 1468-4497
Publisher Taylor & Francis (Routledge)
Peer Reviewed Peer Reviewed
Volume 11
Issue 2
Pages 215-243
Keywords charity, administration cost
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