ARNOVA Presentations
2000 (presenters in bold)
Toward a More Informed Evaluation of the Financial Statements of Charitable Organizations, A.A. Roberts, William Baber (George Washington University), and G. Visvanathan (basically same paper as presented at national AAA meeting in August 2000)
Fund Raising and Administrative Costs: A Comparison of IRS Form 990, Audited Financial Statements Report, and Professional Fundraiser Registration Data, J. Cordes and Sarah Wilson (Center on Nonprofits and Philanthropy).
Survey of Nonprofit Fund Raising and Administrative Expenses: Results and Analysis, Patrick Rooney (Indiana University) and Tom Pollak (NCCS, Urban Institute)
Risky Business? Nonprofits after Widespread Disclosure, Janet Greenlee, Michael Geary and John Trussel (survey of accounting firms about perceived risk of nonprofit clients)
Reegineering Nonprofit Accountability: Measuring Performance in Nonprofit Organizations, Elizabeth Keating (Northwestern University) and Peter Frumkin
An Examination of Differences between Financial Information Provided in IRS Form 990 and Audited Financial Statements of U.S. Private Colleges and Universities, Mary Fischer, Teresa Gordon and Marla Kraut
1999 (presenters in bold)
Executive Compensation and Financial Performance in Nonprofit Organizations: An Intra-Sector Analysis, Sandra Richtermeyer (U of Wyoming)
Board Structure and Organizational Efficiency: The Case of Nonprofits, J. Callen, A. Klein and Daniel Tinkelman (Pace University)
Emerging Information Technology Applications for Nonprofit Organizations, Denise Nitterhouse (De Paul University)
The Impact of Regulatory Standards on Donors’ Decisions to Support Nonprofit Organizations, Teresa Gordon, S. Khumawala and L. Parsons
Predicting Financial Distress in Nonprofit Organizations, Janet Greenlee and John TrusselIssues in Not-for-Profit AccountingNonprofit Entities' Financial Reporting CommitteeGovernment and Nonprofit SectionAmerican Accounting AssociationJuly 9, 1993
1. Jurisdiction and comparability problems
2. Measures of operations
3. Implementation Issues
4. Functional expenses and natural classification of expenses
5. Capitalization of Collections
6. Service efforts and accomplishments (SEA)
7. Economic Consequences of Standards
8. Users and Uses of Information and Focus of Financial Reporting
9. Taxonomy of Organizations
Available from my web page:
http://www.its.uidaho.edu/tgordon
New Developments Since 1993 Report
Data is more available to public and to researchers
New Accounting Standards
Nos. 116, 117 and 124 have been implemented
SOP 98-2 on Joint Activities becomes effective
Changing laws
Intermediate sanctions
Improved accessibility of Form 990
Watchdogs merging
Watchdogs merging
"When watchdogs merge...what to expect". Better Business Bureau Wise Giving Guide, (Holiday 2000): p. 3, 5. Subject file: 670
The National Charities Information Bureau and the Philanthropic Advisory Service of the Council of Better Business Bureaus have merged operations. The office will be in Arlington, VA, but the name of the new entity has yet to be determined. A quarterly publication, Better Business Bureau Wise Giving Guide, will be published to disseminate charity evaluations and donor advice, and a new Web site will be launched shortly.
Fund raising costs
"Charities' zero-sum filing game". Chronicle of Philanthropy vol. 12 (18 May 2000) p. 1, 21-4.
Abstract: A computer analysis of 990 forms by the Chronicle of Philanthropy has determined that many of the nonprofits receiving more than $500,000 in private donations do not report any spending on fundraising. This finding tallies with a recent report conducted by the Urban Institute. One cause for the underreporting may be that charities don't want donors to believe they have high fundraising costs, thus designating more for program. However, not reporting legitimate fundraising costs is a violation of IRS regulations.
Current research project:
"The 'Cost' Project
Funded by Center on Philanthropy & the Urban Institute.
Principal investigators are political scientists but several GNP section members are on the Technical Advisory Committee (including Janet Greenlee, Denise Nitterhouse and Bill Stout)
Goal: Determine the “true cost” of fund raising and administration. The goal is to first figure out what people are including in fundraising costs (the administrative cost portion of this study has been pretty much forgotten) and then come up with some guidelines for auditors, managers, etc. regarding what they should include in fundraising costs
Multi-year time frame. Survey will be mailed to large sample of nonprofit organizations. There are 3 versions (for fund raisers, accountant, and CEO)
Utilizing Form 990 Data in Research
Quality of the Data
Froelich, Karen A. "The 990 return : beyond the Internal Revenue Service". Nonprofit Management & Leadership vol. 8 (Winter 1997) p. 141-55.
Abstract: Details the history of use of IRS Form 990 and its positive qualities for examining the nonprofit sector. But in spite of the increasing pressure for its greater availability, the form has limitations. An estimated seventy percent of exempt organizations fall below the $25,000 threshold; churches and religious charities are also excluded. Other complications arise from the inconsistency between in-house statements and audited financial statements. Failure to file, mistakes in addition or omission are common. Given the increasing attention on the sector, the author encourages nonprofits to be doubly aware of the potency of Form 990 in the public's examination of the organization.
Internal Revenue Service 990 Data: Fact or Fiction? Karen A. Froelich and Terry W. Knoepfle, Nonprofit and Voluntary Sector Quarterly, 1996, Volume 25, number 1
Abstract: This exploratory study examines the reliability and validity of Internal Revenue Service (IRS) 990 data, an increasingly prevalent source of financial measures in the research of nonprofit organizations today. Correlations between selected financial measures taken from the IRS returns of 270 nonprofits and identical measures gathered from the same organizations via mail questionnaire are examined, followed by examination of financial statements and interviews with participants in the accounting process from a subsample of the organizations. High correlations show the IRS 990 Returns to be a generally reliable source of financial data, although this varies by entry, organizational size, and NTEE category. The validity of this data, however, is questionable. The growing prevalence of expense shifting combined with a lack of rules, guidlines, and monitoring of internal expense allocations allows for increasing distortions in the financial picture portrayed by the IRS 990 Return.
Froelich, Karen A.; Knoepfle, Terry W.; Pollak, Thomas H. "Financial measures in nonprofit organization research : comparing IRS 990 return and audited financial statement data". Nonprofit and Voluntary Sector Quarterly vol. 29 (June 2000) p. 232-54.
Abstract: The authors compared 350 nonprofit organizations' audited financial statements with their Form 990 in order to determine the reliability and completeness of the 990. Noting that the Form 990 has become a very important research tool for anyone studying the sector, the issue has become the adequacy of the form itself. Their study concludes that the form is an adequate source of basic financial data, but some variables should be used with caution. With bibliographic references.
Who Do You Trust? Comparing Data on Skilled-Nursing Facilities From the Internal Revenue Service and Health Care Financing Administration, Marie Gantz et al., Nonprofit and Voluntary Sector Quarterly, 12/1/1999, Volume 28, number 4
Abstract: This article explores the finances of nonprofit skilled-nursing facilities (SNFs) by comparing two sources of data: Internal Revenue Service (IRS) Form 990s and Health Care Financing Administration (HCFA) cost reports. The result shows that the amounts reported to both agencies for bottom-line figures, such as total assets and liabilities, are consistent. More than 80% (263) of the 412 SNFs examined reported either total liabilities or total assets to the HCFA and the IRS that matched within 10%; nearly 60% (235) reported both variables within 1%. However, as the breakout of the financial data becomes more detailed, more inconsistencies are found. Agreement between sources drops rapidly from more than 80% for total liabilities and assets to below 10% for expenses. This may be due to differences in the way that the IRS and HCFA define financial variables, or it may be because preparers are not knowledgeable or careful enough, or because organizations lack adequate accounting systems that allow for accurate, consistent reporting.
Using 990 Data for Financial Analysis
Toward a More Informed Evaluation of the Financial Statements of Charitable Organizations, A.A. Roberts, William Baber (George Washington University), and G. Visvanathan (paper presented at national AAA meeting in August 2000)
Greenlee, Janet S.; Trussel, John M. "Predicting the financial vulnerability of charitable organizations". Nonprofit Management & Leadership vol. 11 (Winter 2000) p. 199-210.
Abstract: Presents a prediction model to determine the financial vulnerability of nonprofits. Such a tool can be used by potential donors, grantmakers, creditors, as well as boards and staff.
Current research project:
The Financial Risk Project
Funded by Aspen Institute
Principal investigators: Janet Greenlee and John Trussel
They had previously developed one for the entire sector (published in this month's NML), but they are now dividing the data into sectors & developing models for each & then assigning a risk rating system based on which quintile they fall into. They have submitted a paper on topic for the AAA annual meeting in Atlanta.
Janet says: If anyone there is interested in applying for an Aspen grant, I'd be happy to help them with format, etc. They fund less than 10% of applicants and vita really counts (probably as much as application). Also important is the dissemination plan. Elizabeth Keating also has an Aspen Grant and could provide her insights on how to be successful.
Current research project:
The Strengthening Project
Funded by Center on Philanthropy
Goal: The purpose of this project was to see if providing ongoing management consulting (over a 3 year period) would improve "effectiveness" and "efficiency." Subjects are 100 not-for-profit organizations that were divided into 2 groups -- one received ongoing consulting, one didn't. Janet Greenlee currently has the database that they collected over the three-year period on the 100 NPOs and will be looking for relationships (under her Senior Visiting Researcher position at Indiana University’s Center on Philanthropy)
Other nonprofit related recent publications by GNP section members (very incomplete!)
Greenlee, Janet S. "Nonprofit accountability in the Information Age". New Directions for Philanthropic Fundraising vol. 27 (Spring 2000) p. 33-50.
Abstract: The easy availability of information about nonprofits, especially the Form 990 and lists of charitable solicitors, will have an impact on stakeholders, including potential donors, regulators, and academic researchers. Will it be a boon or a problem that such information as executive salaries, payments to consultants--not to mention, accounting errors--are made known at large? With bibliographic references.
David Coy, Mary Fischer and Teresa Gordon, “Beyond Decision Usefulness: A New Approach for College and University Annual Reports,” Critical Perspectives on Accounting, forthcoming 2000, Vol. X, pp. 1-31
Abstract: This paper argues that the decision usefulness paradigm, which currently dominates accounting theory, is not an adequate basis for considering external reporting. A theoretical foundation is developed that draws upon older ideas of stewardship, as well as more recent notions of public accountability and social responsibility. The specific case of college and university reporting is used to delineate the impact a public accountability conceptual framework could have. The new paradigm is needed to address changes in society and in the environment of higher education in the US and other Western-style countries during the last three decades of the twentieth century. Numerous scandals and other dubious affairs involving even the most senior public officials has brought about an erosion of public confidence, and led to widespread demands for improved accountability by public officials and institutions. Comprehensive disclosures on the condition and performance of institutions would move college and university external reporting beyond decision usefulness and towards true public accountability.
Teresa P. Gordon and Saleha B. Khumawala, “The Demand for Nonprofit Financial Statements: A Model of Individual Giving,” Journal of Accounting Literature, Vol. 18, 1999, pp. 31-56.
Abstract: Relatively little is known about how donors use financial statements of not-for-profit organizations in their decision making process. This paper uses social exchange theory as the foundation to develop a model of individual giving. The model provides a structure for discussing the implications of donor motivations and decisions on the demand for and the use of financial information about not-for-profit organizations. Based on this model, a series of propositions are developed as a guide for future accounting research. A better understanding of the decision making process through which donors make giving decisions should assist accounting regulators and standard setters in the policy making process. Implications of particular interest to standard setters include the importance of comparability and the need to devote special attention to, and perhaps additional disclosure requirements for, the types of entities that solicit contributions from people who will not directly or indirectly benefit from their gifts. The health of the nonprofit sector is dependent on donors making wise resource allocation decisions. Standard setters can help by mandating disclosures that best support the decisions donors make.