This exploratory study has three objectives: (1) to understand the various ways academics, consultants, and practitioners conceptualize operating reserves; (2) to explore differences among academic findings, consultant recommendations, and nonprofit leader perceptions of operating reserves; and (3) to identify how practitioners operationalize operating reserves within their organizations. Using intensive interviews with nonprofit executives, we find that the operating reserve ratio ( ORR ) commonly used in the nonprofit literature does not accurately indicate whether an organization holds an operating reserve according to nonprofit leaders. In addition, results indicate that experienced nonprofit leaders perceive a variety of other fund types including endowment and investment savings as well as ability to borrow, other assets, sister foundations, and donor networks as legitimate substitutes for a reserve.OPERATING RESERVES CAN AID NONPROFIT ORGANIZATIONS in stabilizing periods of fi scal stress by providing a cushion against unexpected events, an opportunity to seize a strategic opportunity, or even the ability to smooth cash fl ow problems in contracting and grant relationships. 1 Within the recent fi scal climate, the need for such funds seems to be on the rise among nonprofits. In 2012, more human service organizations drew from operating reserves, froze or reduced salaries, or closed offi ces or programs than in prior years (Pettijohn et al. 2013 ). Although nonprofi t organizations should ideally hold an appropriate amount of highly liquid unrestricted assets in reserve to address fi scal shock or unanticipated opportunity, many organizations face challenges in creating and maintaining such reserves for myriad reasons . Understanding the complex challenges presented by operating reserves from both research and fi eld vantages is necessary to enable academics and consultants to make sound recommendations and for nonprofi t leaders to make prudent decisions regarding reserves.Th e authors express their appreciation to the nonprofi t leaders who participated in this study and the journal ' s anonymous reviewers whose critique improved the work. We dedicate this article to the memory of Woods Bowman whose foundational scholarship on nonprofi t fi nance has inspired and challenged us.

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The DataArts dataset, although it covers mostly arts organizations, has emerged as an alternative source of data for nonprofit research. Most existing studies use the IRS 990 data, which is considered a reliable source for research. We evaluate the reliability of the DataArts dataset by comparing the consistency of the values reported to the DataArts Cultural Data Profile (CDP) and to the 990 forms. We: 1) examine correlations between the same measures in each dataset, 2) assess the cumulative distribution of differences between the two datasets and 3) compare the results of the same empirical model conducted with the DataArts dataset and 990 data, respectively. We conclude that the DataArts dataset is an adequate and reliable source of financial and performance information, but researchers should be aware of a few limitations.

To better evaluate the effectiveness of overhead-free donations on giving behavior, we seek to further investigate the robustness of the findings from Gneezy et al. using a nonstudent population. In an online experiment, we test whether (a) the level of overhead costs affects giving decisions and whether (b) overhead aversion disappears once donors are informed that an anonymous donor has already covered all overhead costs. Results show that donations decrease as overhead spending increases when donors have to pay for overhead. However, unlike the original article, we find mixed results when someone else covered overhead costs. Participants exposed to a nonprofit with a 33% overhead ratio where overhead was already covered still displayed overhead aversion. However, this aversion disappeared at a high overhead ratio of 67%. The overall results remain unchanged after controlling for demographics. Our results hold important implications for nonprofit organizations who must find a careful balance between appealing to donors for short-term financial gain and addressing the need to alter skewed donor expectations toward financial efficiency in the long run.

Due to increased competition for scarce resources, scholars and practitioners have been devoting more attention to identifying the factors that drive private contributions to nonprofit organizations in recent years. This study aims to investigate whether capital structure decisions made by nonprofit managers have an impact on future contributions from individual donors. More specifically, it asks whether debt is associated with a reduction in future financial support. This study relies on data derived from the DataArts Cultural Data Profile to answer this question. It utilizes a log-log model where the dependent variable is defined as total private contributions in the current period. Results indicate that an increase in the interest expense to total expense ratio is associated with a decrease in future contributions. A nonprofit's debt to assets ratio, however, does not have a statistically significant impact on future contributions.

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Purpose The purpose of this paper is to use data on municipal bond sales in the US primary market for the period 1984–2007 to explore the effect of debt levels on the cost of borrowing for state governments. Design/methodology/approach This paper employs OLS and two-stage least squares regression model using instrumental variables. Findings The empirical analysis finds that despite the steady increase of state debt in recent years, there is no evidence that the market penalizes states with high-debt levels relative to other states. Originality/value The findings urge states to exercise prudence when making borrowing decisions because high-debt levels have the potential to crowd out spending for essential services and can lead to budget imbalances in the long term.

Nonprofit leaders use various strategies when making financial decisions and balancing current mission fulfillment with long-term financial stability is a delicate act for nonprofit organizations. From a financial management perspective, nonprofit managers and executives looking to sustain a healthy organization must successfully manage the tension between pursuing the mission and preserving organizational and financial viability. This study explores potential factors that influence nonprofit arts organizations' decisions to issue financial debt and determine whether these organizations balance financial obligations by exercising pecking order or static trade-off decisions. We use the DataArts database and investigate whether donorrestricted endowments have an impact on financial debt of arts nonprofit organizations. Model estimates show that organizations with a donor-restricted endowment are less likely to issue debt and have lower debt ratios on average. This study finds support for both pecking order theory and static trade-off theory, which indicates that there is no one-dominant capital structure theory to explain the capital structure of arts nonprofits.