Assessing Potential Accounting Manipulation: the Financial Characteristics of Charitable Organizations with Higher than Expected Program-Spending Ratios

Trussel, John M.

doi:10.1177/0899764003257459

Cited by 98 publications

(78 citation statements)

References 16 publications

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“…Although previous studies were more focused on the overall expenditures as compared to the specific expenditure on each program or activities (Trussel 2003;William & Robert 2003;Zimmermann & Stevens 2006), by not having an amount limitation could give some benefits where certain organizational objectives can be achieved. This happens especially when it is involved with a high amount of money in the distributing process.…”

Section: Limit Of Amount Approvalmentioning

confidence: 99%

A Case Study of Internal Control Practices in Islamic Non-Profit Organisations in Malaysia

Kamaruddin

Ramli

2017

AJAG

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Section: Limit Of Amount Approvalmentioning

confidence: 99%

A Case Study of Internal Control Practices in Islamic Non-Profit Organisations in Malaysia

Kamaruddin

Ramli

2017

AJAG

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“…The American Institute of Philantrophy, another major intermediary (www.charitywatch.org), follows a similar set of criteria in its evaluations. Evidently, while rating charitable organizations based just on financial metrics allows these entities to expand their services, this practice may also render the reliability of their ratings suspect, especially considering the empirical research that reports inaccuracies and manipulation in the financial statements of nonprofit organizations (Trussel 2003, Krishnan et al 2006). …”

Section: Propositionmentioning

confidence: 99%

An Internet-Enabled Donor-to-Nonprofit (D2N) Marketplace

Özdemir

Altınkemer²,

De³

et al. 2009

SSRN Journal

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Online intermediaries have recently started offering database services to donors and certification services to nonprofit organizations through the Internet. We conceptualize a Donor-to-Nonprofit (D2N) marketplace as an online intermediary that offers these two services and examine its effect on fundraising strategies of nonprofit organizations using an analytical model based on spatial competition under incomplete information and with donor search. We characterize the signaling equilibria where certification of quality conveys sometimes clear and sometimes noisy information about organizational effectiveness in generating socially valuable services.Interestingly, the emergence of the marketplace may lead to a drop in the total net fundraising revenues in the market, despite the fact that its database service eliminates search costs for some of the donor population. We also show that, given the choice, a service-maximizing D2N marketplace prefers a less costly and less accurate certification process over a more costly and more accurate one.

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“…While these ratios have produced some important insights, their inclusion in rating tables has been criticised as being potentially "highly misleading to donors" (Sargeant et al, 2009, p. 339), and as possibly stimulating NPOs to manipulate their financial metrics in order to improve their ratings (Trussel, 2003). Research suggests that societal pressures, impacting on officers of NGOs as felt responsibility, which result from the publishing of these metrics can result in a myopic pursuit of financial efficiency.…”

Section: Financial Metricsmentioning

confidence: 99%

“…These two studies reinforce the view that pursuit of financial efficiency may lead to a selfreinforcing loop of cost-cutting, resulting in reductions in internal investment, staff burnout and reductions in services (Gregory & Howard, 2009;Lecy & Searing, 2012;McGregor-Lowndes et al, 2014). Another more ominous possibility is that the practice may be stimulating NPOs to manipulate their financial metrics in order to improve their ratings (Trussel, 2003). This view is supported by Gregory and Howard (2009) who comment:…”

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confidence: 99%

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An Accountability Framework for the Financial Sustainability of Australian International Development Organisations

Booth¹

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Non-government organisations (NGOs) are non-profit organisations (NPOs) that contribute toward the support and development of people and countries in need. They play an important humanitarian role in the developing world, acting as a conduit for government funding and an expression of donor concern.NGOs need to be financially sustainable in the long term as they face economic uncertainties. Their situation is more difficult than government or business organisations. For example, governments can access tax revenues and business can access the financial markets. Further, governments and business organisations have access to ongoing feedback for gauging and guiding the current and future sustainability of their enterprise through the use of well-developed tools, or the operation of the market itself. The NPO sector lacks the full discipline of business markets and analysts' metric tools for gauging current and future sustainability.Exacerbating these deficiencies are different stakeholder expectations for the stewardship of NGO resources in order to achieve their mission. The public have a perverse view about overhead expenses and there are confounding issues where beneficiaries are not the principal funders.Given the importance of financial sustainability, arguably there should be a level of accountability by officers for its achievement. While there are formal 'solvency' accountability regimes for organisations there are no similar requirements for the longer-term goal of financial sustainability. Extensive research exists proposing operational approaches to increasing organisational sustainability; however, there is no accepted framework which facilitates accountability for financial sustainability over time.This thesis first investigates the understanding of accountability for financial sustainability by officers of three, long-term, high-integrity Australian NGOs. Next the research assesses whether financial metrics can assist in enhancing NPO accountability through diagnosing and monitoring financial sustainability. The research aims are operationalised by using a qualitative participatory methodology. vi The research found that formal demonstrations of accountability for financial sustainability were mixed. 'Felt' responsibility-that is, responsibility informally accepted rather than externally imposed-presented as a strong lever for achieving an NGO's mission, with tensions identified between mission-generated felt responsibility and more traditional formal accountabilities. Officers of participating NGOs expressed personal responsibility for financial sustainability; however, no shared understanding of financial sustainability was observed either within or among the participant NGOs. The focus was commonly on individual strategies or shortterm solvency.While the outcomes of the research varied between participating NGOs, the theorybased framework developed proved successful as a diagnostic tool, with elements adopted, or intended for adoption, as measurement and monitoring tools.

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Assessing Potential Accounting Manipulation: the Financial Characteristics of Charitable Organizations with Higher than Expected Program-Spending Ratios

Abstract: Accounting manipulation is defined as when the managers of an organization intention-

Cited by 98 publications

References 16 publications

A Case Study of Internal Control Practices in Islamic Non-Profit Organisations in Malaysia

A Case Study of Internal Control Practices in Islamic Non-Profit Organisations in Malaysia

An Internet-Enabled Donor-to-Nonprofit (D2N) Marketplace

An Accountability Framework for the Financial Sustainability of Australian International Development Organisations

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