scholarly journals The Truth about Honesty in the Nonprofit Sector

2021 ◽  
pp. 188-210
Keyword(s):  
Nonprofit Organizations ◽  
Financial Reporting ◽  
Nonprofit Sector ◽  
The United States ◽  
Financial Information ◽  
Benford’S Law ◽  
Non Profit ◽  
External Monitoring ◽  
Benford's Law ◽  
Program Costs

The nonprofit sector aims to provide services with a public benefit, but how honest is it? Since the nonprofit sector relies on fundraising efforts to support its administration and program costs, and since poor financial performance can scare potential contributors away, nonprofit organizations have an incentive to appear fiscally healthy regardless of their true condition. We examine the factors associated with the honesty of organizations in the nonprofit sector using Benford’s Law, which tests for abnormalities in data that result from intentional falsification. Using the 990 tax filings for 51,010 nonprofits in the United States from 2012 and 2013, we find evidence of problems in the accuracy of their financial reporting. Those organizations with more external users of their financial information tend to conform more closely with Benford’s Law, suggesting more external monitoring of non-profit organizations may decrease the likelihood of misreported financial information.

scholarly journals The Truth about Honesty in the Nonprofit Sector

2020 ◽  
Author(s):  
Bruce D. McDonald ◽  
Christopher B Goodman
Keyword(s):  
Nonprofit Organizations ◽  
Financial Reporting ◽  
Nonprofit Sector ◽  
The United States ◽  
Financial Information ◽  
Benford’S Law ◽  
Non Profit ◽  
External Monitoring ◽  
Benford's Law ◽  
Program Costs

The nonprofit sector aims to provide services with a public benefit, but how honest is it? Since the nonprofit sector relies on fundraising efforts to support its administration and program costs, and since poor financial performance can scare potential contributors away, nonprofit organizations have an incentive to appear fiscally healthy regardless of their true condition. We examine the factors associated with the honesty of organizations in the nonprofit sector using Benford’s Law, which tests for abnormalities in data that result from intentional falsification. Using the 990 tax filings for 51,010 nonprofits in the United States from 2012 and 2013, we find evidence of problems in the accuracy of their financial reporting. Those organizations with more external users of their financial information tend to conform more closely with Benford’s Law, suggesting more external monitoring of non-profit organizations may decrease the likelihood of misreported financial information.

scholarly journals Reliability of Financial Information from the Perspective of Benford’s Law

Entropy ◽  
2021 ◽  
Vol 23 (5) ◽  
pp. 557
Author(s):  
Ionel Jianu ◽  
Iulia Jianu
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Financial Statements ◽  
Financial Information ◽  
Benford’S Law ◽  
Professional Judgment ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Benford's Law ◽  
Before And After

This study investigates the conformity to Benford’s Law of the information disclosed in financial statements. Using the first digit test of Benford’s Law, the study analyses the reliability of financial information provided by listed companies on an emerging capital market before and after the implementation of International Financial Reporting Standards (IFRS). The results of the study confirm the increase of reliability on the information disclosed in the financial statements after IFRS implementation. The study contributes to the existing literature by bringing new insights into the types of financial information that do not comply with Benford’s Law such as the amounts determined by estimates or by applying professional judgment.

scholarly journals The Impact of Audit Committees on US Nonprofit Organizations’ Governance

2020 ◽  
Vol 27 (1) ◽  
pp. 30
Author(s):  
Husam Abu-Khadra
Keyword(s):  
Nonprofit Organizations ◽  
Audit Committee ◽  
Nonprofit Sector ◽  
The United States ◽  
Preliminary Evidence ◽  
Securities And Exchange Commission ◽  
Audit Committees ◽  
Public Companies ◽  
Policy Makers ◽  
The Impact

All public companies in the United States are required by the securities and exchange commission (SEC) to have an audit committee. Such enforcement can be attributed to high-profile corporate failures and their connections to nonexistence, ineffective or weak audit committees and governance. Despite the efforts to establish a similar argument and enforcement structure for the nonprofit sector, the internal revenue service (IRS) has not pursued legislation, and no empirical evidence has been established to support any public policy changes. This paper contributes to the literature in this field by being the first study to examine 124,980 nonprofit organizations during the period of 2010 to 2015 to test the association between governance in nonprofit organizations and audit committees. We included fifteen measures from these organizations’ IRS Form 990 filings to formulate the study variables. We found significant evidence that the existence of audit committees improves the governance scores of nonprofit organizations. Our study findings have significant implications for nonprofit executives, policy makers and any other interested parties; these findings act as preliminary evidence to support more proactive policies regarding mandatory audit committees for nonprofit organizations. 

scholarly journals THE LINK BETWEEN EARNINGS MANAGEMENT AND DIGITAL PATTERN / O elo entre gerenciamento de resultado e padrão digital

2014 ◽  
Vol 14 (1) ◽  
pp. 351
Author(s):  
Jennifer Martínez Ferrero ◽  
Beatriz Cuadrado Ballesteros ◽  
Marco Antonio Figueiredo Milani Filho
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Poor Quality ◽  
Financial Data ◽  
Benford’S Law ◽  
Similar Distribution ◽  
Data Set ◽  
Benford's Law ◽  
High Degree

<p>According to Dechow and Dichev (2002) and Lin and Wu (2014), a high degree of earnings management (EM) is associated with a poor quality of information. In this sense, it is possible to assume that the financial data of companies that manage earnings can present different patterns from those with low degree of EM. The aim of this exploratory study is to test whether a financial data set (operating expenses) of companies with high degree of EM presents bias. For this analysis, we used the model of Kothari and the modified model of Jones (“Dechow model” hereafter) to estimate the degree of EM, and we used the logarithmic distribution of data predicted by the Benford’s Law to detect abnormal patterns of digits in number sets. The sample was composed of 845 international listed non-financial companies for the year 2010. To analyze the discrepancies between the actual and expected frequencies of the significant-digit, two statistics were calculated: Z-test and Pearson’s chi-square test. The results show that, with a confidence level of 90%, the companies with a high degree of EM according to the Kothari model presented similar distribution to that one predicted by the Benford’s Law, suggesting that, in a preliminary analysis, their financial data are free from bias. On the other hand, the data set of the organizations that manage earnings according to the Dechow model presented abnormal patterns. The Benford´s Law has been implemented to successfully detect manipulated data. These results offer insights into the interactions between EM and patterns of financial data, and stimulate new comparative studies about the accuracy of models to estimate EM.</p><p>Keywords:<strong> </strong>Earnings management (EM). Financial Reporting Quality (FRQ). Benford’s Law.</p>

scholarly journals An Exploratory Study of Types of Innovation in US Foundations

2019 ◽  
Vol 9 (4) ◽  
pp. 93 ◽  
Author(s):  
Kristina Jaskyte Bahr
Keyword(s):  
Nonprofit Organizations ◽  
Social Economic ◽  
Nonprofit Sector ◽  
External Environment ◽  
The United States ◽  
Political Life ◽  
Staff Members ◽  
Rich Description ◽  
Different Types ◽  
Administrative Innovations

While foundations contribute in significant ways to the United States’ social, economic, and political life, they are experiencing increasing demands placed upon them by their own sector and need to respond to the major changes in their external environment. In order to create breakthrough solutions to long-standing problems, foundations have to become more innovative and seek to experiment and find new approaches. Unfortunately, innovation discourse within foundations has received little attention. This paper fills the gap in the literature as it describes the results of a study that explored different types of innovations implemented in foundations. More specifically, staff members of 17 US foundations that are known for supporting innovation in nonprofit organizations, were asked to describe programmatic and administrative innovations implemented in their own foundations. The results showed that foundations that support innovation are in fact innovative themselves. They implemented numerous innovations in programmatic and administrative, financial, and structural areas. This paper provides a rich description of a broad range of innovations implemented within each of those areas. The contribution of this study and insights are significant at this particular time when foundations’ roles and impact on social change are questioned. The results can enrich our discussion of where foundations can go from here in terms of becoming innovative themselves in order to be able to support and enhance innovation in the nonprofit sector.

The Impact of Regulation on the U.S. Nonprofit Sector: Initial Evidence from the Nonprofit Integrity Act of 2004

2011 ◽  
Vol 25 (1) ◽  
pp. 107-125 ◽  
Author(s):  
Daniel G. Neely
Keyword(s):  
Nonprofit Organizations ◽  
Financial Reporting ◽  
Nonprofit Sector ◽  
Reporting Quality ◽  
Charitable Organizations ◽  
Time Period ◽  
Financial Statement Audit ◽  
Before And After ◽  
Financial Scandals ◽  
The Impact

SYNOPSIS: The early 2000s revealed a series of high-profile financial frauds in the corporate and nonprofit sectors. In response to several of these financial scandals, California passed the Nonprofit Integrity Act (NIA) of 2004. This seminal piece of governance regulation sought to increase financial transparency and mitigate fundraising abuses by California charitable organizations. This study examines the characteristics of California charitable organizations before and after the Act to understand the initial impact the Act had on nonprofit organizations. Key findings from the study include limited reported improvement in financial reporting quality and an increase in accounting fees following the implementation of the Act. California nonprofits subject to the Act’s provisions did exhibit an increase in executive compensation following the implementation of the Act; however, the increase was less than that exhibited by the population of nonprofits during the same time period. Overall, the results of this study suggest that the initial impact of regulations similar to the NIA is greatest for organizations that did not previously have a financial statement audit.

scholarly journals The COVID Wildfire: Non-Profit Organizational Challenge and Opportunity

2020 ◽  
Vol 11 (2) ◽  
pp. 8
Author(s):  
Jeff Loomis
Keyword(s):  
Nonprofit Organizations ◽  
Business Models ◽  
Nonprofit Organization ◽  
Nonprofit Sector ◽  
Non Profit ◽  
Program Delivery ◽  
De Se ◽  
Key Barrier ◽  
Organizational Challenge ◽  
Innovative Approaches

Nonprofit organizations in Canada were significantly impacted by COVID-19, including lost revenue and needing to adjustthe program delivery. The lack of technology capacity in the nonprofit sector is a key barrier for many nonprofit organizations to adapt to delivering programs online. Momentum, a Calgary-based nonprofit organization, experienced both financial and programmatic challenges due to COVID-19. Momentum pivoted program delivery to provide supports during the COVID-19 lockdown and developed innovative approaches to online programming. Since the start of the COVID-19 pandemic in Canada, Momentum was able to rapidly develop its capacity to use technology for online programming with the support of critical new funding. Many nonprofits will have to transform their business models to not only survive but thrive in the post-COVID world.Les organismes à but non lucratif (OBNL) au Canada ont été fortement touchées dans le contexte de la pandémie de laCOVID-19, notamment à cause d'une perte de revenus et de la nécessité de se réajuster afin de prêter des services enligne. Le manque de capacités technologiques dans le secteur à but non lucratif est un obstacle majeur à l'adaptation denombreux OBNL à la prestation de services en ligne. Momentum, un OBNL basé à Calgary, a connu des difficultésfinancières et de planification en raison de la COVID-19. Par contre, l'organisme a su adapter son offre de services pourfournir un soutien pendant le confinement et a développé des approches innovantes pour la prestation de services enligne. Depuis le début de la pandémie au Canada, Momentum a développé rapidement sa capacité à utiliser la technologiepour offrir des services en ligne grâce à des nouvelles sources de financement qui ont été essentielles pour cetteadaptation. De nombreux OBNL devront transformer leur modèle d'entreprise pour non seulement survivre, mais aussiprospérer dans un monde post-COVID. 

scholarly journals THE ACCOUNTING OF NON-PROFIT ORGANIZATIONS IN PORTUGAL: THE CASE OF PRIVATE INSTITUTIONS OF SOCIAL SOLIDARITY (IPSS)

2012 ◽  
Vol 5 (1) ◽  
pp. 72-82
Author(s):  
Maria da Conceição da Costa Marques ◽  
Vanda Maria Vilarinho Maciel
Keyword(s):  
Nonprofit Organizations ◽  
Nonprofit Sector ◽  
Accounting Standards ◽  
Social Solidarity ◽  
Accounting System ◽  
Non Profit ◽  
Goods And Services ◽  
Accounting Rules ◽  
Indispensable Tool ◽  
Government Body

The nonprofit sector is made up of nonprofit organizations that, by law or custom, do not distribute any profit that may be generated by the Associates. They are institutionally separate from government, are self managed and non-binding. The IPSS, are non-profit institutions, created by private initiative, with the purpose of giving organized expression to the moral duty of solidarity and justice between individuals and they are not administered by the State or a local government body to proceed among others, their goals, through the provision of goods and services. The new accounting system of nonprofit institutions, emerges as an indispensable tool for management, because these organizations are not sufficiently different from business enterprises, public agencies, etc., Management models and practices adopted will be similar. This study deals with the system of accounting standards for non-profit sector entities (ESNL), part of the Accounting Standardisation System (SNC), through which they create their own accounting rules, application-specific entities to continue, under primary, non-profit activities and not distribute to its members or taxpayers any direct financial or economic gain. Key words: accounting standards, ESNL, accounting, financial statements.

Contexts/Settings: Agencies and Organizations in Nonprofit Settings

2013 ◽  
Author(s):  
Jennifer E. Mosley
Keyword(s):  
United States ◽  
Political Participation ◽  
Nonprofit Organizations ◽  
Social Services ◽  
Human Service ◽  
Nonprofit Sector ◽  
The United States ◽  
Service Organizations ◽  
Federal Regulations ◽  
Future Challenges

Nonprofit organizations serve a wide variety of functions and play a particularly important role in providing needed social services in the United States. This entry begins by exploring the roles and origins of the nonprofit sector, reporting on its current scope and scale, and reviewing federal regulations governing nonprofit organizations. Special attention is then given to understanding human service organizations and their financing, including the implications of changing government-nonprofit relationships. Four additional issues facing the sector—accountability, technology, political participation, and diversity, as well as recommendations for meeting future challenges, are also discussed.

CHOICES

2017 ◽  
pp. 157-179
Author(s):  
Leigh Nanney Hersey
Keyword(s):  
Social Media ◽  
Nonprofit Organizations ◽  
Performance Metrics ◽  
Nonprofit Sector ◽  
The United States ◽  
Red Cross ◽  
American Red Cross ◽  
The Public ◽  
Use Of Social Media

Social media is increasing becoming a prominent tool in today's nonprofit sector. By 2010, the largest 200 nonprofit organizations in the United States used social media as a tool to meet their goals (Barnes, n.d.). According to those surveyed the top reason for using social media is for increasing awareness of the organization's mission (90%). In studying the American Red Cross' use of social media, Briones, et al. (2011) found that the use of social media built relationships with the public. This chapter explores the success of a mid-sized nonprofit organization, CHOICES: Memphis Center for Reproductive Health, as it develops a strategic social media plan to increase awareness and support for the organization. Through this case study, we will address how this organization has used social media to advance its mission and the process used to develop performance metrics along the way.

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