Do non-profit hospitals provide more charity care when faced with a mandatory minimum standard? Evidence from Texas

Policymakers often question whether not-for-profit (NFP) hospitals provide enough charity care to justify tax advantages. In 1993, Texas enacted legislation requiring NFP hospitals to provide certain community benefits at levels set forth in specific criteria to retain tax-exempt status; this paper focuses on the effect of the legislation’s requirement that NFP hospitals spend a minimum of 4% of net patient revenue on charity care. We also study a modification of the law passed in 1995, which allows the deduction of bad debts expense when calculating net patient revenue. This change effectively lowers required charity care spending, and our study considers whether Texas hospitals responded by reducing charity care spending.     

The impact of RFID adoption on donor subsidy through for-profit and not-for-profit newsvendor: Implications for Indian Public Distribution system

Subsidy programs are sponsored by government and international agencies to improve affordability and accessibility of food and health products for socially deprived community. Although the donors in such programs allocate substantial resources to fund subsidies, a lot of it is wasted due to the inefficiency in the system arising out of product shrinkage and misplacement. This study analyzes the impact of private participation and advanced technology like RFID adoption on the donor subsidy under target consumption level. We formulate the problem as a donor funding the subsidy program through for-profit/not-for-profit newsvendor and compare the equivalent subsidy per consumption with and without RFID. We perform numerical analysis, collecting data from the public distribution system of India, and the results indicate that, unless the for-profit firm operates under a substantially reduced level of shrinkage and misplacement, the donor should always prefer a not-for-profit firm for program implementation. We also observe that among all the scenarios, a not-for-profit firm with advanced technology like RFID requires minimum donor subsidy to generate the target expected consumption.     

Education par excellence: Developing personal competencies and character through philanthropy-based education

This teaching note presents an innovation in accounting education called the Philanthropy Project. ² The Philanthropy Project emphasizes experiential learning and is designed to promote the learning of discipline-specific concepts while simultaneously addressing the social needs of the surrounding community. In the Philanthropy Project, students receive money to distribute to not-for-profit organizations (NFPs) based on a competitive proposal process they help to develop and administer. A distinguishing characteristic of this project is that it is not a simulation. Students make real decisions that have immediate consequences to certain groups of people in their own communities. They have to make difficult choices by allocating scarce resources to some agencies and saying “no” to other agencies, all with worthy causes.     

Charitable organizations' storytelling influence on donors' emotions and intentions

The stories told by charitable organizations are typically designed to take the consumer through different emotional stages. This research probes the view that following exposure to the inciting incident or problem statement in the appeal for a particular charity, the consumer feels negative emotions. These feelings convert into anticipated positive emotions when the consumer is given the opportunity to help the person in need through a donation. Feedback that donors receive from the charitable organization will help to strengthen the emotional pay-off and enhances future donation intentions. The research utilizes an experimental design and data from 319 undergraduate students in a large U.S. university to confirm these hypotheses. Theoretical and managerial implications are then presented.     

The role of the paid preparer in nonprofit reporting quality

The purpose of this paper is to examine whether the preparer of the Form 990 influences the Form 990 reporting quality. Currently, the Form 990 is the only widely available source of governance and financial information for nonprofit organizations. The leading rater of nonprofit organizations, Charity Navigator, relies primarily on information from the Form 990 in developing their ratings. We identify misreporting by utilizing five measures of reporting quality. We find organizations that hire an outside accounting firm to prepare the Form 990 report higher quality financial information than organizations that choose to prepare the Form 990 in house. Interestingly, the size of the accounting firm is not associated with the quality of Form 990 reporting with the exception that paid preparers who are sole proprietors are more likely to misreport. Further exploration reveals that paid preparers who file more returns are less likely to misreport indicating that specialization is associated with more accurate reporting on Form 990. Our study contributes to the literature by using multiple reporting measures to examine the impact of paid preparers on the reporting quality of 990s. Furthermore, our study is the first to consider how specialization affects the accuracy of 990 returns.     

The role of rating agencies in the market for charitable contributions: An empirical test

Rating agencies play the role of information intermediaries in the market for donations. These watchdog organizations obtain and interpret accounting data and other information about charitable organizations and report ratings to help donors select among the many organizations soliciting contributions. In the age of the internet, information from Internal Revenue Service Form 990 returns prepared by tax-exempt organizations is more readily accessible than ever before. This study examines whether the zero- to four-star ratings provided by Charity Navigator have additional information content for donors. Charity Navigator was selected because its rating system relies almost exclusively on the 990 returns and presumably adds value by incorporating peer-group expectations for various ratios and by presenting straightforward and concise data. Using a random sample of 405 charities rated by Charity Navigator, our results suggest that rating changes do impact contributions. Positive rating changes were associated with an increase in contributions and organizations with a decline in rating were associated with decreased contributions. These effects were in addition to what would be predicted using an efficiency ratio commonly computed from Form 990 accounting data and other control variables.     

How personal nostalgia influences giving to charity

Personal nostalgia provides an emotionally engaging means for bonding a donor to a nonprofit organization. Yet, little is known about the relationship between personal nostalgia and charitable giving; this research seeks to fill this gap. A review of the extant literature is integrated with the findings from thirteen focus groups (Study 1) to develop a conceptual model. This model is tested in Studies 2 (using 457 older public television donors) and 3 (with a broader sample of 502 donors) using structural equations modeling. The findings indicate that discontinuity, recovery from grief, and loneliness, along with previous life experiences influence the level of personal nostalgia felt by a donor and associated with a charitable organization. This personal nostalgia provides emotional and familial utility to the donor. The research establishes that the effect of personal nostalgia on the donor's commitment is mediated by the emotional and familial utility that the nostalgia generates.     

An experimental investigation of accounting information’s influence on the individual giving process

In this study, we experimentally investigate accounting information’s role in the individual donation process. Specifically, we manipulate the presence of service efforts and accomplishments (SEA) information in conjunction with a typical fundraising request. We then investigate whether donors obtain comparative financial accounting information for the purpose of maximizing donation efficiency.In our experiment, potential donors felt that fundraising requests containing SEA disclosures were more informative than typical fundraising pleas. In addition, supplementing a standard fundraising request with summary SEA information significantly increased (1) the quality perception of the requesting charitable organization and (2) the percentage of potential donors who claimed they would donate to the requesting organization in the future. However, SEA information did not translate into increased actual giving in our study.Our experiment next offered actual donors the opportunity to obtain comparative financial information for the purpose of verifying efficient giving (i.e., donors could compare the soliciting organization to a similar organization). Although the majority of actual donors were unwilling to obtain this information, the vast majority of those viewing financial accounting information donated to the organization with the highest program-spending ratio. As such, our results support two seemingly opposed contentions: (1) only a minority of individual donors request and use financial information, however, (2) there is a need for increased accuracy of not-for-profit expense classification.     

Accountants’ Relief Foundation (ARF): A not-for-profit case examining contribution receipts and distributions

The Accountants’ Relief Foundation case study exposes students to not-for-profit (NFP) transactions and performance evaluation. Your task is to: (1) explain the advantages and restrictions associated with NFPs, (2) describe and calculate customary NFP performance metrics and assess risks, (3) determine the existence of liabilities and expenses, (4) discuss contract-timing issues, (5) evaluate differences between discretionary and non-discretionary power, (6) evaluate contribution alternatives, and (7) use primary and secondary accounting literature to solve the case.