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Public mandates, market monitoring, and nonprofit financial disclosures

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  • Calabrese, Thad D.
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    Public officials have recently sought increased regulation of financial disclosures from not-for-profit organizations as a means of improving accountability with the public. One objective of this study is to examine whether not-for-profit entities already subject to audit requirements submit financial reports in compliance with GAAP. Further, since the majority of not-for-profit organizations are not subject to public audit mandates, this study also ascertains whether other market actors such as donors monitor and demand accrual-based financial information. The empirical analyses indicate that not-for-profit organizations subject to public audit mandates are largely in compliance with GAAP, although a significant minority of organizations subject to state requirements is not; further analyses suggest that external oversight significantly influence the use of accrual reporting. Models are also tested on a subsample of not-for-profits that switched from cash to accrual reporting, with the results suggesting that increasing public and market oversight have a significant effect on the decision to switch methods. The overall results suggest that public and market actors demand accrual-based financial reporting from not-for-profit organizations.

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    Article provided by Elsevier in its journal Journal of Accounting and Public Policy.

    Volume (Year): 30 (2011)
    Issue (Month): 1 (January)
    Pages: 71-88

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    Handle: RePEc:eee:jappol:v:30:y::i:1:p:71-88
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