Donor Reliance on Accounting and its Consequences for the Charitable Distribution Channel

32 Pages Posted: 11 Sep 2015

See all articles by Anil Arya

Anil Arya

Ohio State University (OSU) - Fisher College of Business

Brian Mittendorf

Ohio State University (OSU) - Fisher College of Business

Date Written: August 31, 2015

Abstract

The organization of charitable distribution channels to ensure donor contributions reach beneficiaries in an efficient manner and the use of accounting metrics of such efficiency (whether provided directly or by charity rating groups) are oft-discussed issues in the nonprofit sector. The two issues are inextricably linked since reported efficiency measures influence subsequent donor giving. This paper develops a parsimonious model of a charity that must decide how best to employ its resources, either by acting as a direct service provider or as a grant provider to organizations that provide services to beneficiaries. We show that the desire to boost perceptions of efficiency vis-a-vis accounting reports leads an organization to rely more on others to provide services rather than being a direct service provider. This temptation to expand either the scope or length of the charity supply line is muted by a desire to avoid redundant costs and improve service delivery. The model's results have implications both for the role of nonprofit accounting and observed distribution strategies of nonprofits.

Keywords: charities, donors, nonprofit accounting, supply chains

Suggested Citation

Arya, Anil and Mittendorf, Brian, Donor Reliance on Accounting and its Consequences for the Charitable Distribution Channel (August 31, 2015). Available at SSRN: https://ssrn.com/abstract=2658299 or http://dx.doi.org/10.2139/ssrn.2658299

Anil Arya

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Brian Mittendorf (Contact Author)

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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