The Quality of Financial Reporting by Nonprofits

Brief

The Quality of Financial Reporting by Nonprofits

Findings and Implications
August 1, 2004

Abstract

This brief is the second of two briefs that summarize results from detailed case studies of the financial management of nine nonprofit organizations. It focuses on public financial reporting and addresses issues such as weak methods for allocating staff salary costs to program, administrative, and fundraising expenses; the need for greater sophistication in accounting for capital gifts and in-kind donations; and the effects of unique IRS reporting rules on overhead and fundraising cost ratios. This brief concludes that simplistic efforts to assess and compare public charities based on their public financial reports may lead to flawed conclusions. The overhead cost project is a collaboration with the Center on Philanthropy at Indiana University.

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