Conversion Ratios, Efficiency and Obfuscation: A Study of the Impact of Changed UK Charity Accounting Requirements on External Stakeholders

Key stakeholders in the UK charity sector have, in recent years, advocated greater accountability for charity performance. Part of that debate has focussed on the use of conversion ratios as indicators of efficiency, with importance to stakeholders being contrasted with charities’ apparent reluctance to report such measures. Whilst, before 2005, conversion ratios could have been computed from financial statements, changes in the UK charity SORP have radically altered the ability of users to do this. This article explores the impact on the visibility of such information through an analysis of the financial statements of large UK charities before and after the 2005 changes. Overall, the findings suggest that, despite the stated intention of increasing transparency in respect of charity costs, the application of the changes has resulted in charities ‘managing’ the numbers and limiting their disclosures, possibly to the detriment of external stakeholders.     

The Disclosure Panacea: A Comparative Perspective on Charity Financial Reporting

This article examines the charity financial reporting regimes of three common law jurisdictions: Ireland, the UK and the US. It assesses whether these respective disclosure models improve either nonprofit behaviour or enforcement odds. Three core aspects of the regimes are reviewed: the reliability of the disclosed information, the consistency of such information and its ability to facilitate comparison between charities, and the level of enforcement arising from disclosure. Particular attention is paid to oversight mechanisms, including audits, and their rates of effectiveness in the regulation of charities. The article examines ongoing efforts to reform broader international accounting standards and considers the impact such moves are likely to have at both regional and national level for charity accountability. It concludes that given the markedly different spheres in which for-profits and nonprofits operate, care should be taken in modelling charity disclosure regimes on those developed for for-profit entities.     

Images and narratives of autism within charity discourses

This research explores awareness of issues and debates concerning images and narratives about disability amongst autism charity brand-management professionals and their counterparts in the creative industries. These include the role of charities in service provision, the social model of disability, and disability stigma. It describes and analyses past and recent charity advertisements in both the United Kingdom and the United States, with attention to the historical context of these and the views and practices of charity and advertising professionals and autistic self-advocates, using David Hevey’s three-stage framework for disability representation by charities. The research concludes by considering emerging counter-narratives, which suggest ways charities may escape the perceived need to produce pathos or fear as part of such campaigns.     

Mandatory Public Benefit Reporting as a Basis for Charity Accountability: Findings from England and Wales

Charitable status is inherently linked in many jurisdictions with the requirement that an entity must be established for public benefit. But, until recently the public benefit principle had relatively little impact on the operations of most established charities. However, in England and Wales, reforms linked to the «Charities Act 2006» led to a new requirement for public benefit reporting in the trustees’ annual report (TAR) of every registered charity. This new narrative reporting requirement had the potential to affect the understanding of accountability by charities. The paper investigates the impact of that requirement through a study of over 1,400 sets of charity reports and accounts and subsequent qualitative work with trustees and others involved in preparing TARs.     

Surviving mission drift: How charities can turn dependence on government contract funding to their own advantage

The widespread contracting out to British charities of welfare services previously furnished by the state has resulted in many charities operating in fields well outside those specified by their original missions. Challenges connected with charity mission drift have received a great deal of (mainly negative and critical) attention in the nonprofit practitioner literature in recent years, yet no academic research has been completed into exactly how charities respond managerially and operationally to government‐induced mission drift. This empirical study attempted to fill this important gap in knowledge about charity management through in‐depth case studies of three charities known to have experienced substantial mission drift during the last decade, focusing on the styles and types of approach the organizations had adopted in their dealings with government funding agencies. It emerged that the three charities accepted mission drift as a fact of life. Rather than simply supplying contract services to government bodies, the charities were highly proactive in seeking to initiate, direct, control, and assume overall strategic responsibility for state‐funded activities.     

Reassessing Charity Trusteeship in Britain? Toward Conservatism, Not Change

The growing prominence given to charity trustees' strategy-making roles and responsibilities is encouraging reassessment of the values and purposes of trusteeship in Britain. This occurs against a background of an increasingly professionalized and managerialist charity sector. Trustees are seen, in public policy terms, as a homogeneous and leadership-oriented group, while some charity managers aspire to or are already fulfilling leadership roles. This research note reviews these developments, considering trustees' strategy-making and controlling functions, and the nature of the relations between charity staffs and trustees. It describes the development of a tentative typology by the authors, characterizing trustees' approaches to their roles, as a means of illustrating the heterogeneous rather than homogeneous nature of the overall charity trustee body. The research process, leading toward the typology's development, is outlined and critiqued. Reflections on the value of the typology are given and possible future developments in trusteeship are considered. The authors consider that those trustees willing to remain in role are likely to adopt custodial rather than entrepreneurial approaches to their trusteeship. Such a role is likely to be increasingly at odds with the role sought or adopted by senior managers in some charities, and also with the proactive model of trusteeship that is being encouraged by the regulatory systems for British charities.     

Will You Trust Me?: How Individual American Donors Respond to Informational Signals Regarding Local and Global Humanitarian Charities

When making charitable donations, individuals would like to have some assurance that their resources will be used appropriately, but they do not necessarily have the time to research charities thoroughly. Charities have thus joined voluntary regulatory programs to signal trustworthiness and good governance. We conduct a survey experiment to explore if individual donors in the United States are more willing to give to a charity participating in a voluntary regulatory program. Because voluntary programs vary in their institutional design, we further test whether the provision of third-party auditing (to ensure that charities abide by program rules and obligations) enhances donor confidence in the voluntary program. Finally, we explore whether individuals seek to circumvent information problems by donating to local charities as opposed to overseas charities. We find that charity membership in a voluntary program does not influence people’s willingness to donate significantly, but that location of operations is significant.     

International Charity: For the Poor?

We show how international charity leads to reduced self-help, exacerbated internal income inequality, and less charity for needy countries when international funds transfer is costly and there are information asymmetries. Mechanism design techniques are used to analyze international income transfer programs in the context of moral hazard, principal-agent, and adverse selection problems. We show that the burden of information asymmetry is borne by the most needy even when charities design incentive contracts which limit informational rents.     

FUNDRAISING INTERMEDIARIES INHIBIT QUALITY‐DRIVEN CHARITABLE DONATIONS

Charitable donations are frequently raised by an intermediary, which accepts donations and subsequently sends the proceeds to the chairty—for example, a workplace campaign for United Way, a 5‐km walk for Susan G. Komen, or buying cookies from a local troop for the Girl Scouts. These fundraisers can greatly increase donations received by a given charity, but how do they affect what types of charities we support? This article shows intermediary fundraisers can make donors insensitive to differences in charity quality: Unattractive charities can receive the same financial support as an attractive charity. In a series of across‐subject experiments, when donations are framed as going directly to the charity, unattractive charities receive fewer and smaller contributions relative to attractive charities; however, when donations for the same charities are collected by (meaningless) intermediary fundraising campaigns, donations become indistinguishable across charities. The fundraising campaign does not affect donor recall of charity identity or evaluation of charity quality; it simply precludes donors from using these data in the donation decision. Follow‐up experiments suggest the results are driven by information overload. (JEL A13, C91, C93, D61, D64, H41)     

The Effects of the Facial Expression of Beneficiaries in Charity Appeals and Psychological Involvement on Donation Intentions

To increase the effectiveness of fundraising campaigns, many human‐need charities include pictures of beneficiaries in their ads. However, it is unclear when and why the facial expression of these beneficiaries (sad versus happy) may influence the effectiveness of charity ads. To answer these questions, an experiment was conducted to investigate the effect of the facial expression on donation intentions, while considering the moderating role of psychological involvement with charities. It found that psychological involvement with charities moderated the impact of the facial expression on donation intentions in that seeing a picture of a sad versus happy person increased intentions to give among participants with lower levels of psychological involvement, whereas the reverse was true for highly involved participants. The moderating effect of psychological involvement was fully explained by the perceived efficacy of one's donation. The findings not only contribute to our understanding of the effect of the facial expression of people pictured in charity appeals on donation behavior, but also suggest that nonprofits should tailor their ads to target potential donors with various levels of psychological involvement with charities.     

Effects of Corporate Support of a Charity on Public Perceptions of the Charity

A quasi-experimental design (N = 517) was used to investigate the effect on audience response to a supported charity if corporate support is featured in an advertisement. The results indicate that corporate support of a charity appears not to influence audience attitudes and donation intentions for the charity. A small portion of the audience may be motivated to donate when learning of a large corporate donation to the charity. The level of individuals’ favorability for the charity was the strongest predictor of their attitudes and intentions. Gender was also a predictor of more positive charity attitudes, with females reporting more positive attitudes than males for three of four charities. Managerial implications and areas for future research are discussed.     

Charity Watchdogs and the Limits of Information-Based Regulation

Transparency concerns and the concomitant accountability challenges have motivated policy and legal scholars to explore information-based regulatory approaches. We examine their usefulness in the context of the nonprofit sector which tends to show signs of governance failure. Although nonprofits are required by law to disclose information on fund use, nonprofit donors face difficulties in accessing and interpreting information about how nonprofits are deploying resources. Charity watchdogs make this information available to donors in a convenient format. In theory, this should allow donors to reward nonprofits that devote resources to service delivery and to punish those that are less careful about controlling overheads. To test the relationship between charity ratings and donations, we examine 90 nonprofits in the state of Washington for the period 2004–2007. Drawing on ratings data provided by Charity Navigator, we find that changes in charity ratings tend not to affect donor support to these nonprofits. We explore this statistical finding via interviews with 10 charities located in Washington State. Supporting the statistical results, we find that charities believe that donors tend not to systematically embed ratings in their donation decisions. Instead, they believe that donors assess nonprofits’ effectiveness and trustworthiness via other means such as familiarity, word-of-mouth, or the visibility of the nonprofit in their community. In sum, the policy challenge is to provide information which users desire such as organizational effectiveness as opposed to basic fund allocation in the case of non-profits. What matters for policy efficacy is not how much information is provided but of what type.     

‘The unwilling and the unwell’? Exploring stakeholders’ perceptions of working with long term sickness benefits recipients

This paper draws on qualitative research with Incapacity Benefit (IB) stakeholders in the North East of England, UK. Stakeholders’ experiences of working with long-term sickness benefits recipients reveal multiple barriers that both sick and disabled people, and themselves as practitioners, clearly face. Reflections on what ongoing welfare reform could mean for future practice for both stakeholders and recipients will be explored. The findings suggests that whilst stakeholders recognise the complex barriers faced by those receiving sickness benefits, a wider moral dialogue between ‘deserving’ and ‘undeserving’ is being created and sustained as a result of negative stereotyping of sickness benefits recipients.     

Regulating Small and Medium Charities: Does It Improve Transparency and Accountability?

Internationally, there has been a steady increase in the number of countries instigating charity regulation. Public interest theory suggests that regulation increases organisational transparency through reducing information asymmetry, protects (or encourages) a competitive market, and leads to a distribution of resources which is in the public interest. While these arguments may explain charity regulation, the cost of compliance can be an issue for small- and medium-sized charities. Therefore, regulators tend to take a light-handed approach to small and medium charities’ information provision. This paper ascertains the impact of a light-handed enforcement regime on small and medium charities’ reporting, analysing the financial reporting practices of a selection of 300 small- and medium-sized charities registered with the former New Zealand Charities Commission against the Charities Act 2005 requirements and hence the rationale for this regulator. It uses this analysis to predict how the regulator’s activities might impact future reporting practices of charities.     

Accountability as a Managerial Tool in Non-Profit Organizations: Evidence from Italian CSVs

The long-term performance of NPOs is based on their ability to link and maximize social value as defined in their mission. This involves legitimacy obtained from stakeholders influenced by and influencing NPO activities, and their operational capacity or economic efficiency. Thus, NPOs have to utilize multiple level accountability systems which should be compatible with their multiple objectives and stakeholders’ claims. The accountability system of an NPO should focus on its operational capacity, because in order to maximize its efficiency, an NPO has to measure its resource use, cost structure, and financial structure. Legitimacy obtained from stakeholders is also integral. If an organization is considered a social contract between multiple stakeholders, it has to consider the social economic effects of its activities and it has the duty to account for them. However, since the mission of an NPO is to create and distribute social value to a certain specific group, its social value creation has the most important role and an NPO should measure the social value it has created. This article analyzes the accountability system of a specific type of Italian NPO called Centri di Servizio per il Volontariato (CSVs)—namely centers which provide services for voluntary associations. The aim of the research is to verify if the accountability system adopted by CSVs satisfies their need for multiple level information (operational, legitimacy, and social value) and accomplishes their stakeholder claims, and to determine its impact on the definition and implementation of their strategy and on their long-term performance. The research was carried out using the action research model, and the findings are based on the analysis of a sample of 64 CSVs situated throughout Italy.     

Phrasing the Charitable Bequest Inquiry

This paper reports interest levels associated with twenty-three different phrasings of a request to leave a gift to charity in a will among 9964 survey respondents. Previous research suggests that a review of one’s life story may be an important component of bequest decision-making. Other findings suggest that mortality reminders may increase support for social norms and the pursuit of symbolic immortality. The attempts to reference symbolic immortality tested here were not effective. However, results supported avoiding extraneous death terms (“that will take effect at my death”) and using social norms (“many people like to leave a gift to charity in their wills”). The strongest support arose for the addition of the phrase “to support causes that have been important in their/your life/lives” to explain either the respondent’s or the social norm exemplars’ intent in making such a gift. Among common terms, “a gift to charity in your will” generated greater interest than substitute terms such as “bequest,” “leave a legacy” or “remember your favorite charities.”

     

Charity,Volunteering Type and Subjective Wellbeing

We examine the impact of volunteering and charitable donations on subjective wellbeing. We further consider if the model of the volunteering work (formal vs. informal) and the geographical location of the charity organisation (local vs. international) people donate to has any impact on subjective wellbeing. Using UK’s Community Life Survey data, we find that volunteering and engagement in charity are positively associated with subjective wellbeing, measured by individual life satisfaction. We show that while there is a positive effect of volunteering and charity on life satisfaction, the level of utility gained depends on the type of charity or volunteering organisation engaged with (i.e. local or international). Specifically, donating to local (neighbourhood) charities as opposed to international/national charities is associated with higher wellbeing. Similarly, engaging in informal volunteering, compared to formal volunteering, is associated with higher wellbeing. To explain our results, we use the construal-level theory of psychological distance, which suggests that people think more concretely of actions and objects that they find spatially and socially close.

     

Learning as a process of personal-social transformation: volunteering activity in health and social care charities

This paper explores how people learn about global societal challenges as they work towards them in collaborative activity. It focuses on the activity of volunteering within UK health and social charities and draws upon the approach of Transformative Activist Stance to conceptualize learning in this environment as a form of individual and social transformation. The study is a multiple qualitative case study, which includes three charities that address complex health and social challenges. By exploring how volunteers learn about and address complex societal challenges findings show the transformative opportunities this process offers for volunteers, the charity, and the wider community.     

Charity Appeals Using Celebrity Endorsers: Celebrity Attributes Most Predictive of Audience Donation Intentions

We compare the relative influence of different celebrity endorser attributes on respondents’ intentions to donate to a fictitious charity. The celebrity endorser attributes we modeled are expertise, admirability, likeability, trustworthiness, and attractiveness. We examine the moderating effects of audience sex, and general attitudes toward charities. Finally, we examined the mediating effects of perceived endorser fit with the endorsed charity. Our results find that endorser expertise and admirability are significant predictors of audience donation intentions. Audience general attitudes toward charities are a significant moderator of the influence of endorser expertise and admirability on donation intentions. We discuss the implications of our findings for researchers and practitioners.

     

Web-Based Accountability Practices in Non-profit Organizations: The Case of National Museums

Stakeholder theory posits that accountability systems depend on the strength and the number of their stakeholders. This paper aims to analyze the empirical validity of stakeholder theory, focusing on accountability systems in the museum sector. Based on Wikipedia resources, we have selected all of the “National Museums” (134 museums) in the major developed countries: Australia, Canada, France, Germany, Italy, the United Kingdom, and the US. After we control for type of activity (art or other), cost per visitor and country, the results of an OLS multivariate model show that size of the museum, which is assumed to represent the strength and number of stakeholders, and the amount of funds received, which represents the power of a particularly salient category of stakeholders (donors), are the two main determinants of the accountability level. We conclude that accountability, in the absence of shareholders, is driven by the number and the power of different stakeholders, validating the stakeholder theory.