Date of Project

5-2-2023

Document Type

Honors Thesis

School Name

W. Fielding Rubel School of Business

Department

Finance

Major Advisor

Dr. Dan Bauer

Second Advisor

Dr. Bradley Stevenson

Abstract

As the nonprofit sector has grown in size and importance over the years, so has competition for donations and attention to the financial behaviors of organizations. Donors and information intermediaries have long expected nonprofits to remain financially lean - there is an expectation for organizations to direct all revenues directly to program areas, and any other spending is viewed as a misappropriation of funds. Nonprofit organizations attempt to satisfy this widely held donor expectation at the expense of organizational infrastructure and growth potential. I reviewed the Economic Research Institute’s Form 990 data and NCCS CORE data for 2013/2014 and 2018/2019 to analyze how donors respond to nonprofit financial measures through their donative behaviors. I analyze the two periods to determine if donative behaviors, and thus donor expectations, have shifted with increased research and discourse on the negative implications of NPO financial leanness. This study looks at the root of the discussion about misguided donor expectations, the need for greater impact disclosure, and the need for more discussion with donors about the importance of organizational growth and capacity building to further program impact. Donor aversion to administrative spending and emphasis on financial leanness is evident in the findings. This reaffirms the need for more discussion about the importance of overhead spending and capacity building in the nonprofit sector and for more transparent and uniform means of reporting organizational impact.

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