Although accountability systems are established to ensure organizational adherence to financial and ethical standards for nonprofit organizations, the reality of whether such standards make a difference to donors has not been measured. This article discusses the current landscape of accountability systems and accountability ratings and describes a model for estimating the effect of ratings systems on donor behavior within the theoretical context of information asymmetry. Hypotheses are tested with nonprofit ratings for New York charities from the Better Business Bureau's Wise Giving Alliance to estimate the effect of accountability ratings on the amount of contributions an organization receives. Results indicate that the Wise Giving Alliance “pass” ratings have a statistically significant effect on the contributions received; however, “did not pass” ratings are nonsignificant. The study is important for academics as well as practitioners who are monitoring time and money spent on accountability issues.
Alchian, A.A., & Demsetz, H. (1972). Production, information costs, and economic organization . American Economic Review, 62(5), 777-795.
2.
American Institute of Philanthropy. (2007). Welcome. Retrieved April 29, 2007, from http://www.charitywatch.org
3.
Anheier, H.K. (1987). Indigenous voluntary associations, nonprofits, and development in Africa. In W. Powell (Ed.), The nonprofit sector: A research handbook (pp. 416-433). New Haven, CT: Yale University Press.
4.
Bejar, H., & Oakley, P. (1996). From accountability to shared responsibility: NGO evaluation in Latin America. In M. Edwards & D. Hulme (Eds.), Beyond the magic bullet: NGO performance and accountability in the post-cold war world (pp. 91-100). West Hartford, CT: Kumarian Press.
5.
Bennett, J.T., & DiLorenzo, T.J. (1994). Unhealthy charities: Hazardous to your health and wealth. New York: Basic Books.
6.
Bernholz, L. (2004). Creating philanthropic capital markets: The deliberate evolution. Hoboken, NJ: John Wiley .
7.
Biekart, K. (1996). European NGOs and democratization in Central America: Assessing performances in light of changing priorities. In M. Edwards & D. Hulme (Eds.), Beyond the magic bullet: NGO performance and accountability in the post-cold war world (pp. 80-90). West Hartford, CT: Kumarian Press.
8.
Bies, A.L. (2001). Accountability, organizational capacity, and continuous improvement: Findings from Minnesota's nonprofit sector. In P. Barber (Ed.), Accountability: A challenge for charities and fundraisers (Vol. 31, pp. 7-22). San Francisco: Jossey-Bass.
9.
Biggs, S.D., & Neame, A.D. (1996). Negotiating room to maneuver: Reflections concerning NGO autonomy and accountability with the new policy agenda. In M. Edwards & D. Hulme (Eds.), Beyond the magic bullet: NGO performance and accountability in the post-cold war world (pp. 40-52). West Hartford, CT: Kumarian Press.
10.
Brody, E. (2001). Enforcement: Legal standing and private remedies . In P. Barber (Ed.), Accountability: A challenge for charities and fundraisers (Vol. 31, pp. 7-22). San Francisco: Jossey-Bass.
11.
Brody, E. (2002). Accountability and public trust. In L. S. Salamon (Ed.), The state of nonprofit America (pp. 471-498). Washington, DC: Brookings Institution Press.
12.
Charity Navigator. (2007). Find a charity you can trust. Retrieved April 29, 2007, from http://www.charitynavigator.org
13.
Desai, V., & Howes, M. (1996). Accountability and participation: A case study from Bombay. In M. Edwards & D. Hulme (Eds.), Beyond the magic bullet: NGO performance and accountability in the post-cold war world (pp. 101-113). West Hartford, CT: Kumarian Press.
14.
Edwards, M., & Hulme, D. (Eds.). (1996). Beyond the magic bullet: NGO performance and accountability in the post-cold war world. West Hartford, CT: Kumarian Press.
15.
Gariyo, Z. (1996). NGOs and development in East Africa: A view from below. In M. Edwards & D. Hulme (Eds.), Beyond the magic bullet: NGO performance and acccountability in the post-cold war world (pp. 142-155). West Hartford, CT: Kumarian Press.
16.
Gronbjerg, K.A. (1993). Understanding nonprofit funding: Managing revenues in social services and community development organizations. San Francisco: Jossey-Bass.
17.
Hager, M.A. (2003). Current practices in allocation of fundraising expenditures. New Directions for Philanthropic Fundraising , 41, 39-52.
18.
Hager, M.A., Rooney, P., & Pollak, T. (2002). How fundraising is carried out in US nonprofit organisations. International Journal of Nonprofit & Voluntary Sector Marketing, 7(4), 311.
19.
Hayes, T. (1996). Management, control and accountability in nonprofit/voluntary organizations. Brooksfield, VT: Avebury.
20.
Independent Sector. (2008). Accountability: Who's doing what-Compendium of standards, codes, and principles of nonprofit and philanthropic organizations. Retrieved January 29, 2008, from http://www.independentsector.org/issues/accountability/standards2.html
21.
Irvin, R.A. (2005). State regulation of nonprofit organizations: Accountability regardless of outcome. Nonprofit and Voluntary Sector Quarterly , 34(2), 161-178.
22.
Kanter, R.M., & Summers, D.V. (1987). Doing well while doing good: Dilemmas of performance measurement in nonprofit organizations and the need for a multiple-constituency approach. In W. Powell (Ed.), The nonprofit sector: A research handbook (pp. 154-166). New Haven, CT: Yale University Press.
23.
Karim, M. (1996). NGOs in Bangladesh: Issues of legitimacy, beneficiaries, donors and the state. In M. Edwards & D. Hulme (Eds.), Beyond the magic bullet: NGO performance and accountability in the post-cold war world (pp. 132-141). West Hartford, CT: Kumarian Press.
24.
Krishman, R., Yetman, M.H., & Yetman, R.J. (2006). Expense misreporting in nonprofit organizations . Accounting Review, 81(2), 399-420.
25.
Lampkin, L., Romeo, S., & Finnin, E. (2001). Introducing the nonprofit program classification system: The taxonomy we've been waiting for. Nonprofit and Voluntary Sector Quarterly, 30(4), 781-793.
26.
Ministry Watch. (2007). The MinistryWatch.com 5 Star Ratings System. Retrieved April 29, 2007, from http://www.ministrywatch.org/mw2.1/A_About.asp
27.
Moore, D. (2001). On accountability: A state charity official's perspective. In P. Barber (Ed.), Accountability: A challenge for charities and fundraisers (Vol. 31, pp. 103-120). San Francisco: Jossey-Bass.
28.
Murray, V. (2001). The state of evaluation tools and systems for nonprofit organizations. In P. Barber (Ed.), Accountability: A challenge for charities and fundraisers (pp. 39-50). San Francisco: Jossey-Bass.
29.
National Center for Charitable Statistics. ( 2006). Nonprofit organizations and program classifications. Retrieved September 10, 2006, from http://www.nccs.org
30.
National Council of Nonprofit Associations and National Human Services Assembly. (2005). Rating the raters: An assessment of organizations and publications that rate/rank charitable nonprofit organizations. Retrieved December 15, 2007, from http://www.ncna.org/_uploads/documents/live/Rating%20theRaters_5-9-05.pdf
31.
Peters, G. (2001). By what means? Accountability and the law. In P. Barber (Ed.), Accountability: A challenge for charities and fundraisers (pp. 23-38). San Francisco : Jossey-Bass.
32.
Salamon, L.S. (1999). America's nonprofit sector: A primer. New York: Foundation Center.
33.
Salamon, L. S. (Ed.). (2002). The state of the nonprofit sector. Washington, DC: Brookings Institution Press.
34.
Salamon, L.S. (2003). The resilient sector: The state of nonprofit America . Washington, DC: Brookings Institution Press.
35.
Tuckman, H.P., & Chang, C.F. (1998). How pervasive are abuses in fundraising among nonprofits? Nonprofit Management & Leadership, 9(2), 211.
36.
Weisbrod, B. (1977). The voluntary nonprofit sector: An economic analysis . Lexington, MA: Lexington Books .
37.
Williamson, O.E. (1975). Markets and hierarchies: Analysis and antitrust implications. New York: Free Press .
38.
Wise Giving Alliance. (2007). Standards for charity accountability. Retrieved April 29, 2007, from http://www.give.org/standards/newcbbbstds.asp
