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New Study Shows Accountability the Norm in the Nonprofit Sector

(May 9, 2005) A new study reveals that a large percentage of nonprofits across the United States already engage in the kinds of accountability practices currently under consideration by the Senate Finance Committee, bringing into question why nonprofit accountability has become such an issue with Congress.

The data come from the preliminary results of a survey distributed to hundreds of charitable organizations by the Johns Hopkins Nonprofit Listening Post Project during March 2005. The project is a collaborative undertaking of the Center Civil Studies at the Johns Hopkins Institute for Policy Studies in Baltimore, Md., and a number of charities.

According to the study, 95 percent of sampled organizations regularly distribute financial statements to their boards of directors. In addition, a large percentage of groups already engage in such best practices as:

  • Making their financial reports available for public review upon request (74 percent)
  • Distributing their financial reports to their funders (70 percent)
  • Publishing their financial statements in their annual reports (54 percent)

An overwhelming majority (97 percent) of those surveyed reporting having undergone an independent audit at some point during the previous two years, despite only 40 percent being aware that state law required an audit. Even more importantly, the survey shows that charities are taking appropriate action as a result of these audits:

  • Adding or strengthening internal management controls (53 percent)
  • Adding or strengthening financial reporting (32 percent)
  • Adding or strengthening asset or cash management procedures (25 percent)
  • Adding or strengthening purchasing procedures or personnel policies (12 percent)

In addition, 57 percent said that they have a board committee whose responsibility is overseeing an audit, and 14 percent indicated they were considering creating such a committee.

Undercutting the Need for Reform?

The findings from the survey are especially significant because Congress is currently considering major reforms related to financial accountability, audits and disclosure for the nonprofit sector. The Senate Finance Committee has stated on numerous occasions that it believes there is a serious lack of accountability in the sector. However, the results of the Johns Hopkins study seem to undercut that belief.

'We've been telling Congress for a long time that the accountability problems it is hearing about arise from just a few organizations,' said AFP President and CEO Paulette V. Maehara, CFRE, CAE. 'This study further reaffirms our position there is no major accountability problem in the sector, and that best practices are working very well.'

Maehara agrees that raising awareness of accountability issues is positive for the sector. 'There are always improvements that can be made, especially in a sector that is as large and diverse as ours,' she says. 'But the requirements that Congress is considering are mostly unnecessary and will simply create additional burdens for charities.'

For example, one requirement being developed by the Finance Committee is the stipulation that charities' chief executive officers must sign their Form 990. However, the survey reports that 73 percent of nonprofits already do this, and 8 percent have the form signed by their board chairs.

For More Information

More information about this survey and the Johns Hopkins Nonprofit Listening Post Project can be found at the project's website.

The surveys were distributed via the Internet to 443 organizations selected with the aid of five project partner organizations, and to another 162 organizations in the same field selected randomly from lists gleaned form the Internal Revenue Service's Exempt Organization Master File. The response rate for the selected organizations was 46 percent, while the randomly selected sample returned a rate of 25 percent.

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