Nonprofit Transparency

Topics: Non-profit organization, Management, Charitable organization Pages: 16 (4524 words) Published: December 18, 2012

Nonprofit Transparency
by Rebecca Alene Goza
Doctoral Candidate – Anderson University
2011 Cohort

This paper will discuss the emerging management trends developing as a result of the increasing incidents of financial misappropriation and the associated reputation destruction resulting from recent scandals in nonprofit entities. Discussion will include the many possible considerations associated with increased fraud incidents in charitable nonprofits, including inconsistent statutory requirements based on the state of incorporation as well as outdated federal oversight requirements over 501(c)(3) organizations. The paper will research three key management theories and will draw a conclusion regarding the next evolution of management theory in nonprofit entities. This paper will summarize how one of the largest charities is handling this evolving area and will present a theory that one of the biggest areas of focus and awareness should be the expectation that nonprofits demonstrate to stakeholders, explicitly and measurably, that they are being effective and transparent in fulfilling their missions. Table of Contents

Table of Figures4


a.The critical point5

II.§501(c)(3) Definition and Legal Research7

a.Basic definition of a §501(c)(3) organization7
b.State specific nonprofit legislation8
c.Intermediate sanctions9

III.Management Theory For Nonprofits10

a.Stakeholder theory10

i.Circumstances surrounding development10
ii.Management theorist responsible for stakeholder theory development and acceptance10 iii.Historical roots of stakeholder theory10
iv.Theory impact11

b.Corporate governance13

i.Circumstances surrounding development13
iii.Historical roots of corporate governance and theory impact13


i.Circumstances surrounding development14
ii.Management theorist responsible for transparency theory development and acceptance15 iv.Theory impact15

IV.Conclusions and Recommendations16

b.Recommendations for further study17

Appendix A. Reference List

Table of Figures

Figure 1. Internal Revenue Service Data Book 20107
Figure 2. Cutt’s and Kearn’s Accountability Matrix12

I. Introduction

1 The critical point

In the American Cancer Society’s “the Society” 2011 Stewardship Report, Chief Executive Officer Dr. John Seffrin made the statement “We are at a critical point in our fight against cancer” (American Cancer Society, n.d.). The “critical point” referred to has to do with more than just the fight against cancer or the mission of the American Cancer Society. There are new realities facing the Society and the entire nonprofit sector that have resulted in a convergence of concerns from all stakeholders, including regulatory groups and legislative bodies (American Cancer Society, n.d.). “The nonprofit sector represents a sizable slice of the United States economy. Nonprofit organizations had over $3.4 trillion in assets under their control and charitable giving to these organizations reached an estimated $295 billion, or 2.2 percent of gross domestic product in 2006” (Wing et al., 2008). Recent scandals in the nonprofit sector have brought attention to the significant fiduciary responsibilities of nonprofit managers and the relatively weak regulatory oversight of the nonprofit industry. “These scandals include the fraud conviction of the United Way CEO; the Ponzi scheme perpetuated by the Baptist Foundation of Arizona; the embezzlement of funds from ACORN by the founder’s brother; and lavish spending of university money by the president of Oral Roberts University, to name a few” (Petrovits, C., Shakespeare,...
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