An Investigation of Fraud in Nonprofit Organizations: Occurrences and Deterrents

Losses due to fraudulent activities are particularly troublesome in the nonprofit sector because they directly reduce resources available to address tax-exempt purposes. The ensuing bad publicity may also reduce contributions and grants in subsequent periods. This paper uses data provided by Certified Fraud Examiners to report on the types of fraud they identified in nonprofit organizations and the characteristics of both the victims and the perpetrators of the fraudulent activities. Based on the analysis of the data, the authors suggest ways that fraud losses can be prevented or mitigated. In particular, governing boards are urged to consider important controls in addition to the annual financial statement audit.This publication is Hauser Center Working Paper No. 35. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

The Single Audit Act: How Compliant Are Nonprofit Organizations?

Audits are an important legal accountability tool used by resource providers (donors, grantors, and others) to assure that resources are spent by nonprofit organizations in accordance with the resource providers intentions. This paper reports on audits that are required by the government of the United States for organizations receiving large amounts of federal financial assistance. Since 1990, nonprofits receiving substantial federal funds are required to undergo this rigorous and expensive form of federal oversight. We report on 11,841 nonprofit entities that underwent such audits, and the 3,592 audit firms that conducted them, from 1997 to 1999. Overall, compliance with federal regulations appears to be high. Our study indicates that smaller nonprofits, those that are new to government grants, and those with prior audit findings have a significantly higher rate of adverse audit findings. Perhaps for cost or other reasons, these nonprofits are being audited by less experienced auditors. Current federal funding does not provide any additional funds for Single Audit Act compliance. One policy implication of our work might be to provide federal funding specifically for Single Audit Act compliance to these nonprofits.This publication is Hauser Center Working Paper No. 16. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

Measuring Operations: An Analysis of the Financial Statements of U.S. Private Colleges and Universities

As events in the business sector have highlighted, companies can play by the rules and yet produce misleading financial statements. This study examines the nongovernmental organizations that provide a substantial portion of higher education in the United States. We seek to determine whether private colleges and universities take advantage of the discretion available to them under accounting and auditing standards by presenting an operating measure in their statement of activities. We find that nearly 60 percent of schools report an operating measure but the items included or excluded from operations vary widely.This publication is Hauser Center Working Paper No. 17. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

Assessing Financial Vulnerability in the Nonprofit Sector

Effective nonprofit governance relies upon understanding an organization's financial condition and vulnerabilities. However, financial vulnerability of nonprofit organizations is a relatively new area of study. In this paper, we compare two models used to forecast bankruptcy in the corporate sector (Altman 1968 and Ohlson 1980) with the model used by nonprofit researchers (Tuckman and Chang 1991). We find that the Ohlson model has higher explanatory power than either Tuckman and Chang's or Altman's in predicting four different measures of financial vulnerability. However, we show that none of the models, individually or combined, are effective in predicting financial distress. We then propose a more comprehensive model of financial vulnerability by adding two new variables to represent reliance on commercial-type activities to generate revenues and endowment sufficiency. We find that this model outperforms Ohlson's model and performs substantially better in explaining and predicting financial vulnerability. Hence, the expanded model can be used as a guide for understanding the drivers of financial vulnerability and for identifying more effective proxies for nonprofit sector financial distress for use in future research. This publication is Hauser Center Working Paper No. 27. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

Uncertainty in Lung Cancer Stage for Outcome Estimation via Set-Valued Classification

Difficulty in identifying cancer stage in health care claims data has limited oncology quality of care and health outcomes research. We fit prediction algorithms for classifying lung cancer stage into three classes (stages I/II, stage III, and stage IV) using claims data, and then demonstrate a method for incorporating the classification uncertainty in outcomes estimation. Leveraging set-valued classification and split conformal inference, we show how a fixed algorithm developed in one cohort of data may be deployed in another, while rigorously accounting for uncertainty from the initial classification step. We demonstrate this process using SEER cancer registry data linked with Medicare claims data.Comment: Code available at: https://github.com/sl-bergquist/cancer_classificatio

From bipartite to tripartite devolved HRM in professional service contexts: evidence from hospitals in three countries

This article explores the devolution of HRM in a hospital context. Based on secondary data and 128 interviews conducted in nine hospitals across three European countries (Ireland, the Netherlands and UK), we examine roles and responsibility for HRM under devolution and coordination between those delivering it. Findings challenge bi-partite conceptions of devolution, identifying a tripartite model with: (1) HR practitioners, (2) line managers and, (3) senior professionals (managers and specialists) implementing HRM. Involving senior professionals in HRM reflects longstanding concern regarding managerial legitimacy in overseeing professional work. In the tripartite relationship each party has scope to contribute to people-management: HR practitioners to formulate a strategic framework, HR practices, and provide advisory services; line managers to implement HR practices and interface between HR and front-line professionals and; senior professionals to act as line managers’ advocates and provide expert knowledge and credibility to inform people-related decision-making. However, lack of role clarity and tensions in coordination relate to the differing goals of, and distance between, the HR function, line managers and senior professionals. Our theoretical reframing of devolution notes potential for tripartite relational involvement to enhance HR performance in professional service contexts, the contingencies affecting this and potential implications for the HR architecture