Intersecting Sectors? The Connection Between Nonprofit Charities and Government Spending

In this paper, we articulate that rent-seeking behavior by nonprofit charities and budgetary discretionary behavior by public agents should lead to a positive correlation between nonprofit charity and government spending. Using a large national database of government spending that we merged with charitable spending, we empirically test our research question. Overall, we find a positive correlation between spending by both sectors that is unequivocal and nontrivial, thus supporting the rent-seeking theory of nonprofit charities’ behavior. When we examine spending by the sectors by specific areas of service provision to determine public budgetary reallocation, our results indicate positive associations in legal and judicial services, libraries, and public welfare spending – supporting the rent-seeking explanation. However, we found no correlations between spending by the two sectors in several important areas of service provision, including education, health, hospitals, and housing. The lack of correlation in these areas might be indicative of government failure theory rather than rent-seeking. Importantly, the positive association between charitable and government spending suggests that public spending may increase beyond optimal levels – leading potentially to tax burdens that are greater than necessary, crowding out of private enterprise, and spending patterns that are difficult to alter in light of fiscal shocks

Towards a Metatheory of Budgeting

In this paper. we suggest that many budget theories actually are about appropriating and not about budgeting. We trace this development back to the classic budgeting question posed by V.O. Keys in 1940. To clarify the issue, we examine early normative theories of budgeting, and apply many contemporary theories about budgeting to the budgeting process advocated for in this early work. By analyzing current theories, we show that budget theories are, in many cases, simply focused on parts of the budget process or on the role of techniques in decision making. Our analyses suggest that rather than theories competing with each other, a larger metatheory of budgeting emerges that can accommodate these different approaches. Further, we identify important gaps in the literature that still need to be addressed for a complete treatment of public budgeting theory

Public mandates, market monitoring, and nonprofit financial disclosures

Public officials have recently sought increased regulation of financial disclosures from not-for-profit organizations as a means of improving accountability with the public. One objective of this study is to examine whether not-for-profit entities already subject to audit requirements submit financial reports in compliance with GAAP. Further, since the majority of not-for-profit organizations are not subject to public audit mandates, this study also ascertains whether other market actors such as donors monitor and demand accrual-based financial information. The empirical analyses indicate that not-for-profit organizations subject to public audit mandates are largely in compliance with GAAP, although a significant minority of organizations subject to state requirements is not; further analyses suggest that external oversight significantly influence the use of accrual reporting. Models are also tested on a subsample of not-for-profits that switched from cash to accrual reporting, with the results suggesting that increasing public and market oversight have a significant effect on the decision to switch methods. The overall results suggest that public and market actors demand accrual-based financial reporting from not-for-profit organizations.

Instrumental Philanthropy, Nonprofit Theory, and Information Costs

Instrumental philanthropy has gained attention and popularity in recent decades as an approach to maximizing the impact of giving. This article evaluates the suitability of the nonprofit institutional form, specifically the US public charity, as a vehicle for instrumental philanthropy. The analysis identifies an incongruity between the informational requirements of instrumental philanthropy and the form and theory of the nonprofit. An alternative theory of licensure is proposed to illustrate the difficulty of the information problem. Analysis suggests that the viability of instrumental philanthropy hinges upon information costs. Several public policy options are considered as means of better supporting instrumental philanthropy, presuming that allocative efficiency in the production of public benefits is a desirable public policy objective

Intersecting Sectors? The Connection Between Nonprofit Charities and Government Spending

In this paper, we articulate that rent-seeking behavior by nonprofit charities and budgetary discretionary behavior by public agents should lead to a positive correlation between nonprofit charity and government spending. Using a large national database of government spending that we merged with charitable spending, we empirically test our research question. Overall, we find a positive correlation between spending by both sectors that is unequivocal and nontrivial, thus supporting the rent-seeking theory of nonprofit charities’ behavior. When we examine spending by the sectors by specific areas of service provision to determine public budgetary reallocation, our results indicate positive associations in legal and judicial services, libraries, and public welfare spending – supporting the rent-seeking explanation. However, we found no correlations between spending by the two sectors in several important areas of service provision, including education, health, hospitals, and housing. The lack of correlation in these areas might be indicative of government failure theory rather than rent-seeking. Importantly, the positive association between charitable and government spending suggests that public spending may increase beyond optimal levels – leading potentially to tax burdens that are greater than necessary, crowding out of private enterprise, and spending patterns that are difficult to alter in light of fiscal shocks

The Status of Budget Forecasting

This article examines the breadth of the current forecast literature as it relates to public budget making. It serves to provide summary information to decision-makers who otherwise do not have the resources to learn more than a small amount focused on much more narrowly defined areas of forecasting (such as the politics of forecast bias). Next, it serves those who perform forecasting related to budgeting by reviewing the current methods and practices commonly used in this domain. It also provides a ground level for future public budget forecasting research. Finally, this article identifies several areas in which the public forecasting literature needs additional development. Several of these areas, such as the effectiveness of nonregression-based forecasting techniques, are quite important to the majority of governments in the United States and other subnational jurisdictions, where budget offices are limited and resource investments in technology are scarce

Intersecting Sectors? The Connection Between Nonprofit Charities And Government Spending

In this paper, we articulate that rent-seeking behavior by nonprofit charities and budgetary discretionary behavior by public agents should lead to a positive correlation between nonprofit charity and government spending. Using a large national database of government spending that we merged with charitable spending, we empirically test our research question. Overall, we find a positive correlation between spending by both sectors that is unequivocal and nontrivial, thus supporting the rent-seeking theory of nonprofit charities’ behavior. When we examine spending by the sectors by specific areas of service provision to determine public budgetary reallocation, our results indicate positive associations in legal and judicial services, libraries, and public welfare spending – supporting the rent-seeking explanation. However, we found no correlations between spending by the two sectors in several important areas of service provision, including education, health, hospitals, and housing. The lack of correlation in these areas might be indicative of government failure theory rather than rent-seeking. Importantly, the positive association between charitable and government spending suggests that public spending may increase beyond optimal levels – leading potentially to tax burdens that are greater than necessary, crowding out of private enterprise, and spending patterns that are difficult to alter in light of fiscal shocks