Saleha B. Khumawala

TRACKS: Assessing the Quality of Not-For-Profit Efficiency Ratios: Do Donors Use Joint Cost Allocation Disclosures?

We examine whether required disclosures regarding joint cost allocations raise concerns about the validity of efficiency ratios reported by not-for-profit organizations. An experimental design is used to hold constant the geographic location, size, and mission of competing charitable organizations. Participants include financial officers of not-for-profit organizations (preparers), foundation executives (expert donors), and students (novice donors). We find that preparers base contribution decisions almost entirely on the reported fund-raising cost and accept the validity of reported program ratios. Foundation executives, representing experienced users of not-for-profit financial statements, also appear to accept the joint cost allocations as reported. By contrast, novice users are the most attentive to the allocation disclosures and consider them more often when deciding on the amount of a hypothetical gift. Overall, there is little evidence that joint cost allocation disclosures are used to adjust reported expenditures for fund-raising costs. Based on our results, donors appear to ignore the effects of allocating joint costs. Although current accounting standards limit the availability of an accounting method commonly used to manage financial results, it appears that the opportunity for not-for-profit managers to use joint cost allocations to manage ratios and influence donors remains.

PUBLIC SECTOR ACCOUNTING IN INDIA: A HISTORICAL REVIEW AND AN ANALYSIS SINCE INDEPENDENCE TO THE ECONOMIC REFORMS OF THE NINETIES

This study provides a history and an inventory and analysis of existing public sector accounting principles in India from the time of independence from the British in 1947 through the economic reforms of the nineties. It also analyses the factors that are affecting the current evolution in governmental accounting from an ineffective bureaucratic system to an informative decision making tool, utilizing Luder’s Contingency Model of Public Sector Accounting.

ACCOUNTING PROFESSIONALISM AND LOCAL GOVERNMENT GAAP ADOPTION: A NATIONAL STUDY

We examine the factors that associate with local government decisions to comply with Generally Accepted Accounting Principles (GAAP). GAAP non-compliance is surprisingly common among larger local governments, and that trend has important implications for public policy, financial management transparency, and government accountability. To examine the factors that drive GAAP compliance, we develop a conceptual framework based on the politico-economic perspective on accounting policy choice, and then test that model with data from a national survey of local government finance professionals. Our key contribution is that we incorporate accounting professionalism. The findings suggest that for many local governments the decision to adopt GAAP is a response to the pressures of professionalism rather than a rational response to political and economic motives.

Country level corruption and frequency of issue in the U.S. market

This paper examines if country level corruption affects the size of a country’s stock market and its ability to raise equity capital. Using Transparency International’s ranking of countries based on corruption levels, we relate the corruption index to total market capitalization for a sample of 104 countries and also examine the number and volume of new equity issues in each country across time. Additionally, we examine if corruption affects the frequency of foreign firms’ raising capital in the U.S. We find that the corruption index is not highly correlated to either the number of issues or the total volume of issue. The correlation between the average volume of issue and the TI index suggests that there is no clear cut relation between the corruption index and the likelihood of the firm raising capital abroad.