Carroll, Deborah A. and Thad Calabrese. 2013. Alternative Service Delivery: Does Nonprofit Financing Influence State Tax Burden? American Review of Public Administration 43(2): 200-220.
Ives, Martin and Thad Calabrese 2013. Employee Benefit Financing and Municipal Bankruptcy. Journal of Government Financial Management 62(1): 12-19.
Calabrese, Thad. 2013. Running on Empty: The Operating Reserves of US Nonprofit
Organizations. Nonprofit Management & Leadership 23(3): 281-302.
Calabrese, Thad, Grizzle, C. 2012. Debt, Donors, and the Decision to Give. Journal of Public Budgeting, Accounting, and Financial Management, volume 24, no. 2: 221-254.
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There has been a significant amount of work done on the private funding of nonprofits. Yet, despite the enormous size of the nonprofit sector as a whole, the importance of private donations to the sector, and the significance of the sector to public finances, there has been very little empirical research done on the capital structure of nonprofit organizations, and none has examined the potential effects of borrowing on individual contributions. Debt might affect donations because programmatic expansion might “crowd-in” additional donors, the use of debt might “crowd-out” current donors since expansion is undertaken at the behest of the organization (and not due to donor demand for increased output), donors might have a preference for funding current output rather than past output, or because of concerns that the nonprofit will be unable to maintain future programmatic output. These potential effects of debt on giving by individuals have not been the focus of research to date. The primary data for this paper come from the “The National Center on Charitable Statistics (NCCS)-GuideStar National Nonprofit Research Database” that covers fiscal years 1998 through 2003. The digitized data cover all public charities required to file the Form 990. The final sample contains 460,577 observations for 105,273 nonprofit entities. The results for the full sample support a “crowding-out” effect. The analysis is repeated on a subsample of nonprofits more dependent upon donations, following Tinkelman and Mankaney (2007). The restricted sample contains 121,507 observations for 36,595 nonprofit organizations. The results for the subsample are more ambiguous: secured debt has little or no effect, while unsecured debt has a positive effect. The empirical analysis is then expanded to test whether nonprofits with higher than average debt levels have different results than nonprofits with below average debt levels. The results suggest that donors do remove future donations when a nonprofit is more highly leveraged compared to similar organizations.
Nonprofits may fear that the use of debt signals mismanagement or bad governance, worrying that donors will punish the organization by removing future donations. The results presented here suggest a more complicated relationship between nonprofit leverage and donations from individuals than this simple calculus. On the one hand, increases in secured debt ratios (from mortgages and bonds) seems to reduce future contributions, possibly because donors are wary of government or lender intervention in the nonprofit’s management, or possibly because of the lack of flexibility inherent in repaying such rigid debt. On the other hand, unsecured debt, while more expensive, seems to crowd-in donations, even at increasingly higher levels when compared to similar organizations. There are at least two important conclusions from this analysis. First, during times of fiscal stress, nonprofits are often tempted to use restricted funds in ways inconsistent with donor intent simply to ensure organizational survival. Rather than violate the trust of certain donors, the results here suggest that nonprofits would be better off utilizing unsecured (possibly short-term) borrowing to smooth out cash flow needs. This option, however, assumes that nonprofits have access to some type of borrowing which is not true for many organizations. A second conclusion one might draw, therefore, is that policy considerations should be made to expand access to debt for nonprofits. The results here suggest that certain types of unsecured debt might in fact draw in additional resources, allowing nonprofits to leverage these borrowings for additional resources. By encouraging this type of policy option, nonprofits would not only gain access to increased revenue sources, but might be able to maintain programmatic output during times of fiscal stress.
Finkler, Steven A., Robert M. Purtell, Thad D. Calabrese, and Daniel L. Smith. 2012. Financial Management for Public, Health, and Not-for-Profit Organizations. 4th ed. Upper Saddle River, NJ: Pearson Prentice Hall.
Calabrese, Thad. 2012. The Accumulation of Nonprofit Profits: A Dynamic Analysis.. Nonprofit and Voluntary Sector Quarterly 41(2): 300-324.
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Notwithstanding its importance as an internal source of financing, no analysis has examined why nonprofits choose to retain unrestricted net assets. As restricted net assets might not be used as desired by the nonprofit manager, unrestricted net assets are a more accurate definition of available internal resources than total net assets. This article tests several theories that might motivate nonprofit accumulation of unrestricted net assets. Furthermore, the empirical strategy employed allows an analysis of unrestricted net asset accumulation over time and overcomes several significant statistical estimation issues. The results suggest that nonprofits target profits and seek their accumulation over time, although targets may be set at very low levels. Furthermore, the results suggest that the low levels of profits accumulated annually are for the purpose of reducing organizational financial vulnerability. The results also suggest that many nonprofits behave as if leverage and unrestricted net assets are substitutes.
Calabrese, T., Carroll, D. 2012. A Consequence of Exempting the Third Sector: Do Homeowners
Pay More Property Taxes? Public Finance and Management Vol 12(1): 21-50.
Marwell, Nicole, and Thad Calabrese, Jack Krauskopf 2012. A Financial Analysis of New York State’s Child Welfare Organizations. Baruch College Center for Nonprofit Strategy and Management.
Steven Finkler, David Ward, and Thad Calabrese 2012. Accounting Fundamentals for Health Care Management, 2nd Edition..
At A Time When Health Care Organizations Face Unprecedented Financial Challenges, Understanding Financial Accounting Is Important For All Health Care Professionals, Especially Those Who Manage A Department And A Budget. Designed For Both Students And Professionals, Accounting Fundamentals For Health Care Management, Second Edition Clearly Explains Accounting Principles And Applies Them To The Health Care Environment.Critical Topics Such As Recording And Reporting Financial Information, Depreciation, And Financial Statement Analysis Are All Thoroughly Covered The Second Edition Offers: New Co-Author, Thad Calabrese New Chapter (Chapter 2) Provides An Excel Tutorial. New Discussion Of The Impact Of Health Care Reform In Chapter 3 Updated Throughout With Information On IFRS Coverage Of Cash Basis Vs. Accrual Basis New Discussion Of Fair Value Simplified Discussion Of MACRS New Discussion Of Sarbanes-Oxley Act Many General Updates
Calabrese, Thad, and Deborah A. Carroll 2012. Nonprofit Exemptions and Homeowner Property Tax Burden. Public Finance and Management 12(1): 21-50.
This paper examines the question of whether there is any correlation between the prevalence of nonprofit organizations with property, plant, and equipment exempt from property taxation and the property tax burden for homeowners. Data from the Tax Foundation and Internal Revenue Service was used to analyze general-purpose local governments within larger counties (populations greater than 65,000) in the United States for years 2005 and 2006. Several econometric specifications were used to estimate homeowner property tax burden as a function of the value of nonprofit fixed assets, government tax structure characteristics, and a series of control variables. Our estimates suggest that county geographies with greater presence of nonprofits tend to have higher homeowner tax burdens on average. Specifically, the value of nonprofit tax-exempt fixed assets within a county geography that is 10% above the mean of $15.4 million is generally associated with a median property tax paid by homeowners as a % of household income that is between 0.0009% and 0.0154% above the mean or between $2 and $24 higher on average. The median property tax paid as a % of homeowner’s home value would be between 0.0006% and 0.0069% above the mean or between $3 and $12 higher on average. Overall, we find a strong, positive correlation between nonprofit fixed assets and property tax burden for homeowners at the local level.
Calabrese, T., Ely, T. L. 2011. School District Pension Bond Issuance and the Influence on
Spending Behavior. Association for Education Finance and Policy.
Ives, M., Calabrese, T. 2011. Creating Deficits with Balanced Budgets. Journal of Government Financial Management 60(4): 38-44.
Calabrese, Thad. 2011. Do Donors Penalize Nonprofits with Wealth Accumulations? Public Administration Review 71(6): 859-869.
Calabrese, Thad., Ely, T. L. 2011. Money for Nothing? Pension Obligation Bonds and
Government Spending. Public Finance and Budgeting Section, Western SocialSciences Association.
Calabrese, Thad. 2011. Public Mandates, Market Monitoring, and Nonprofit Financial
Disclosures. Journal of Accounting and Public Policy, 30(1), 71-88.
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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.
Calabrese, Thad, 2011. Testing Competing Capital Structure Theories of Nonprofit Organizations. Public Budgeting and Finance 31(3): 119-143.
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The static trade-off and pecking order capital structure theories are analyzed and applied to nonprofit organizations. In addition, this paper also considers how nonprofits adjust their leverage over time. The analyses consider the unique role of donor-restricted endowments in the decision to borrow, as well as different types of borrowing by nonprofits. The results indicate that nonprofit capital structure choices are best explained using the pecking order theory, in which internal funds are preferred over external borrowing. Further, nonprofit endowment is not found to increase leverage. Despite the unambiguous findings across varying definitions of leverage, the results also suggest that a “modified pecking order” is a more apt descriptor of nonprofit behavior.
Munnell, A., Calabrese, T., Monk, A., Aubry, J.-P 2010. Pension Obligation Bonds: Financial
Crisis Exposes Risks (Brief Number 9 in State and Local Pension Plans Series ed.). Center for Retirement Research at Boston College.
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The brief’s key findings are:
- Some state and local governments issue Pension Obligation Bonds (POBs) to raise cash to cover their required pension contributions.
- POBs allow governments to avoid increasing taxes in bad times and could reduce pension costs, but they pose considerable risks.
- Those who issue POBs are often fiscally stressed and not well-positioned to handle the investment risk.
Calabrese, Thad. 2009. Why Do Nonprofits Retain Unrestricted Net Assets? Evidence from Panel Data, and Policy Implications. Association for Research on Nonprofit and Voluntary Action.
Calabrese, Thad. 2009. The Determinants of Nonprofit Net Assets. Faculty Research Seminar, School of Public Affairs.
Calabrese, Thad. 2009. Public Pensions, Public Budgets, and the Risks of Pension Obligation
Bonds. Society of Actuaries, Public Pension Finance Symposium.
Budgeting is the core financial task in subnational governments. Although limited research has outlined the relationship between the annual operating budget and public pension funds, the existing literature has not considered the manner in which financial resources are measured within government budgets, how this measurement of resources might affect public budget decisions, and how the interaction of the budget with the actuarial model can lead public budget managers to engage in financially damaging transactions such as pension obligation bonds. This paper fills this void, and argues that the short-term nature of public budgeting coupled with the actuarial model's use of expected investment returns rather than a market discount rate for pension liability measurement causes governments to shift risk to future generations. This paper also recommends that a blended discount rate for pension liabilities be considered more appropriate when governments fund their annual pension expenditures using debt rather than equity (such as tax revenues).
Calabrese, Thad. 2008. What Determines Nonprofit Net Assets? Association for Public Policy and Management.
Calabrese, Thad. 2008. Examining the Determinants of Nonprofit Accounting Basis Choice. Association for Budgeting and Financial Management.
Weinstein, M., Calabrese, T. 2008. IESP Brief: Public Funding for After-School Programs 1998-2008.
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The authors of this policy brief document that in the decade since the Open Society Institute awarded a challenge grant to TASC to encourage the creation of sustainable public funding streams for after-school programs, every level of government has dramatically increased public funding for comprehensive after-school programs in New York City.
The authors note that the City of New York has contributed an increasingly larger share of public support since the city launched its Out-of-School Time Initiative to provide kids with academic, cultural and recreational activities after school and during summers. The authors estimate that eight times more kids in kindergarten through high school attend after-school programs today than in 1998. "Over the past ten years in New York City," they conclude, "public support for after-school programs has become one of the foundations of service for children and youth."