Use this link to view the PDF file: Are Restricted Funds an Effective Governance Tool for Non-Profit Organizations?
Are Restricted Funds an Effective Governance Tool for Non-Profit Organizations?
Shane A. Van Dalsem
The Journal of Finance Issues
This paper studies the use of restricted funds as a monitoring tool for non-profit organizations. The paper examines a random sample of 600 non-profit organizations for evidence that restricted funds are a substitute for other forms of governance and that the use of restricted funds affects organizational behavior. The results provide evidence that restricted funds are used and are useful as a form of governance. Specifically, restricted funds and tax-exempt debts may act as substitute governance tools; the likelihood of reporting fundraising expenses is positively related to having restricted funds; and compensation for officers and directors is inversely related to the level of permanently restricted funds.