Disclosure Management in the Nonprofit Sector: A Framework for Past and Future Research

This paper provides a review and synthesis of past research regarding financial disclosure management by nonprofit organizations, and suggests directions for future study. We begin by defining disclosure management in nonprofit organizations and exploring the motivations for why it might occur. We also review nonprofit financial reporting objectives, practices and the informational needs of the users of nonprofit financial reports. Research into the motives, methods, and consequences of disclosure management is summarized. The evidence suggests that nonprofit managers have a variety of incentives to manage reported numbers, and that they do in fact alter spending decisions, choose accounting methods, and design cost allocations to achieve certain performance benchmarks. However, many questions remain unanswered: just how serious is this problem and what can or should be done about it?