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Debra Kent
IU School of Public and Environmental Affairs
dskent@indiana.edu
812-855-6802

Adriene Davis
IU Center on Philanthropy
adrldavi@iupui.edu
317-278-8972

George Vlahakis
IU Media Relations
gvlahaki@indiana.edu
812-855-0846

Last modified: Wednesday, September 8, 2004

Most Indiana nonprofits can demonstrate accountability, study shows

But a significant minority are not prepared for government scrutiny

EDITORS: Detailed data and graphics are available upon request, including selected information by county, region, type of nonprofit and industry comparisons.

INDIANAPOLIS -- While many Indiana nonprofit organizations have the monitoring tools in place to easily demonstrate accountability, a significant minority fall short, according to a new report from the Center on Philanthropy at Indiana University and the IU School of Public and Environmental Affairs.

The findings come as government scrutinizes the financial and management practices of nonprofits.

The Senate Finance Committee has recommended that nonprofits file information with the Internal Revenue Service every five years -- including written conflict of interest policies, financial reports and management policies -- to determine if they continue to meet the requirements for tax-exempt status.

Based on a survey of 2,206 Indiana nonprofit organizations, including charities, congregations, advocacy groups and membership associations, the report shows that only:

-- 64 percent have audited financial reports
-- 60 percent have computerized financial records
-- 80 percent have written job descriptions
-- 71 percent have written personnel policies
-- 30 percent have a formal conflict of interest policy
-- 70 percent have an annual report

"A number of state attorneys general are beginning to look at the accountability of charities and to explore greater oversight of exempt organizations more generally," said Kirsten Grønbjerg, project director for the study. "Our findings suggest that while most nonprofits have key reporting tools in place, there is also ample room for improvement."

Grønbjerg emphasized that many nonprofits don't have the resources to put all these tools in place. "It's clearly unrealistic to ask very small nonprofits to get a full audit. It's expensive," she said. "But something like an annual report or a conflict of interest statement is within the purview of virtually every organization and would help nonprofits operate systematically and with greater transparency."

Other key findings:

Though volunteers are critical to nonprofits, few organizations have programs to recruit, train and retain these vital workers. Three-quarters of Indiana nonprofits report that volunteers are very important to their organizations. But only about a quarter of them have formalized volunteer recruitment/retention and training programs.

Larger nonprofits have greater financial reserves. Not surprisingly, organizations with $500,000 or more in annual revenues are more likely than smaller nonprofits to have financial reserves dedicated to meeting maintenance and equipment needs, giving them a buffer to handle unexpected operational expenses such as equipment repair. Religious nonprofits are the most likely to have reserves dedicated to capital needs such as building expansion and the purchase of new equipment.

The benefits of age

Older nonprofits are more likely than younger ones to have financial management tools as well as reserves dedicated to maintenance and capital needs.

"Mutual benefit" nonprofits are under the most severe financial pressure. These include fraternal societies, such as Knights of Columbus, Moose and Free Masons, as well as cemeteries and organizations that provide insurance services or pension funds for their members.

Grønbjerg is a professor in nonprofit management in the School of Public and Environmental Affairs at Indiana University and holds the Efroymson Chair in Philanthropy at the Center on Philanthropy headquartered at Indiana University-Purdue University Indianapolis.

This report is part of the ongoing Indiana Nonprofit Sector: Scope and Community Dimensions project begun in 1999 to examine the size and composition of the Indiana nonprofit sector and the critical roles Indiana nonprofits play in communities. The project is funded through support from the Efroymson Chair in Philanthropy by the Indianapolis Foundation, an affiliate of the Central Indiana Community Foundation and the Center on Philanthropy's Indiana Research Fund, supported in part by Lilly Endowment Inc. The new report is available on the project Web site at http://www.indiana.edu/~nonprof/.

The IU School of Public and Environmental Affairs, which is located on eight campuses, is committed to teaching, research and service in areas such as public and nonprofit management, public policy, environmental science, criminal justice, arts administration and health administration. The school maintains continuing relationships with a large number of public agencies at all levels of government; public and private hospitals and health organizations; and nonprofit organizations and corporations in the private sector. SPEA has earned national distinction for innovative educational programs that combine administrative, social, economic, financial and environmental disciplines.

The Center on Philanthropy, which is a part of the IU School of Liberal Arts at IUPUI, is a leading academic center dedicated to increasing the understanding of philanthropy and improving its practice through research, teaching, public service and public affairs programs in philanthropy, fundraising and management of nonprofit organizations.