Nonprofit and Voluntary Sector Quarterly
June 2015; 44 (3)
http://nvs.sagepub.com/content/current

.
Two Approaches to Nonprofit Financial Ratios and the Implications for Managerial Incentives
Adam Eckerd1
1Virginia Tech, Alexandria, USA
Abstract
Nonprofits compete in donation markets for resources and are expected to report on the financial stewardship of the organization. Without a clear comparative signal to differentiate organizations in this resource market, simple financial ratios have been used as proxy measures of relative organizational efficiency. Two conceptual models can be applied to the use of these ratios: first, as dichotomous conformance thresholds that identify poor performers who are unable to meet some minimum standard, or second, as directly comparable scales of performance where more optimized ratios can be used to distinguish the best performers. These two different conceptual models imply two different managerial approaches and potential organizational outcomes. This research assesses the extent to which nonprofits that are evaluated by an external evaluator appear to use the ratios as thresholds to pass or as scales to optimize.

.
Anatomy of the Nonprofit Starvation Cycle
An Analysis of Falling Overhead Ratios in the Nonprofit Sector
Jesse D. Lecy1, Elizabeth A. M. Searing1
1Georgia State University, Atlanta, USA
Abstract
The nonprofit starvation cycle is a debilitating trend of under-investment in organizational infrastructure that is fed by potentially misleading financial reporting and donor expectations of increasingly low overhead expenses. Since its original reporting in 2004, the phenomenon has been referenced several times, but seldom explored empirically. This study uses 25 years of nonprofit data to examine the existence, duration, and mechanics behind the nonprofit starvation cycle. Our results show a definite downward trend in reported overhead costs, reflecting a deep cut in administrative expenses partially offset by an increase in fundraising expenses. The organization’s size is instrumental to its behavior, with a sharp rise in reported overhead occurring when revenues equal $100,000, but diminishing at $550,000. Finally, the brunt of the cuts have fallen on nonexecutive staff wages and professional fees, which heightens the concern of potentially ill effects derived from a fixation on overhead cost reduction.

.
International Nonprofit Collaboration – Examining the Role of Homophily
Yannick C. Atouba1 Michelle Shumate2
1Rutgers, the State University of New Jersey, New Brunswick, USA
2Northwestern University, Evanston, IL, USA
Abstract
The importance and popularity of interorganizational collaboration among nongovernmental organizations (NGOs) have grown considerably in recent years. Despite these growths, however, not much is known about why NGOs network the way they do or why NGO networks are structured the way they are. Using homophily theory and exponential random graph modeling, this study examines the patterns of interorganizational collaborative ties among infectious diseases international NGOs (INGOs) in 2007 (n = 94). The results suggest that these NGOs are more likely to collaborate when they have the same status, when they have similar (closer) founding dates, when they are headquartered in the same global hemisphere (north/south), when they have common funding partners, and when they are headquartered in the same geographic regions. Overall, the findings from this study suggest that various sources of homophily inform partner selection among infectious disease INGOs.