Document Type
Article
Publication Date
3-2025
Publisher
Springer
Source Publication
Review of Accounting Studies
Source ISSN
1380-6653
Original Item ID
DOI: 10.1007/s11142-023-09814-4
Abstract
This paper identifies a helpful red flag stakeholders can use to detect whether a nonprofit has managed its financial information. This red flag is reporting an identical program ratio—that is, the nonprofit organization reports the exact same ratio in multiple years—while reporting a large change in total spending. We find nonprofits are more likely to report identical program ratios when resource providers rely on ratios; pay is determined, at least in part, by performance; and the potential for regulatory interference is high. This paper also identifies the cost allocation techniques and the specific expenses nonprofits likely manage. We find most nonprofits alter the allocations of multiple expenses and find the specific expenses most likely manipulated are ones where managers have a high degree of discretion over how much to allocate to programs.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Recommended Citation
Ling, Qianhua and Roberts, Andrea Alston, "Identical Ratios: A Red Flag of Ratio Management" (2025). Accounting Faculty Research and Publications. 152.
https://epublications.marquette.edu/account_fac/152
Comments
Published version. Review of Accounting Studies, Vol. 30, No. 1 (March 2025): 119-155. DOI. © The Author(s). Used with permission. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.