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Why do nonprofit managers accumulate surpluses, and how much do they accumulate?
Author(s) -
Chang Cyril F.,
Tuckman Howard P.
Publication year - 1990
Publication title -
nonprofit management and leadership
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.844
H-Index - 54
eISSN - 1542-7854
pISSN - 1048-6682
DOI - 10.1002/nml.4130010204
Subject(s) - equity (law) , revenue , business , asset (computer security) , value (mathematics) , internal revenue , sample (material) , finance , net asset value , economics , public economics , marketing , service (business) , law , political science , chemistry , computer security , chromatography , machine learning , computer science
Most theories of nonprofit behavior assume that nonprofit managers run surpluses only temporarily and that managers choose a budget level equal to expected revenues. In reality, equity accumulations have intrinsic value to nonprofit managers, and equity balances of nonprofits do grow over time. The authors discuss the tax treatment of nonprofits under U.S. tax laws, present existing theories of nonprofit behavior, and consider the reasons a prudent nonprofit manager might wish to earn and retain surplus funds. Data from a 1983 national sample of nonprofits are used to show that a large majority of nonprofits earned surpluses in 1983, that surprisingly few nonprofits had surpluses close to the zero level, and that the size of a nonprofit's surplus was related to its equity and asset holdings.