Restricted Contributions and Fungible Dollars: Can Donors Tell the Difference?

Evelyn A McDowell, Rider University

ABSTRACT: Accounting pronouncements require not-for-profit organizations to separately identify and account for contributions that have donor-imposed restrictions. These contributions are given the label “restricted” contributions and can distort judgment. It is argued that accounting for restricted contributions makes money appear inflexible however; money like other commodities is fungible. As a result, the accounting label can give donors a false sense of security about how resources are used by a non-for-profit organization (NFP). The goal of this study is to investigate whether the accounting classification of donor-imposed restrictions on contributions decreases the perceived fungibility of cash, and therefore alters donor judgment. An experiment was conducted to accomplish the goals of the research project. Subjects were asked to play the dictator game. The result showed that restricting contributions increase donations and efficiency was not a significant factor.

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