Efficient Funding: Auditing in the Nonprofit Sector

Abstract:

Nonprofit organizations are a critical part of society as well as a growing sector of the economy. For funders there is an increasing and pressing need to ensure that society reaps the most social benefit for their money while also developing the nonprofit sector as a whole. By routinely scrutinizing nonprofit reports in an effort to deduce whether a nonprofit organization is efficient, funders may believe that they are, in fact, giving responsibly. However, we find that these nonprofit reports are unreliable, supporting a myriad of empirical research and revealing that report-based funding methods do not facilitate efficient allocation of funds. In response, we develop audit contracts that put funders in a position to enact change. Auditing, perhaps obviously, supports funders; however, we find that it also benefits the population of nonprofits. Moreover, auditing results in improved efficiency for the nonprofit sector overall. Indeed, our conclusions indicate that nonprofits maywant to work with funders to increase the use of auditing, consequently increasing efficiency for the sector overall and impacting society as a whole.

Biography:

Natalie Privett is a recent addition to the MIT-Zaragoza Logistics Center as a Postdoctoral Research Fellow.  She received her PhD and Masters degrees from Stanford University’s department of Management Science & Engineering.  Prior to graduate school, Dr. Privett earned her undergraduate degree in Industrial Engineering from Texas A&M University and subsequently worked as an industrial engineer for Applied Materials where she gained industry and manufacturing experience.
Privett’s research lies at the intersection of operations management, nonprofit studies, and global public health, focusing on applying the theories and tools of operations management in philanthropy and civil society using the global public health landscape as a novel platform for innovation. This intersection creates valuable opportunities where similarities and differences between the for-profit and nonprofit sectors can be leveraged for both scientific and operational advances. Privett is currently interested in strategic supply chain interventions, that is, the notion of external actors intervening in markets and supply chains for specific operational outcomes.

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