Nonprofit accountability: The viewpoint of the primary stakeholders

• DOI: http://doi.org/10.1111/faam.12181
• Date: 01 February 2019
• Author: Geiza Goulart da Silva,Ericka Costa
• Published date: 01 February 2019

Received: 25 April 2017 Revised: 4 April 2018 Accepted: 5 April 2018

DOI: 10.1111/faam.12181

ORIGINAL ARTICLE

Nonprofit accountability: The viewpoint of the

primary stakeholders

Ericka Costa1Geiza Goulart da Silva2

1Departmentof Economics and Management,

Universityof Trento, Via Inama, Trento,Italy

2EcoNomics,Inc, Dana Point, California

Correspondence

ErickaCosta, Department of Economics and

Management,University of Trento, Via Inama,

538122Trento, Italy.

Email:ericka.costa@unitn.it

Abstract

By means of a questionnaire survey, this paper aims at analyzing

the primary stakeholder viewpoint regarding nonprofit organization

accountability. In detail, it investigates the member's perspective

regarding social accountability in a cooperative bank (CB)in Italy.

Our findings suggest that respondents had a high level of satisfac-

tion with social reporting: a large portion of the sample indicated

that they found social reporting to be useful, credible, transpar-

ent, and complete. Moreover, members of the CB under investiga-

tion consider social accountability as a way to improverelationships,

strengthen trust among members, and demonstrate transparency in

its activities within the community.

KEYWORDS

cooperativebank, NPO accountability, primary stakeholder, receiver

perspective, social reporting

1INTRODUCTION

Despite the growing importance of the nonprofit sector in providing public services in many developed countries,

much remains to be understood in terms of its accounting and accountability mechanisms (Benjamin, 2013; Valentinov,

2011). What has to date been discussed is that nonprofit organizations (NPOs) have to respond to multiple stakehold-

ers (Costa & Pesci, 2016) and therefore have to broaden their accountability mechanism in order to include mission

achievement(Ryan, Mack, Tooley,& Irvine, 2014; Valentinov, 2011). In discussing broader accountability requirements

for the nonprofit sector,many scholars have de-emphasized the role of financial reporting information in favor of more

nonfinancialinformation with a strong focus on mission and mission achievement (Ryan et al., 2014). Within this stream

of research many terms have been developedand discussed in order to encompass a more inclusive way of delivering

NPOs accountability mechanism, such as “public” accountability (Coy et al., 2001), “identity” accountability (Unerman

&O'Dwyer, 2006),“relational” accountability (Ebrahim, 2003b), and “social accountability” (Nicholls, 2010; Unerman

&O'Dwyer,2006).

Social accountability is an important practice within NPOs and relates to the way in which NPOs inform stake-

holders about organizations’ social, environmental, and ethical achievements (Ball & Osborne, 2011b; Costa, Parker,

& Andreaus, 2014; Gray,Dillard, & Spence, 2011). Social accountability primarily aims to provide accountability to all

stakeholders who might be affected directly or indirectly bythe organization. These accountability practices reveal an

Financial Acc & Man. 2019;35:37–54. wileyonlinelibrary.com/journal/faam c

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38 COSTAAND GOULART DA SILVA

organization's overallcommitment to transparency, while also demonstrating its contributions to community develop-

ment (Grayet al., 2011).

Researchers have investigated social accountability in NPOs as a complex, multidirectional, and multistakeholder

accountability process through which an organization measures and reports on its performance to multiple stakehold-

ers (Brown & Moore, 2001; Costa & Pesci, 2016; Ebrahim, 2005; Knutsen & Brower, 2010; Najam, 1996). By inves-

tigating to whom NPOs should be/are accountable, many scholars have analyzed which stakeholdersare affected by

NPO activities—namely donors, funders, beneficiaries, workers, volunteers, and the members themselves (Ebrahim,

2003b; Najam, 1996; Ospina, Diaz, & O'Sullivan, 2002). They have also identified possible outcomes (Benjamin, 2013)

or impact measures (Costa & Pesci, 2016) toward different stakeholders. These studies have mainly concentrated

on the sender perspective, seeking to understand how managers broadly implement standards of accountability while

determining the amount of attention they pay to different stakeholders in the accountability process (Knutsen &

Brower,2010; Ospina et al., 2002; Saxton & Guo, 2011). These researchers have also recognized the importance of the

stakeholder's voicein strengthening accountability processes by suggesting how managers should engage with critical

stakeholderswithin their accountability space and how NPOs should consider beneficiaries’ perceptions regarding the

services delivered (Benjamin, 2013; Ospina et al., 2002; Valentinov,2011).

Toa lesser extent, studies have investigated the receiver perspective, which involves stakeholders’ reactions to the

NPO's accountability and social accounting process (Benjamin, 2008; Ebrahim, 2002). The receiver's perspective has

been investigated primarily by considering the funder's needs (Brown & Caughlin, 2009); to date, funders haveindeed

been recognized as the most powerful stakeholders in NPOs, and they are usually the ones who provide a formal

request for accountability requirements (Benjamin, 2008; Ebrahim, 2002, 2005). However, there is a complete lack

of studies dealing with broader stakeholder perceptions of NPO accountability.

In the for-profit context, several studies have examined information requested by the primary—economically

powerful—stakeholders (Azzone, Brophy, Noci, Welford, & Young, 1997; De Villiers & van Staden, 2010; Epstein &

Freedman, 1994; Solomon & Solomon, 2006). Within this setting, studies have also considered, to a lesser extent,the

secondary—less economically powerful—stakeholders (O'Dwyer,Unerman, & Bradley, 2005a; O'Dwyer, Unerman, &

Hession, 2005b; Tilt, 1994). However,in the NPO context, these kinds of studies are fragmented and underexplored

(O'Dwyer,2002).

Tofill this gap, this paper seeks to analyze the receiver perspective on NPO accountability, with specific reference to

the primary stakeholders’ perceptions of social reporting in an Italian cooperative bank (CB);this paper considers the

members’ viewpoints in great detail. This research adopts a cross-disciplinary perspective because it deals both with

the concept of NPO accountability—with reference to the receiverperspective—and with a social accounting project in

anonprofit context. By developing this nexus of issues in different disciplines (NPO accountability and social reporting),

this paper makes a contribution to the advancement of knowledge in both of them. First, it considers the receiver per-

spective of social reporting, thus contributing to the literature on NPO accountability by investigatingwhether social

reporting is (or is not) accepted by the primary stakeholder in a CB context (Benjamin, 2008; Ebrahim,2003b, 2005;

Jäger & Beyes,2010; Ospina et al., 2002). Second, it offers an understanding of whether theNPO context could extend

our knowledge on the receiver perspective of social and environmentalreporting (O'Dwyer et al., 2005a, 2005b).

To achievethe objective of this research, we administered 262 questionnaires, based on Bryman's (1988) survey,

to one CB with a strong presence in northern Italy. In order to better understand why primary stakeholdersare fully

satisfied with the CB's social reporting, we complemented the surveys with an analysis of the CB's social reports from

1999 to 2011.

The remainder of the paper is organized as follows: the next section introduces the concept of NPO accountability

by emphasizing its relational dimension toward different stakeholders in order to highlight the gap in the literature.

Section 2 reviews prior studies that examineprimary stakeholders’ views of social reporting in different countries. The

next section describes the research context by introducing the CB setting and its multiple-stakeholder nature. Sec-

tion 4 presents the methodology by describing the surveyused in this research. This description includes the question-

naire, pretest, and pilot test as well as the content analysis used to complement the survey results. The final section

discusses the results of our analysis before presenting concluding remarks.