Matching Donors

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MATCHING DONORS AND NONPROFITS

THE IMPORTANCE OF SIGNALING IN FUNDING AWARDS

Gina Yannitell Reinhardt

ABSTRACT

The topic of nonprofit reform has sparked a debate on the battle between effi-

ciency and effectiveness. Why do ineffective nonprofits survive? Prospective

donors favor applicants likely to fulfill donor priorities. Donors with limited

time and energy look for signals that reveal recipients true capabilities.

Knowing this, recipients attempt to send the right signals to prospective

donors. If the process of sending and reading signals is efficient, funding deci-

sions will tend toward an optimal outcome in which only effective agencies

survive. What signals do donors consider the most helpful? Are organizations

that send such signals receiving the highest payoffs? What is the financial yield

of each signal to recipients? This article uses a signaling game to sharpen our

understanding of nonprofit fundraising and derive the conditions under which

signals will be credible. Interview and survey evidence gathered in Brazil indi-

cate that signals of accessibility, reliability, and credibility attract the highest

payoffs.

KEY WORDS . foreign aid . fundraising . information asymmetry . nonprofit

.

signaling game

Introduction

Nonprofit organizations efficiency and effectiveness have gained increased

attention over the past decade. Characterized by Anheier and Salamon (1998) as

private, voluntary, self-governing entities that do not profit owners, share-

holders, or directors, nonprofit studies programs are cropping up in schools of

business and public administration around the world. Journals focusing on

Special thanks to Andrew Sobel, Gary Miller, Randall Calvert, the Center for New Institutional

Social Sciences, and the American Association of University Women, for providing intellectual and

institutional support for this research. Thank you to the organizations and respondents that took part

in this study, to the editorial staff and reviewers of the Journal of Theoretical Politics for helpful

comments and suggestions, and to Will Reinhardt.

Journal of Theoretical Politics 21(3): 283309 The Author(s), 2009.DOI: 10.1177/0951629809103965 Reprints and permissions:http://jtp.sagepub.com http://www.sagepub.co.uk/journalsPermissions.nav


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policy and management are devoting special space to studies of nonprofits (see

Journal of Policy Analysis and Management, 1998), and websites directing

would-be donors to nonprofit organizations are proliferating online (e.g. guide-

star.org, giveforchange.com, helping.org). Some of this attention is due to the

surge in participation in the sector, both in volunteers and employees, as well asthe rise in public contracts extended to nonprofit organizations (see Light,

2000). Elsewhere, attention has been driven by the concern over the abuse of

nonprofit funds, a fear released by scandals such as those generated by the resig-

nation of United Way President, William Aramony, in 1992 (see Keating and

Frumkin, 2003). These trends together have fueled the topic of nonprofit reform

the research, debate, media attention, and investigation into how to increase

nonprofit efficiency and effectiveness.

Nonprofit managers are often pulled by these two countervailing forces; as

they strive to be more efficient in operating and maintaining donor relation-

ships, they can lose effectiveness in serving their target populations. This pull

is noted by Paul C. Light (2000: 87) in his report on the tides of nonprofitmanagement reform, as he cites some concern that scarce resources are being

used more to jump through the hoops than actually serve clients. Nonprofits

thus seek the least costly methods of securing donors, so that as many

resources as possible are left to fulfill mission goals and serve clients; they

must strategically position themselves to appeal to donors (a tendency most

notably referenced in Frumkin and Kim, 2001). Conversely, donors try to

save time and effort in evaluating potential recipients, looking for clues or

indicators, hereafter termed signals, which reveal recipients true capabilities.

If the process of sending and reading signals is efficient, funding decisions

will tend toward an optimal outcome in which efficient waste is economized.

Nonprofit organizations that are experienced fundraisers may have learnedhow to send accurate signals efficiently regardless of their effectiveness, but

the less experienced may confront problems with both the cost and accuracyof their signals.

How do ineffective agencies survive? Why do they continue to get dona-

tions? I argue that the survival of ineffective agencies is perpetuated by the

nature of the fundraising interaction between donors and recipients. It is not

enough to blame a decrease in effectiveness on the quest for efficiency. Rather,

we must look more carefully at the recipientdonor interaction, which I do by

characterizing the problem as one of asymmetric information and modeling it as

a signaling game. I find that in order for a signal to be a credible indicator of

nonprofit effectiveness, the cost of sending the signal must be differential basedon whether or not the recipient is effective. The smaller the grant award, the

more likely it will be that only effective organizations will find that the benefit

outweighs the cost. Smaller grants will therefore be more likely to differentiate

those for whom the signaling cost is low from those for whom it is high. If send-

ing the signal isnt worthwhile to effective recipients, or it is so cheap that either

284 JOURNAL OF THEORETICAL POLITICS 21(3)


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type of recipient can send it, nonprofits will pool together and be indistinguish-

able to prospective donors.

Formalizing the donorrecipient interaction clarifies why ineffective agen-

cies persist, and elucidates how donors can manipulate grant sizes to ensure

the continual funding of a small group of organizations, to the detriment oforganizations attempting to break in to the funding network. I use these theore-

tical findings as a springboard for an empirical investigation, in which I pre-

sent interview and survey data collected from donors and recipients in Brazil

that point to a real-world designation of recipient attributes. Respondents indi-

cate that unalterable attributes, such as age or religious affiliation, help donors

narrow their searches. Donors then turn to alterable attributes, such as profes-

sionalism and accountability, as signals to help determine who will receive

funding. Multivariate analysis highlights which signals yield the most money,

with postestimation of how much money each signal generates. Legally regis-

tered organizations with high degrees of donor accessibility attract more

money than nonregistered, inaccessible entities. Organizations with strongreputations, and those that undergo third-party audits attract more than double

the funds of their competitors.

As I find that donor perceptions of professionalism and accountability condi-

tion funding decisions and nonprofit behavior, it becomes imperative to explore

the implications of the signaling process for nonprofit effectiveness. Unless the

signals exhibited are differentially costly and correlated with effectiveness, the

signaling process bears out a signal-reading system that is efficient according to

the constraints of the fundraising system, but possibly suboptimal in terms of

overall agency effectiveness at serving core missions. While I do not seek to test

the correlations between signals and effectiveness empirically in this piece, by

identifying and confirming the existence of signaling strategies in the nonprofitworld, this article provides an important first step to understanding how the

fundraising process can perpetuate ineffective agencies. Scholars of nonprofitmanagement and accountability can additionally benefit from the insights into

funding cycles, donor motives, and recipient strategies that formalization pro-

vides. Practically, managers of donors and nonprofit recipient organizations will

find useful information in the results regarding which signals donors target and

how much money each signal yields. Finally, this piece represents the applica-

tion of a canonical signaling model to a new situation of nonprofit funding, with

original data that expands both bodies of literature.

The Search for Credible Signals

Due to the growing competition among nonprofit and for-profit organizations,

sharpening our understanding of the nonprofit fundraising process is important

(Young and Salamon, 2003). Much of the literature on funding nonprofits

REINHARDT: MATCHING DONORS AND NONPROFITS 285


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(McIlnay, 1998; Navarro, 1988), and on the allocation of development assis-

tance (Alesina and Dollar, 2000; Alesina and Weder, 2002), focuses on donor

motivations and preferences as determinants of funding allocation. Frumkin and

Kim (2001) are an exception, viewing nonprofits as strategic in positioning

themselves to attract money. In striving to convey certain images to prospectivedonors, the organizations that compete for national and international funds are

active players in the funding arena.

Donors and recipients operate in a situation of information asymmetry.

Donors seek their ideal recipient, but only recipients know whether or not they

truly fit a donors ideal. Recipients seek to show donors, before funding occurs,

that they are of the donors ideal type, whether they are or not. Donors thus

search for credible signals as to recipients true types.

Consider the various attributes a nonprofit organization might have. Spence

(1973) divides attributes into two categories: indices and signals. Indices are

unalterable attributes. For a nonprofit, an index might be the organizations age

or the terms under which it was founded. Signals are alterable attributes theycan be manipulated by the organization. Previous literature indicates that attri-

butes nonprofits can alter might be their levels of professionalism (see Abram-

son and McCarthy, 2003) or accountability (Tuckman, 1998; Keating and

Frumkin, 2003).

It is the combination of alterable and unalterable attributes, or signals and

indices, which presents an observable picture of a nonprofit to donors. What the

donor hopes to glean from this picture is a credible indicator of the organiza-

tions true type, and whether or not that type fits the donors ideal. As indices

are unalterable, it is through the manipulation of its alterable attributes that a

nonprofit can signal its type to donors. The task then falls upon the donor to

determine which signals are credible indicators of a recipients true type, andwhich merely signify time spent on trying to achieve the look of a donors ideal.

How can one recipient be convincing?Consider the game (Figure 1) between donor (D) and recipient (R). First,

nature (N) designates the type of a potential recipient. With probability p, R is

the donors ideal (Type I). With probability (1 p), R is not ideal (Type II). The

recipient knows its true type; the donor does not. Both know the value of p.1

Assume 0 < p < 1.

The recipient moves first, deciding whether to invest in sending a signal to

the donor (S) that it is ideal, or not (S). Based on Rs action the donor can

update its beliefs about Rs type and either Fund (F) the recipient, or not ( F).

The donor distributes funding where appropriate, the game ends, and payoffsare awarded.

1. Initially, the game must be analyzed as though the two agencies have no prior funding

relationships.



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Payoffs

For each outcome in Figure 1, the payoff to the recipient is listed first, followed

by the payoff to the donor. Note that for the recipient, the payoff is determined

by the level of funding it receives, discounted by any signaling cost incurred. Iffunded, signalers receive a higher level of funding (FH) than nonsignalers (FL).

Further, Type I (effective) recipients incur a different signaling cost (cL) from

Type II (ineffective) recipients (cH). These type-differential signaling costs are

crucial to achieving separation through a credible signal.

Donor payoffs are based on recipient type. Funding an effective recipient

(H) is better than funding no one (0), but funding no one is better than fund-

ing an ineffective recipient (L). Changing the relationships among the value of

p and the payoffs for each player will determine the conditions under which var-

ious equilibria are derived.

Equilibria for the Game

Three perfect Bayesian equilibria for this game are described here:

Equilibrium 1. Organization types are distinguishable by recipients actions. The

equilibrium strategy profile is (SESE, FSFS)2 provided cH FH FL.

The Donors beliefs are 1= 0, 2= 1.

Equilibrium 2. Organization types are not distinguishable by recipients actions.

The equilibrium strategy profile is (SESE, FSFS).

The Donors beliefs are 1=p,p0 LHL ,2

0LHL.

Equilibrium 3. Organization types are not distinguishable by recipients actions.

The equilibrium strategy profile is (SESE, FSFS).

The donors beliefs are 1=p,p0LHL

, 20 LHL

.

As the game parallels the canonical signaling game, derivation of the equi-libria is omitted.3

In the first equilibrium, a credible signal achieves separation. Ideal recipients

always send the signal; non-ideal recipients never do. The donor believes the

2. Read: Recipient Sends signal if Ideal (Type I), does Not Send signal if Not Ideal (Type II).

Donor funds all senders, and does not fund non-senders.

3. Proofs available upon request. A fourth equilibrium exists where organizational types are not

distinguishable by recipients actions, and pffi. The equilibrium strategy for the recipient is

(SESE), while the Bayesian donor randomizes around its prior beliefs (1=2) and funds or

not funds by a toss of the coin.



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signal, funds all senders, and never funds non-senders. To reach this state, the

signaling cost to a Type II recipient must be higher than the highest benefit it

can attain; the non-ideal recipient will never try to send it. Ideal recipients will

send it if their cost of signaling is less than the highest benefit attainable.

If cH= cL or FH > cH, the signal is worthless, and no organization will choose

to send it; all recipients will pool by not sending a signal. Donors will retain

their prior beliefs regarding each recipients probability of being an ideal orga-nization, and will fund depending on the relationship between h and as

opposed to and L. As (h ) approaches equality with ( L), the

minimum p necessary for the donor to fund approaches 1/2. As (h )exceeds ( L), p decreases. As (h ) grows smaller than ( L),

p increases. Donors that place high priority on achieving a match with

(1-p)4

F

F

FH-cL,H

-cL,

FL,H

0,

-cH,

FL,L

0,

A

D

D

D

N

Type I:Effective

Signal

S

~S

Fund

~Fund

F

DDontSignal ~F

~F

~F

(p)

Type II:Ineffective

FH-cH,L

A

1

Let FH be the funding level to an applicant that signals.

Let FL be the funding level to an applicant that does not signal.

Let cL be the signaling cost to a Type I applicant.

Let cH be the signaling cost to a Type II applicant.

Let H be the donor payoff to funding a Type I applicant.

Let be the donor payoff when it grants no funding.

Let L be the donor payoff to funding a Type II applicant.

Assume FH > FL >0 and H > 0 >L.

2

3

Figure 1. Game between donor and recipient



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recipients (only funding Type I recipients, and never funding Type II recipients),

but do not discern between mismatching and funding no one, will fund based on

lower levels ofp (Equilibrium 2). Donors that feel that funding no one is nearly

as important as matching, but that mismatching is particularly bad, require a

higher p for funding to occur (Equilibrium 3).

Discussion

The outcomes of this model speak to the survival of ineffective organizations by

outlining the possible outcomes that may arise in the nonprofit world. Ideally,

signals credibly separate effective nonprofits from ineffective nonprofits, and

only effective nonprofits survive. The model reveals that the more expensive

and difficult it is to send signals, the more likely we are to see ideal nonprofits

differentiating from non-ideal nonprofits in the real world. Similarly, the smaller

the grant award relative to the signaling cost for nonideal nonprofits, the more

likely it will be that only Type I organizations will find that the benefit out-weighs the cost. Smaller grants will be more likely to differentiate those for

whom the signaling cost is low from those for whom it is high.

It is possible, however, that type-differential signals may credibly signal the

donors ideal, but that the donors ideal is notnonprofit effectiveness. If, instead,

the donor prioritizes characteristics such as public relations, brand naming, or

the favor of another donor, a credible signal of one of those attributes can lead

to separation based on factors beyond effectiveness. An ineffective organization

that credibly signals a good brand name will survive. The funding process, while

suboptimal according to effectiveness, will efficiently allocate resources accord-

ing to the donors ideal and the recipients signal.

Additionally, if a signal is more costly than it needs to be, those organizationsthat can afford to send it may still be incurring too much cost to do so. Both par-

ties have an interest in keeping the signal as cheap as possible, without collap-sing the separation. Any signal that costs more than separation requires is using

too many of the effective organizations extra resources, thus reducing its own

effectiveness. Even Type I organizations will have their effectiveness threatened

by having to jump through hoops to please donors.

And if the signal is too costly for anyone to send, all organizations will sim-

ply avoid sending it. Effective organizations will not be able to separate, which

will lead to regulations that require transparency and other accountability mea-

sures. Rather than insuring separation, these measures will sap further resources

from the effective organizations, while continuing to allow ineffective organiza-tions to exist, resulting in the suboptimal allocation of all funding.

As the model establishes the theoretical possibility that the fundraising pro-

cess allows ineffective agencies to perpetuate, it becomes important to investi-

gate the fundraising system empirically. The full signaling process cannot be

tested directly for, as observers, we are in the same boat as the donors: we



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cannot know at the onset which organizations are ideal, nor can we know their

true costs of signaling. What can be investigated is how donors conceptualize

alterable and unalterable attributes, and which signals are correlated with higher

levels of funding. Based on the previously discussed theoretical propositions,

then, I generate the following empirical propositions:

PROPOSITION 1: Donors recognize a distinction between recipient signals and

indices, and use information transmitted through signals and indices to make

funding decisions.

PROPOSITION 2: Recipients incur a cost when sending signals, a cost that makes

signaling too expensive for some recipients to bear.

PROPOSITION 3: Recipients that send signals receive a benefit that outweighs their

cost of signaling.

Empirically investigating these propositions is the focus of the next sections.

Qualitative Evidence of Signaling

Stone et al. (2001) discuss which nonprofit attributes attract different types of

donors. Authors contributing to Anheier and Salamon (1998) investigate these

attributes in arenas outside the US. Allowing insights from the signaling model

to drive the data analysis, I set out to investigate which signals and indices, or

alterable and unalterable attributes, donors and recipients believe correlate with

funding in the international arena.Previous scholarship suggests that some donors gear their funds toward

nations or regions of priority (Alesina and Dollar, 2000), making a cross-

national study inappropriate for this analysis. To control for cross-national

trends, which are often based on aggregate indicators and political or economic

behavior at the national level, this investigation will be limited to one develop-

ment arena. This restriction insures that preferences are common among donors,

and that the legal constraints on organizations and donors are constant. Focusingon one nation also allows investigation at the organizational and individual

level, opening an opportunity to untangle the decision-making process of orga-

nizational agents.

Brazil is an ideal choice to investigate the donornonprofit signaling interac-tion because it houses active domestic and international nonprofits that regularly

compete for funds. The economic and social needs of Brazil are not met by the

private market, and low levels of public spending have left the efforts of eco-

nomic and social development to nonprofit organizations (Anheier and Salamon,1998). The per capita amount of bilateral and multilateral funds flowing to



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Brazil is so small that nonprofits must turn to private donors (Landim, 1998),

making Brazil ideal for analyzing various types of donors (corporate/private,

nonprofit, governmental) in one study. As Brazils state and civil society are

increasingly working together to confront social and economic goals, it is a con-

structive environment for the study of nonprofit fundraising.Brazil is a generalizable test case because organizations operating there do

not stand out as recipients of particularly high or low levels of assistance (Inter-

national Development Statistics Online Database on Aid and Other Resource

Flows, 2003). Brazil fits in the 52nd percentile of developing countries, when

ranked in terms of per capita dollars flowing to nonprofits and NGOs. A few

unique attributes of Brazilian nonprofit activity will slightly constrain measure-

ment, but should not severely threaten the generalizability of the model.

Brazilian nonprofit activity has historically been structured by the ruling

regime (Bosch, 1997; Pearce, 1997). In 1993, in response to corruption scandals

unleashed by President Fernando Collor, Brazil created the National Social Wel-

fare Council (CNAS) to oversee social welfare policies (Landim, 1998). Underthe registration rules of CNAS, nonprofits must submit by-laws, founding min-

utes, and directors names. Philanthropies are a special class of organizations,

nonprofit public interest entities that provide services without discrimination,

maintain unremunerated directors, and receive breaks in water, electricity, and

trash expenses.4 Many nonprofits and philanthropies operate without registration

due to a costly and lengthy application process, and because registered non-

profits and philanthropies cannot own property (interviews with the author,

2003). Thus, nonprofits in this study will not be defined legally, but along the

lines of Anheier and Salamons (1998) categorization of a private, voluntary, self-

governing entity that does not profit owners, shareholders, or directors.

Reports of Signaling

As the model tells us there should be a distinction between alterable and unalter-

able attributes, the investigation begins with qualitative evidence of which signals

and indices donors and recipients report are factored into funding decisions. I con-

ducted 88 open-format interviews with executive and financial directors from

donor and recipient organizations that operate in Brazil (methods in Table A1). A

purposive sample was chosen to reach a broad range of donors and recipients. Of

167 organizations contacted, 61 granted at least one interview (36.5%).

Donors in the sample represented three types of agency: governmental orga-nizations (such as Interamerican Development Bank (IDB), United States

4. Donations to an unregistered nonprofit are not tax deductible. Individuals receive deductions on

up to 10 per cent of income; firms have a 5 per cent limit (Articles 79 and 246 of Brazils Federal

Income Tax Regulations, quoted in Landim, 1998).



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Agency for International Development (USAID), World Bank, European Union

(EU)); private or corporate foundations (Volkswagen, Bosch, Hewlett-Packard

Institute); and intermediary nonprofits (those that both receive and distribute

funds, such as World Wildlife Fund, Fundacao Orsa, Fundacao Abrinq). I asked

the Executive/Regional Director or Director of Projects what criteria determinewho receives money. Many governmental donors publicly solicit project propo-

sals. Other donors privately solicit applicants to enter closed competitions. Pri-

vate and corporate foundations often choose recipients without waiting for them

to approach, or accept unsolicited proposals.

Recipient respondents receive money from various combinations of govern-

mental sources (such as USAID, IDB, UNICEF, World Bank, Brazilian federal,

state, and city ministries), private/corporate foundations (Kellogg, Ford,

MacArthur, Bill and Melinda Gates, Hewlett-Packard Institute, Natura, Boti-

cario), individuals, and intermediary nonprofits (DKT International, Private

Agencies Collaborating Together, International Youth Foundation). The sample

includes organizations that have not competed successfully for internationalfunds. I asked the organizations Executive or Financial Director about fundrais-

ing strategies and operations. Some recipients have departments and staffs

devoted entirely to fundraising, while others maintain staffs that intersperse

fundraising with other duties. Respondents engage in events, direct mailing,

grant-writing, collecting dues, and providing fees-for-service.

Donors confirm that they do look to a nonprofits organizational attributes for

signals of its true type before disbursing grants. Recipients confirm that they

structure and operate their organizations according to the signals they believe

donors seek. Respondent reports of a distinction between alterable and unalter-

able attributes, coupled with insights from the literature, illustrate which attri-

butes are considered credible signals of type.

Indices

Indices indicate to donors the sort of programs an organization will be able to imple-

ment. One index donors reportedly consider is an organizations geographic range of

service. Bebbington and Riddell (1997: 11113) report that some donors choose to

fund nonprofits that are based in the region of choice, because less money is trans-

ferred to contractors along the way. Our foundation works only with communities

where a lot of our employees live, states one corporate foundation donor agent.5

Others prefer to fund intermediate or broader-range nonprofits with connections to

smaller nonprofits in diverse regions. As one recipients finance manager states, Wegot that Ministry of Education grant because our local contacts were clear. Our lower

communication costs helped us get the grant.

5. For confidentiality, no names or organizations will be associated with specific comments.



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A second unalterable attribute, or index, is the sector the organization serves.

Although previous work distinguishes sector or issue area in various ways (Reiner

and Wolpert, 1981; Wolpert and Reiner, 1984b), respondents in this sample point

the focus to the sectors of women, children, and the environment, for various

reasons. Some donors only give to childrens organizations. Womens organiza-tions tend to receive more money from international donors than from national

donors, and respondents from these organizations believe their target population

is overlooked. Authors argue that environmental organizations are staffed with

disproportionately well-educated and middle class employees (Hochstetler,

1997: 192), which might position them to petition for funds more effectively.

The third index is the type of service the potential recipient gives, either

direct or indirect. Some donors fund direct, hands-on efforts such as distributing

food, rather than the indirect pursuits of education or advocacy (more in Wolpert

and Reiner, 1984a). Gordenker and Weiss (1996: 3741) argue that indirect ser-

vice organizations find it the most difficult to raise funds. While 55 per cent of

donors agree that they prefer to fund direct service, some disavow the trend:Every child has a mother, so we try to fund organizations that work for their

rights. These conflicting views result in a relationship between type and fund-

raising that is not clear cut.

Previous literature (Reiner and Wolpert, 1981; Landim, 1998) indicates that

a nonprofits age is an unalterable attribute that can affect its ability to attract

money. Yet several Brazilian organizations were founded in response to the

political scandals and poor development reports of the early 1990s (similar to

trends in the US: Abramson and McCarthy, 2003). Many donors thus believe

that organizations founded in the 19914 scandal response range are less likely

to be corrupted, while still old enough at the time of this study (20034) to be

trusted with large amounts of money. Consequently, donors account for theunalterable attribute of the founding date with respect to this time period, rather

than the age itself, when making funding decisions.Seventy-eight per cent of donors state that whether or not a potential recipi-

ent has a religious affiliation has a profound effect on funding decisions. Pre-

vious work (Wolpert and Reiner, 1984a; Tuckman, 1998; Hodgkinson, 2003)

confirms that religious affiliation can be an important draw or deterrent of fund-

ing from different types of donor groups. Although some donors are not legally

allowed to donate to religious nonprofits, others seek them out in order to reach

certain communities. One clever recipient realizes this distinction:

we are not officially affiliated with any religion, because we have to be able toapply for federal funds. But our sister organization, which draws in millions each

year in support of its religious activities, funds us indirectly, because our work

appeals to them. That way were able to get dollars from both those that support

religious activities and those that dont. We simply cant affiliate with a religion if

we expect our work to continue.



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Indices help donors narrow their searches for the ideal recipient. Note that in

the short term of a donors funding cycle, these attributes are unalterable.6 A

recipient organization, once formed, cannot change its indices without becom-

ing a different organization.7

Signals

A signal is an alterable attribute. Although potentially difficult and time-con-

suming, recipients can change these attributes, and thus the strength of the sig-

nals they send. Interviews indicate that donors focus on two main signals of an

organizations true type: professionalism and accountability. A recipients type

influences not only the strength with which it sends various signals, but also its

ability to change that strength.

The first signal, mentioned by 100 per cent of donors, is the professional-

ism of the recipient. Abramson and McCarthy (2003: 343) define the profes-

sionalization of an organization to be a shift away from amateur orpersonalized responses and towards technical and standardized approaches to

providing services. A professionalization trend among nonprofits is noted in

Frumkin and Andre-Clark (quoted in Light, 2000) as a vehicle for improving

management, and in Gordenker and Weiss (1996) among recipients of devel-

opment assistance.

Donors interviewed believe that agencies with higher degrees of profession-

alism are more effective in their work: People who can handle things profes-

sionally are better at servicing populations and clients, states one donor

agencys managing director. Recipient financial directors confirm that they

strive to appear professional, often at great cost. When pressed for how profes-

sionalism is gauged or assessed, responses converge around three main attri-butes: accessibility, experience, and fundraising specialization.

A high degree of accessibility indicates that potential donors can gatherinformation about the organization without difficulty. An organizations accessi-

bility is the ease with which prospective donors can communicate with its staff,

6. An environmental organization cannot suddenly change itself into an AIDS clinic, just as an

organization that works exclusively in a small rural community cannot shift to the international level

overnight. It is possible that in the long run such shifts could occur (Wolpert and Reiner, 1984a;

Luong and Weinthal, 1999), but these possibilities would involve a tremendous investment of capital

and resources (see Uvin, 1996), could dilute funding, and for parsimony will not be considered here.

7. Laffont and Tiroles (1991) work on regulatory capture suggest an organizations governancestructure as another unalterable attribute. As nonprofits have no shareholder or public accountability,

some become essentially one-man operations with a captured regulatory board of directors. While

donors in the sample acknowledge that this is a plausible dimension to consider on theoretical

grounds, they report that it is too difficult to try to examine every organization closely enough to

determine whether its board is captured. Further, one donor even asserts that sometimes one person

knows whats best for an organization and its target population, so that doesnt concern me.



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and is prioritized by 79 per cent of donors. As one donors program director

states, There are people in my organization that need to see reports in Spanish

or English. If I can see right away that an organization can accommodate that,

they move to the top of my list. To attract international donors, it is often neces-

sary for a recipient to employ staff members that speak or write in more thanone language (Hulme and Edwards, 1997), even though it may have nothing to

do with the organizations core mission. States one recipients financial director,

You think its necessary to speak French to give children lunch? Its necessary

to speak French to keep our main donor from Dijon, so we pay a premium for

someone who does.

Respondents assert that to signal high levels of professionalism, an organiza-

tions employees need diverse professional experience. Donors are drawn to

recipients that operate as the donors do. It becomes important for recipients to

have experience from other economic sectors that they can use to enhance fund-

raising. As one recipient representative says, Its really expensive to hire busi-

nesspeople who . . . know how to speak the business language. And its worth itin the end because of how good they make us look.

The final component of professionalism that donors notice is a nonprofits fund-

raising specialization, whether any staff positions are devoted to attracting and

maintaining donors. Frumkin and Kim (1998, quoted in Light, 2000) note that

fundraising specialization is becoming a high priority in nonprofit hiring practices.

Ninety-one per cent of donors cite fundraising specialization as crucial to their

choice of recipients, as it offers a well-trained contact within a recipient organiza-

tion that will be available to them at all times. Schneider and Ji (1990) argue that

organizations with fewer resources cannot apply for funding because they do not

find it worth their time, based on their chances of success. A recipient agrees, Of

course wed like to hire people to devote exclusively to fundraising. Who couldntuse the extra money they might win? As it is, we cant pay the people we do have,

and they all have thousands of responsibilities.Beyond professionalism, 100 per cent of donors report seeking recipients that

are accountable. A nonprofit is here considered accountable if it can be held

responsible for its actions or inactions (OConnell, 2005; see also Tuckman,

1998; Brody, 2003). Details of how donors assess the concept are summarized

in the discussion of four alterable attributes: transparency, reliability, credibility,

and reputation.

The first component of accountability is transparency, the ability to view and

evaluate information regarding recipient accounting and operations. Previous schol-

ars (Postma, 1994; Tuckman, 1998; Keating and Frumkin, 2003; Roberts, 2004;Koppell, 2005) assert that transparency is a key means to holding organizations

accountable. Seventy-six per cent of donors agree, stating that more transparent

organizations are more accountable, and thus more likely to receive their money.

Many donors mention, however, that transparency is not always enough to

insure accountability. Transparent records must also have a high degree of



14/27

reliability, considered present if financial records have been audited by a third

party, as suggested in Keating and Frumkin (2003; see also Kearns, 1994; Frum-

kin and Kim, 2001). Donors and recipients maintain that the audit process,

although expensive, is vital to reliably proving that an organization is operating

legitimately (see also Herman and Renz, 2004). States one recipients financialdirector, I know weve lost prospective donors because we cant assert that our

finances have been audited, but we just cant pay them, so I cant spend time

thinking about it.

Credibility, referred to by Keating and Frumkin (2003) as the ability to

believe in and trust an organization, is high on donors lists of desirable signals.

As many nonprofits in Brazil are not legally registered, donors (82%) consider

an organization more credible if it is registered as a nonprofit or philanthropy,

which Koppell (2005) argues shows that it can follow the rules. Prospective

donors know that registered organizations conform to standards of organization

and conduct, and use this registration as a signal of capabilities. For recipients,

the cost of this registration is sometimes too much to bear, as an executive direc-tor states: The red tape we have to get through would take years, and I dont

have the time. I have an organization to run.

Lastly, donors gauge an organizations accountability through its reputation,

its overall quality as judged by others. Donors are wary of relying on nonprofit

self-generated reports, which can be biased (see Frumkin and Kim, 2001), so

they often accept the endorsement of other donors (via presence of a grant from

that donor) as evidence of an effective organization. Some donors even forgo

their own searches for effective recipients to fund recipients that already have

prestigious donors. One donor reports seeking out recipients because of its repu-

tation among other donors, and eschewing recipients that approach it without

such endorsement. This practice is not lost on strategic recipients, who believedonors share opinions of recipients with one another.

Discussion

This qualitative analysis confirms the three empirical hypotheses listed earlier.

First, donor agents look to a recipients alterable and unalterable attributes

when determining funding. Second, altering these attributes is costly, too

costly for some organizations to bear. Third, the recipients that do invest in

signaling do so because they believe the cost outweighs the benefit. Addition-

ally, the quotations reflect that altering attributes can divert resources awayfrom a recipients core mission, and does not always directly reflect organiza-

tional capabilities. Hiring people who speak foreign languages, undergoing

third-party audits, and obtaining organizational certification are costs recipi-

ents incur to signal professionalism and accountability. Recipients affirm that

expending resources in these areas can divert funds away from the direct



15/27

provision of services, although it indirectly increases the ability to provide

services by raising funds. Under what conditions will the benefit of signaling

outweigh the cost? The next section investigates this question with a larger-

sample study.

Quantitative Evidence of Signaling Benefits

I conducted a survey of 385 nonprofits in Brazil to discern which signals attract

the most funds, and how much funding they attract. Simple gross income of an

organization in the year 2003 (in US dollars), transformed logarithmically to

ensure a normal distribution, is the dependent variable in a standard OLS model.

I expect that a nonprofits signal scores will be positively correlated with its

intake, despite controlling for indices and other factors.

Data and Measurement

There is no universally known or publicly available record of nonprofits in Bra-

zil, although scholars estimate that over 200,000 exist (Anheier and Salamon,

1998). A sample of 3594 nonprofits was compiled from three clearinghouses

(ABONG, 2004; Ajuda Brasil, 2004; Seja um Voluntario, 20045),8 and invited

to participate via the internet, yielding 385 responses (10.71%).9 All communi-

ques and materials were transmitted in Portuguese.10

Signal and index measures are derived based on the qualitative reports,11 and

designed to conform to an important distinction between signals and costs: sig-

nals may not directly prove type (Spence, 1973). There is a direct link betweenan organizations type and the costit bears in signaling. Non-ideal organizations

incur high costs; ideal organizations incur low costs. Measurements must chara-

cterize signals that are expensive to send and reflect the potential to differ in cost

from one nonprofit to another.

8. Sources similar to sources found on giveforchange.com, guidestar.org, and helping.org.

9. There is a concern that poorer nonprofits will have fewer resources to fill out the survey, or that

richer nonprofits will not want to fill out a survey, resulting in self-selection and bias in the sample.

To guard against this possibility, respondent organizations were given access to a forum of partici-

pant nonprofits, and a link to their organization on the survey website, as an added enticement.Further care was taken to restrict the analysis to variables gathered from questions that yielded

approximately normal frequency distributions. As with any survey, the possibility of selection bias

cannot be completely eliminated.

10. Materials were translated into Portuguese by a native Portuguese speaker, translated back into

English by a native English speaker, then revised and translated back into Portuguese.

11. Table A2 lists definitions and sample statistics.



16/27

An example illustrates the distinction. Consider a plausible measure of

experience the number of employees with degrees in higher education. Such a

measure indicates high levels of experience for a tuberculosis clinic because

highly educated personnel are required to operate it, but confounds proof of type

with a signal of type. Instead, consider the measure for reliability: it is expensiveto hire third parties to perform audits, and to conform to the requirements neces-

sary to undergo such an audit, yet it is unlikely to directly enhance an organiza-

tions ability to perform its core mission. This and the other measures are

designed to be true to the signaling game in that signaling costs differ, but mea-

sures are not direct proof of abilities.

A few added measures merit discussion. Reputation counts the number of

donors from which an organization received funds prior to one year before

filling out the survey. This measurement allows for the time delay between

decision and disbursal, captures the influence prominent donor relationships

can have on future funding, and accounts for repeat donor relationships

without biasing results by including a lagged dependent variable on theright-hand side.12

Several controls were inserted. Fulltime staff size13 is expected to be

positively associated with yearly intake. A few measures capturing an orga-

nizations founding scenario, the level of boost an organization received

from its founding, allows for the organizations founding to influence future

funding, and was included to guard against endogeneity.14 As Brooks

(2000) indicates, the expected effect of a founding scenario on yearly intake

is unclear, as high levels of support at founding can either boost or crowd

out other donations.

Results

Some responses were left blank or filled in with Dont know or Prefer notto respond. Rather than use listwise deletion to eliminate these responses

completely, many scholars have chosen to impute multiple datasets that

simulate missing values for these responses, then to estimate the model on

each dataset and combine the results into one output (Rubin, 1986;

12. As many assert (Shi and Svensson, 2004), an agencys budget in year t is likely to be a func-

tion of its budget in year t 1. Following Achen (2000), a lagged dependent variable is not used here

as it is likely to bias the remaining results downward.

13. Counts of volunteers were inconsistent and unreliable, and thus inappropriate to include.14. There is an infinite regress that results from the logic: If an organization makes more now, it

was more credible a year ago, but it was probably more credible then because it made more before

that. So grant success in year t 1 could increase the likelihood of grant success in year t. Ideally,

this problem would be resolved by using data spanning several years, which the current study cannot

accommodate. Instead, the reputation and founding scenario variables are used as the best available

options to combat endogeneity.



17/27

Brownstone and Valletta, 2001). Following the lead of Escobar-Lemmon

(2003), Scheve and Slaughter (2001), and Boehmke (2002), I used the AME-

LIA (King et al., 2001) program to simulate missing values for multiple

imputations of data.15 Manipulations were run on the imputed datasets with

CLARIFY (King et al., 2000), which estimates the model on each dataset

Table 1 . Determinants of 2003 Intake (White-corrected Standard Errors in Parentheses)

Intake03 Intake03

Indices:

Geographic range: international 2.57 (1.39)* 2.69 (1.40)*Geographic range: national 1.58 (0.83)* 1.68 (0.87)*

Geographic range: state 1.02 (0.75) 1.03 (0.76)

Geographic range: municipal 1.17 (0.63)* 1.10 (0.63)*

Sector: environment 0.51 (0.67) 0.58 (0.67)

Sector: women 0.16 (0.56) 0.19 (0.56)

Sector: children 0.25 (0.72) 0.24 (0.71)

Type (direct/indirect) 0.26 (0.67) 0.22 (0.67)

Scandal range 0.85 (0.70) 0.87 (0.70)

Religious affiliation 1.69 (0.58)*** 1.75 (0.60)***

Signals:

Professionalism

Accessibility (language count) 0.46 (0.24)*

Accessibility (english dummy) 0.62 (0.60)Experience in private sector 0.00 (0.00) 0.00 (0.00)

Fundraising staff 1.77 (0.91)* 1.76 (.91)*

Accountability

Transparency (financial records) 0.09 (0.55) 0.11 (0.57)

Reliability (audit dummy) 0.87 (0.52)* 0.87 (0.52)*

Credibility (registration) 1.23 (0.57)** 1.31 (0.56)**

Reputation (prior donor) 0.79 (0.46)* 0.91 (0.46)*

Controls

Strong founding 1.05 (1.10) 1.03 (1.09)

Mid-level founding 0.10 (0.53) 0.19 (0.51)

Fulltime staff size 0.00 (0.00)* 0.00 (0.00)*

Constant 6.13(1.16)*** 6.25 (1.22)***

Observations 385 385

R2^ 0.19 0.18

^ The values for R2 are averages across all imputed datasets.

*significant at p< .10; ** significant at p< .05; *** significant at p< .01.

15. Listwise deletion is only more appropriate than multiple imputations when the data is assumed

to be Missing Completely At Random (King et al., 2001), a condition this survey data violates.

AMELIA generates educated guesses as to what the missing values would be, based on simulations

of random linear functions created from the information that is not missing. AMELIA imputed five

datasets, using Expectation-Maximization with Important Resampling.



18/27

and applies an algorithm to yield one output.16 All descriptive statistics (see

Table A1) were based on the data before imputations. From here forward

estimates, standard errors, and predicted values reported will be based on the

imputed datasets generated by AMELIA and processed with CLARIFY.

Based on the interviews and tendency for selection, dummies for children,women, and the environment account for sector and are allowed to vary, along

with accessibility, across ten basic iterations.17 Table 1 lists estimations of

yearly intake in the log of 2003 dollars. The first column contains results for the

model including a count of foreign languages spoken, the second for the English

dummy estimation. Eight indices and signals show significance: accessibility,

reliability, credibility, fundraising specialization, reputation, religious affilia-

tion, fulltime staff, and geographic range of service.

Indices show mixed significance. Sector indicators are not significant deter-

minants of yearly intake, either inserted individually or together. This calls into

question recipient respondents beliefs that sectors beyond their own are dispro-

portionately favored in the nonprofit arena. Similarly, lack of significance on thescandal response range indicator suggests that donors do not make funding deci-

sions based on whether an organization arose as a result of the corruption

scandals.

Geographic range of service and religious affiliation indices, on the other

hand, show significance robust to all variations on the model. International,

national, and municipal range organizations all demonstrate significantly greater

intake than neighborhood organizations, although state-level organizations do

not show a significant improvement in intake over those neighborhood organiza-

tions. Religiously affiliated groups organizations take in statistically signifi-

cantly more money than their nonaffiliated counterparts.

Five of the seven signal measures show statistical significance. In thedimensions of professionalism, accessibility is significant and positive when

measured as a total language count, but not as the English dummy. As 53per cent of the organizations that speak only one foreign language list it as

English, it appears that speaking English and Portuguese alone are not

enough to attract funds. Having specialized fundraising staff, however, does

help attract funds, even controlling for fulltime staff size. Further, an inter-

national range is significant despite controlling for English and fundraising

specialization, refuting arguments that the measure simply captures the

16. With regression coefficients, means, and predicted probabilities, CLARIFY estimates the

value within each dataset and averages the values across all datasets to reach the value of output.With standard errors, CLARIFY averages the estimated variances within each dataset and adds to it

the sample variance in the point estimates across the datasets, multiplying the average across datasets

with a factor that corrects for bias (see King et al., 2001).

17. Iterations were run with each sector, no sector, and three sectors. Varying accessibility

doubled the iterations. In unreported regressions, a Spanish dummy replaced the English dummy.

Through all iterations, results were robust in magnitude, standard error, and directional effects.



19/27

ability to hire English speakers or other specialized staff. Private sector

experience does not appear significant, which I believe is more likely a

reflection on the measurement of the concept than the theoretical validity of

the relationship.18 Together, the results on these elements of professionalism

confirm donor and recipient assertions that professionalism matters in fund-

ing allocation.

With respect to accountability, although transparency of records is not sig-

nificant, reliability of records is.19 The finding confirms donor assertions that

viewing financial records is less important than knowing they were audited by

a third party. Donors also prefer formally registered beneficent organizationsand/or public utilities to those that are not.20 The large sample confirms the

interview findings that recipient accountability is an important factor in fund-

ing decisions. Reputation, measured by how many international donors the

recipient had one year prior to the funding cycle, is also significant, demon-

strating the importance of other donors endorsements in one donors decision

calculus.

Table 2 . Effects of Varying Significant Variables while Holding Others

Constant at Their Medians

Variable Change in Value Effect on Yearly Intake

Accessibility (language count) 0 to 1 $9,7101 to 2 $15,412

Reliability (audits) 0 to 1 $16,387

Fundraising specialization 0 to 1 $21,756

Credibility (registration) 0 to 1 $18,378

Reputation 0 to 1 $32,370

(prior international donors)

Religious affiliation 0 to 1 $119,439

Geographic range (international) 0 to 1 $308,474

Geographic range (national) 0 to 1 $108,148

Geographic range (municipal) 0 to 1 $62,620

Fulltime staff size One StDev $10,959

18. While previous scholarship suggests a valid link between private sector experience and intake,

interview respondents suggested that one or two key business minds could make an important dif-ference in signaling. If so, the effort to approximate a continuous variable by counting those recipient

staff members with private sector experience could be confounding the results.

19. Results are robust to exclusion of financial records availability and the inclusion of an interac-

tion term.

20. Keep in mind that tax deductions are not applicable to donors who do not pay taxes in Brazil.

Further, most domestic donors in the sample are governmental and unconcerned with deductions.



20/27

Analysis

How much money does each signal yield? Table 2 illustrates the effect of

changing significant variables values on yearly intake.21 Each variables

effect was measured by estimating the change in expected yearly intake as thevariable moved from one value to another, while other variables were held

constant at their medians. Dichotomous variables moved from 0 to 1, while

accessibility, reputation, and fulltime staff varied in terms of standard devia-

tions from the mean.

Varying signals shows profound effects on yearly intake. In terms of profes-

sionalism, an organization with zero accessibility, signifying that no one speaks

a foreign language, attracts an average of US$16,533 in 2003. Its competitor

that employs someone with proficiency in one foreign language brings in close

to US$10,000 more, enough to pay that person six times the minimum wage and

still increase funds by over US$5,000.22 The organization with a person that

speaks two extra languages makes an additional US$15,400, enough to pay twopeople six times the minimum wage each and still net the organization

US$15,000, double that of its counterpart. An organization with no specialized

fundraising staff averages US$4,487 in 2003, while its competitors with staff

members designated for fundraising makes US$26,243, nearly six times as

much. The increase is enough to pay a professional fundraiser ten times the

minimum wage and still increase funds by over US$13,000.

As for the elements of accessibility, an unreliable organization (no third-

party audits) brings in US$11,777. Its competitors that do undergo audits attract

over US$16,000 more. An organization that is not credible in that it is not certi-

fied or registered with the government averages US$7,865 per year. An organi-

zation that does boast legal registration brings in over US$26,000, over threetimes as much. And an organization with a low reputation among international

donors, having had no international donors in the year prior to the year of the

study, brings in an average of US$26,243, compared to US$58,613 brought in

by its counterpart that had only one international donor the year before. Index

variance illustrates important effects that unalterable attributes can have on

yearly intake as well. Organizations with community/neighborhood ranges are

eclipsed by their municipal-level, national-level, and international-level coun-terparts, which bring in an extra US$63,000, US$108,000, and US$308,000,

respectively. Increasing fulltime staff size by one standard deviation yields an

increase in 2003 intake of close to US$11,000. Religious organizations bring in,

on average, more than five times (US$119,000) as much as their non-religiouscounterparts.

21. Please contact author for original log values and confidence intervals.

22. Minimum wage in Brazil in 2003 was US$71 per month, US$852 per year (BBC, 2003).



21/27

The analysis confirms the qualitative evidence and expands its implications.

Donors give to organizations with higher levels of professionalism and account-

ability, conceptualized through fundraising specialization, credibility, reliability,

reputation, and accessibility. Not only do these signals attract funds; they gener-

ate high returns that can more than offset the cost of the signal itself.

Conclusion

This research has explored the donorrecipient relationship in nonprofit fund-

ing and the effects of signaling on nonprofit resources. Multivariate analysis

shows that donors channel their money to organizations exhibiting higher

levels of reliability, accessibility, credibility, reputation, and fundraising spe-

cialization. Nonprofits emit these signals through obtaining certification,

employing staff members that speak various languages, acquiring the endorse-

ment of international donors, and undergoing third-party audits, and donors

are giving their money to the most skillful signalers. Larger geographic ranges

of service, more fulltime staff, and religious affiliation also increase an organi-

zations yearly intake.

Two key implications of this work are interesting to practitioners and aca-

demics. The first pertains to the potential of signaling to either co-opt or build

capacity. Hulme and Edwards (1997) and Gordenker and Weiss (1996) express

concern that concentrating on pleasing donors could, either through diverting

resources or co-opting agendas, result in a recipient losing the ability to fulfill

its core mission effectively. Strong signals would not indicate organizational

capabilities, but simply signaling capabilities, as this recipients Executive

Director implies:

Our founder was famous, Thank God. The government continues to give us money,

and people think were big and great, because we have our founders name. Were

barely holding ourselves together and our services decline every year but as long

as we keep giving the government a good name, a good place to put their money,

we should survive.

Another states, Look, we do our best, but theres no doubt that other organiza-

tions are better [at this work]. We need more money, and that means we give the

donors what they want.

Yet nonprofits benefit from the grants and relationships signaling acquires.

These relationships lead to the acquisition of resources and the possibleenhancement of capabilities as nonprofits strive to meet the procedural require-

ments associated with maintaining acquired grants. Says one program manager,

The IDB made us, forced us, to clean up. We got the IDB grant because the

World Bank had been watching us, but to keep it, IDB made us professionalize,

make our accounting more transparent, you would not believe. Another



22/27

mentions the computer a donor demanded she acquire, after receiving funding,

to track spending. Acknowledging that it took staff away from service provision,

she is thrilled with her organizations new method for tracking of clients, and

maintains that everyone is better off.

Thinking about various donor ideals in light of the formal model can explainthe differing observed effects. Some donors fund organizations that signal a

good reputation because it helps their own image; others fund organizations that

are registered because of a concern with accountability. Such donors fund dif-

ferent types of organizations, but search for signals in the same manner. Still

others look carefully for recipients for capacity-building funds. These donors

are playing an entirely different game not one of shortcuts and signals, but one

of gathering information to discern which organizations can best utilize capa-

city-building funds, as this donor indicates: We spend years looking for organi-

zations to receive our funds. We focus on a small number and bring them in to

train in how to write project proposals and use grant money. Searching takes

time, but we believe it is crucial to building capacity. An exploration of thisspecial donorrecipient relationship is a provocative area for future research.

The second implication concerns the payoffs of the game, the fact that in

order for the signal to be credible, its cost must be higher than the highest bene-

fit possible for nonideal recipients. Donors have the incentive to make grants

small, so that the only recipients will be those for whom the cost is low. Recipi-

ents accustomed to filing applications for US$1,000 grants will continue to do

so without thinking, while those for whom the cost is high will never apply for

such small amounts. The smaller grant serves as a screening device, giving reci-

pients an in when it is time to apply for larger grants, and donors savvy to this

aspect of the game enforce the status quo by repeatedly funding the same pool

of recipients.As signaling is relevant in a variety of contexts, this empirical model is

applicable across a broad range of countries and institutional settings, particu-larly those with a competitive funding environment. The qualitative work is

specialized with respect to Brazil, but with the possible exception of the accessi-

bility measure, the quantitative variables can be measured similarly elsewhere.

Not all signals will matter to the same degree in every case, yet it will be inter-

esting to see how coefficients differ across arenas.

This study has shown that the higher signalers make the most money. It is in

the formalization of the fundraising interaction that the possible implications of

these findings are elucidated. If the signals found to yield more money are also

correlated with effectiveness, and if those signals are no more costly than theyneed to be in order to maintain separation, these donors and recipients have

reached optimal funding relationships. If, however, any of these signals is not

correlated with effectiveness, or is so costly that the organizations sending them

are wasting resources that could be used to fulfill missions, then ineffectiveness

in organizations is forced to persist.



23/27

Appendix

Table A1. Data Collection Table Interview Methodsa

USb

Brazilc

Time frame AprilMay 2003 JulyAugust 2003

Number of peopled (organizations)

interviewed from recipient agencies

19 (15) 36 (28)

Number of people (organizations)

interviewed from donor agencies

10 (5) 23 (15)

a Interviews were open in format. The respondent was allowed to speak freely, while the interviewer

directed conversation in general terms.b Fourteen of the interviews with US agencies were conducted over the telephone (2595 minutes).

Four were conducted over email (427 days). One interview was conducted in person (160 minutes).c Thirty-seven of the Brazilian interviews were conducted in person (4775 minutes) in Sao Paulo,

SP, and Braslia, DF. One interview was conducted over the telephone (25 minutes). Four interviews

were conducted over email (315 days).d Interview respondents were solicited first from a purposive sample of lists of nonprofit contacts and

donors provided by USAID, IDB, the World Bank, the Grupo de Institucoes, Fundacoes e Empresas

and the Associacao Brasileira de Organizacoes Nao Governamentais. The sample included recipient

organizations that are successful at acquiring international funding, as well as those that are not, and

donor organizations at the national (Brazilian) and international level. Contact with this first sample

was initiated via email or over the telephone, with a 28 per cent response rate. At that point, respon-

dent contact continued from references of previous respondents, resulting in an overall sample that

originated as purposive, but ended with snowball effects.

Table A2. Variable Definitions and Descriptive Statistics

Variable Measurement Range Mean SD N

Yearly intake 2003 US$ $0$448m $4.2m $27.7m 297

Log intake Natural log of the 2003 intake 019.92 10.92 4.55 297

Experience Number of people on staff with

private sector experience

0856 17.82 65.99 319

Accessibility The total number of languages

(other than Portuguese) in which

someone from the organization

can communicate.

05 1.44 1.10 347

Fundraising

specialization

1=1 or more staff designated for

fundraising; 0=no staff

designated for fundraising.

01 0.76 0.43 301

Transparency 1=financial informationavailable; 0=financial

information unavailable.

01 0.59 0.49 317

Reliability 1= third-party audits performed;

0= no third-party audits

performed

01 0.56 0.50 315

(continued)



24/27

Appendix. (continued)

Variable Measurement Range Mean SD N

Credibility 1= the organization possesses a

Certificado de Entidade Benefi-cente de Assistencia Social

CEBAS(Certificate of a

Beneficent Social Assistance

Entity) or Ttulo de Utilidade

Publica (Title of Public Utility)

0= no certification possessed.

01 0.65 0.48 370

Development sector * Children/Infants, Street children,

Youth/adolescents, Women,

Energy, Rights, Health,

Education, Landless Movement,

Consumer Protection,

Environment

NA NA NA 385

Children 1=

works with or for children;0= else. 01 0.68 0.47 385

Women 1=works with or for women;

0= else.

01 0.42 0.49 385

Environment 1=works with or for environment;

0= else.

01 0.22 0.42 385

Type of service 1=offers some type of indirect

services, such as research or

advocacy; 0=only direct

service offered.

01 0.74 0.44 384

International 1= international range; 0= else 01 .01 .20 381

National 1=national range; 0= else 01 .17 .38 381

State-level 1= state range; 0= else 01 .20 .40 381

Municipal 1=municipal range; 0= else 01 .35 .48 381

Community 1=neighborhood/community

range; 0= else

01 .23 .42 381

Religious affiliation 1=Religious affiliation 0=No

religious affiliation

01 0.22 0.42 383

Fulltime staff Number of fulltime staff 01400 37.11 133.73 344

Scandal range 1= founded 199194; 0= founded

prior to 1991, or after 1994

01 0.11 0.32 385

Reputation Count of international donors one

year prior to filling out survey

04 0.04 0.31 356

Strong found 1=Money from fund

appropriation, founders private

funds and contacts, or as a

spin-off with funds from another

organization; 0= else

01 .11 .31 375

Med. found 1= Individual, foundation, or

corporate funds, or combination

of money and volunteers;

0= else

01 .42 .49 375

Poor found 1=No money to found; 0= else 01 .47 .50 375

* Respondents listed a total of 10 extra sectors in the Other option.



25/27

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GINA YANNITELL REINHARDT is Assistant Professor of Public Policy, Inter-

national Affairs, and Public Service Administration at the Bush School of Govern-

ment and Public Service at Texas A&M University, where she researches

decision-making under uncertainty and its effects on the distribution of wealth in

society. ADDRESS: Bush School of Government and Public Service, Texas

A&M University, College Station, TX 77843-4220. [email: greinhardt@bush

school.tamu.edu]


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