Wednesday, February 18, 2009

Transparency on Wall Steet? Use the Nonprofit Model

An interesting op-ed in yesterday's New York Times argues that if newly appointed Treasury Secretary Timothy Geithner wants to increase financial transparency on Wall Street, he should look to the Nonprofit Sector for a model:

TIMOTHY GEITHNER, the Treasury secretary, has pledged that the second bank bailout will be characterized by far greater transparency than the first on the part of the financial institutions. If he is sincere in his goal, then there is a simple accounting procedure that should be a part of the plan: the beneficiaries of taxpayer financing should have to keep track of their money in the same way nonprofits must.

Nonprofit accounting is designed to ensure that the recipients of grants from the federal government and other benefactors are held accountable for the funds they receive. Regrettably, the big banks that have been granted billions from the Troubled Asset Relief Program are less transparent in their financial reporting than the local soup kitchen that gets federal support.

Nonprofits use what is known as “fund accounting.” Fund accounting requires that a separate set of books be maintained for all grants that are designated for a specific activity. The aim is to ensure that the resources are spent for their intended purpose.

. . .

Charity is accountable. TARP recipients should be, too.

Definitely worth reading.


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