Nonprofit Lobbying: Museums and Collections Capitalization

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    Anne L. Christensen and Rosanne M. Mohr*


    Most current accounting standard setting environments encourage theparticipation of affected entities in the standard setting process. Thisparticipation often takes the form of `lobbying' on proposed standards. In theUS (and elsewhere), comment letters are an important lobbying componentof the standard setting `due process' (Miller et al., 1994, pp. 58^85).The actual decision to `lobby' or comment on proposed accounting

    standards has been modelled as part of the positive accounting theoryliterature (Watts and Zimmerman, 1978 and 1986). That literature positsthat there are underlying economic and political reasons why managers (1)choose different accounting methods or levels of disclosure and (2) lobby onproposed changes in the accounting choice set (Kelly, 1983). The motivationsof management play a key role in the theory. Managers are assumed to beutility-maximizing individuals whose actions are governed by perceivedeconomic costs and benefits.Christensen andMohr (1995) proposed a positive accounting theory model

    of museum accounting behaviour. They then used that model to examine anaccounting choice: the choice of art museum managers to capitalize or not tocapitalize their art collections. This research extends that earlier work byfocusing on another aspect of positive accounting theory: the decision tolobby; specifically, the decision of US museums to lobby on the FinancialAccounting Standard Board's 1990 Exposure Draft (FASB, 1990) that wouldhave required the capitalization of collections.There are several reasons why it is important to understand the

    characteristics of nonprofit organizations that choose to lobby on financialreporting standards. First, most financial reporting requirements affect a wide

    Financial Accountability&Management, 15(2), May 1999, 0267-4424

    Blackwell Publishers Ltd. 1999, 108 Cowley Road, Oxford OX4 1JF, UKand 350Main Street, Malden, MA 02148, USA. 115

    *The authors are fromthe School of Business Administration, Portland StateUniversity.They wouldlike to thank the participants at the Portland State/Washington State-Vancouver AccountingResearchColloquiumandtheAAAAnnualMeeting inDallas aswell as Paul Copley for their helpfulcomments on this manuscript. In addition, they are grateful for a Portland State University FacultyResearch Grant which enabled them to purchase the comment letters on the FASB Exposure Draft,Accounting for Contributions Received and Contributions Made and Capitalization of Works of Art, HistoricalTreasures, and SimilarAssets.The data for this study were obtained frompublicly available sources. A listof the sample museums is available from the authors on request.

    Address for correspondence: Anne L. Christensen, Associate Professor, School of BusinessAdministration, Portland State University, POBox 751, Portland, OR 97207-0751, USA.e-mail:

  • range of organizations and, as such, all types of affected entities should berepresented in the standard setting process. If only certain types of nonprofitorganizations participate, then standards may be promulgated that areinappropriate for the non-participants. Wyatt (1991) suggests that thecurrent standard setting process will only survive if it is influenced by a widerange of constituents. Second, financial reporting standards can have a varietyof financial statement effects. Studying the characteristics of the lobbyists canshed light on the magnitude and meaning of projected financial statementeffects for a subset of entities and thus provide standard setters with a base forassessing the impacts of the proposed standard on the types of entitiesrepresented in the lobbying group (Kelly, 1985). Finally, examining nonprofitlobbying entities provides evidence on the perceived net costs of becominginformed about and lobbying on a standard setting proposal. Partly becauseof more limited accounting systems and personnel, those costs may differ fornonprofit entities and may bear upon the ability of standard setters to obtainadequate input from all affected interests.Thus, the purposes of this study were to determine (1) whether certain

    museum characteristics were related to the decision to lobby and (2) to whatextent the lobbying museums were representative of the overall population ofUSmuseums. Logistic regression analysis on the 103museums that lobbied onthe 1990 capitalization proposal and a sample of 103 museums that did notlobby indicates that museum size, age, and membership in and accreditationby the American Association of Museums (AAM) were all significantlyrelated to the lobbying decision. Follow-up chi-square tests comparing thelobbying museums to the overall US museum population confirm thatlobbying museums were older and more likely to be private or art museums.Though limited to only one type of nonprofit entity, these results provide somepreliminary insight into how nonprofit lobbyists compare with for-profitlobbying entities.The remainder of this paper is organized as follows. The next section briefly

    describes the proposed capitalization requirement and related lobbyingefforts. Then the underlying theory and related research are presented,followed by the research hypotheses, empirical tests, and research results.The final section contains a discussion, concluding comments, and suggestionsfor future research.



    In recent years, the Financial Accounting Standards Board (FASB) hasbecome increasingly involved with the reporting practices of US nonprofitentities. In 1990, the FASB issued the first Exposure Draft (FASB, 1990) inconjunction with its Not-for-Profit Organizations Project. That Exposure


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  • Draft (ED) addressed two primary issues: the broad issue of `Accounting forContributions Received and Contributions Made', applicable to all not-for-profits; and the more specific issue of `Capitalization of Works of Art,Historical Treasures, and Similar Assets', directed primarily towardmuseums.On the latter issue, the FASB proposed that all past, present, and future

    acquisitions of:

    works of art, historical treasures, and similar assets shall be capitalized . . . if they areintended tobe soldor are of a kind for whichmarkets exist inwhich theyare or couldbesold or exchanged (FASB,1990, par.18).

    With that proposal, the FASB intended tomakemuseum accounting practicesmore consistent with the asset recognition practices of both for-profit andmostother not-for-profit entities. Focusing on the need for `representationallyfaithful' and `decision useful' data, the Board concluded that collection itemsare a significant long-term asset that should be reported in the museumbalance sheet. Also, to alleviate concerns about data collection costs, theBoard proposed considerable flexibility in selecting a measurement basis1

    and a three-year delay in implementing the retroactive requirement forcapitalization of prior years' collections.The FASB proposal was, however, in stark contrast to predominant US

    museumreportingpractice.A1989FASB staff study of 134museums (randomlysampled from a population of 1,300 museums that had submitted grantapplications to the Institute ofMuseumServices) indicated that only 18 percentcapitalized collections, with another 9 percent disclosing a dollar amount in thenotes to the financial statements (Jaenicke and Glazer, 1991, pp. 38^9).Similarly, in a study of 106 artmuseums,Christensen andMohr (1995) reportedthat only 29 percent disclosed capitalized collections data in their 1988 balancesheets. Thus, for most of the nearly 14,000USmuseums (AAM, 1992a), the EDrepresented a major shift in collection reporting practices.In response to the 1990 ED, the FASB received comment letters from 1,093

    individuals and entities.2 While many of the letters addressed the`Contributions' portion of the project, the views of museums on thecapitalization requirement were also well represented. In general, the lettersfrom museum directors, trustees, etc., expressed concern about and/or strongopposition to the collections capitalization proposal. Of the 123 different3

    responding museums and museum associations, 119 opposed all or part of theproposal. Only one favored it as `appropriate, and doable' (Miller, 1990),while three others gave no opinion on the capitalization issue. Much of theexpressed opposition was based on the perceived costs of complying with thestandard. Underlying those perceptions may have been concerns about themonetary, personnel, and time costs associated with collecting the data andthe political costs associated with appearing too `big' or `wealthy'(Christensen andMohr, 1995).


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  • The lobbying museums were apparently influential in the standard settingprocess as the FASB decided to substantively revise its proposed requirement.In the reissued ED (FASB, 1992) and the subsequent Statement of FinancialAccounting Standards (SFAS)No. 116 (FASB, 1993), the Board encouraged, butdid not require, the capitalization of collection items that are `held for publicexhibition, education, or research in furtherance of public service' (FASB,1993, par. 11). Though some expanded footnote disclosure was required, thenew standard essentiallymaintained the status quo for balance sheet reportingof museum collection data.There are several notable aspects of the above-described standard setting

    events. For its part, the FASB had little data or research on which to base itscapitalization proposal and clearly did not anticipate the `nasty' debate thatfollowed (Cowan, 1990). On the other hand, the ED respondents often showedminimal knowledge of the FASB proposal and/or of the objectives of externalfinancial reporting. At the public hearing on the 1990 ED, Dennis R.Beresford, chairman of the FASB, noted the:

    large number [of comment letters] which were not based on the proposal, but on asummary or article about the document . . . [S]ome of those summaries and articleswere incomplete or wrong (FASB,1991).4

    Research can improve our understanding of standard setting constituenciesand their lobbying behavior. Prior studies (e.g., Dhaliwal, 1982; Hope andGray, 1982; Francis, 1987; Deakin, 1989; and Schalow, 1995) that examinedlobbying behavior on accounting standards have focused on financialreporting standards that primarily affected for-profit entities. This studyrepresents an initial examination of a group of nonprofit entities, museumsand related institutions, that chose to lobby on the collection capitalizationproposal.


    Accounting research on lobbying behaviour is part of the broader positiveaccounting theory literature (Watts and Zimmerman, 1978 and 1986).Within a positive accounting theory framework, the decision to comment or`lobby' on a standard setting proposal has been modelled as an economiccost/benefit decision (Sutton, 1984). That is, firms or individuals choose tolobby only if the perceived benefits exceed the costs. As summarized by Tandyand Wilburn (1992), the perceived benefits may include: (1) the economicadvantages (or avoidance of economic costs) to be gained from a favourableoutcome to the lobbying effort and (2) the psychological benefits ofparticipating in the standard setting process. Costs may include: (1) the actualcosts of preparing a submission and (2) the costs of being informed (i.e.,awareness of standard setting documents and related reading and research).


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  • To date, positive theory researchers (e.g., Dhaliwal, 1982; Kelly, 1982 and1985; Hope andGray, 1982; Francis, 1987; Deakin, 1989; and Schalow, 1995)have proposed and tested several factors that may impact the decision of for-profit managers to comment on accounting standard setting documents.Those factors include: firm size (total assets or sales), management's stockownership percentage, management incentive plans, firm leverage, industrytype, and projected income statement and balance sheet effects.In general, these positive theory studies have found that the lobbying

    decisions of for-profit managers are significantly related to firm size, industrytype, projected financial statement effects, and position on (for or against) theproposal. That is, larger firms from particular industries that may be mostsubstantively affected by the proposed standard are more likely to commentand, most often, their comments express opposition to all or part of thestandard setting proposal. These findings have certain implications forpolicymakers. While comment letters may be useful in assessing the majorimpacts of a proposed standard, they also are not likely to be representativeof the total population of affected entities (particularly the `smaller' providersof financial data.) Also, comment letters provide only incomplete evidence ofthe level of any constituency support for a standard setting proposal.In addition to positive theory studies, a few researchers (Mezias andChung,

    1989; and Tandy and Wilburn, 1992 and 1996) have conducted descriptivestudies on the number and nature of comment letters actually received by theFASB on its standard setting proposals. In general, these researchers observedthat preparers of financial statements write most of the letters, commentwriters are more likely to oppose the FASB position, financial statement userswrite very few letters, and only a small portion of any constituency actuallyparticipates in the comment process. Nonetheless, Mezias and Chung (1989,p. 21) conclude:

    The writing of comment letters is an important activity that seems to exhibit asystematic associationwith decisions at the FASB; it should be continued.

    No empirical studies have yet examined the lobbying behaviour of nonprofitentities on standards primarily addressing not-for-profit accounting principles.But to better understand the degree of feedback and acceptability (Tandy andWilburn, 1992) in the comment letters it receives, the FASB needs informationon the commenting entities.What are their characteristics? Do the commentingentities differ systematically fromnon-participants?Andhow representative arethe commenting entities of the overall nonprofit constituency?This study examines the characteristics of museums that lobbied on the

    FASB's 1990 collection capitalization proposal. As an initial examination ofnonprofit lobbying, it focuses on a single type of not-for-profit entity that wasdirectly impacted by the proposed requirement. Wallace (1987, p. 59), indescribing the applicability of positive accounting theory to the governmentaland nonprofit sectors, notes that, initially:


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  • it is likely that empirical investigation will be most fruitful if it focuses on ahomogeneous group of . . . reasonably similar non corporate entities.5



    The positive theory literature posits that entities will choose to comment onstandard setting documents when the perceived benefits exceed the costs(i.e., the perceived net benefits of lobbying are positive). In this study, wehypothesize that certain museum characteristics are associated with theperceived net benefits of lobbying. Our research hypotheses are outlinedbelow:

    H1: The decision to lobby on collection capitalization is positively relatedto museum size.

    H2: The decision to lobby on collection capitalization is positively relatedto museum age.

    H3: The decision to lobby on collection capitalization is positively relatedto museum membership in and accreditation by the AmericanAssociation of Museums.

    H4: The decision to lobby on collection capitalization is positively relatedto private (as opposed to public) museum ownership.

    H5: The decision to lobby on collection capitalization is related tomuseum type (e.g., art, history, etc.).

    Hypothesis H1 is derived from prior lobbying research. In most previousstudies, entity size has been significantly related to the lobbying decision.Entity size may in fact capture various aspects of the perceived costs andbenefits of lobbying (Ball and Foster, 1982, pp. 190^1). With regard to theproposed collections capitalization requirement, larger museums would mostlikely bear greater data collection and information production costs. There isalso some anecdotal evidence that, `politically', museum directors found `littlebenefit in flagging the enormous riches in their collections if it would deterdonors and tempt thieves' (Cowan, 1990, p. C13). Presumably, the `enormity'of the `riches' is positively related to museum size. Finally, the relative costs ofpreparing and submitting a comment letter may be less for a larger museum.Museum age (H2) is hypothesized as a complementary dimension of the

    costs of implementing the collections capitalization proposal. The existingsurvey studies on collection reporting practices reveal that only smaller andnewer museums tend to report capitalized data (Jaenicke and Glazer, 1991,pp. 38^42). As such, higher implementation costs, and hence, greaterlobbying incentives, may be associated with larger (H1) and older (H2)museums.


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  • The third hypothesis (H3) links involvement with the AmericanAssociationof Museums (AAM) with an increased likelihood of commenting on thecapitalization proposal. The AAM took a very clear and strong positionagainst the proposal. In its monthly newsletter, the association `urg[ed]museums to make known their views' and to send copies of their commentletters directly to the AAM accreditation department (AAM, 1991, pp. 1^2).As such, AAM membership and/or accreditation could have enhancedmuseum awareness of the proposal, thus reducing research costs, andpositively affecting the likelihood of a lobbying submission.Next, it is hypothesized (H4) that the type of ownership (public versus private)

    may have influenced the lobbying decision.Technically, FASBpronouncementsare applicable only to private (for-profit and not-for-profit) entities. TheGovernmental Accounting Standards Board (GASB) sets standards fornonfederal governmentally owned and operated entities and the FederalAccounting Standards Advisory Board (FASAB) establishes accounting rulesfor federal agencies. Thus, due to its more direct impact, there may have beengreater incentive for private museums to comment on the FASB proposal.Finally, the type of museum (art, science, history, etc.) may have been

    associated with the decision to lobby (H5). Even though our research sampleis limited to museums, it is clearly still not a homogeneous set of entities. Themost recent AAM National Museum Survey (AAM, 1992a, p. 7) outlinedthirteenmajor types of museums, including such diverse entities as aquariums,arboreta, art museums, children's museums, historic sites, science centres, andzoos. The differential impact of the capitalization requirement on these manytypes of entities was acknowledged during the debate surrounding the 1990proposal. Ronald J. Bossio, the FASB Project Manager, noted that naturalhistory museums would face very different issues than art museums incomplying with the proposed requirement (Cowan, 1990, p. C16). Of course,differential impacts imply different economic costs and benefits, and hence,may affect the lobbying decision.The selection of factors in the above hypotheses was based on prior lobbying

    research6 and on the debate surrounding the 1990 collections capitalizationproposal. As an exploratory study, we are attempting to identify museumcharacteristics that may capture the major economic costs and benefits of theproposed requirement. That is, we hypothesize that museum size, age, AAMinvolvement, ownership, and type are related to perceived informationproduction costs, `visibility' (political) costs, and the actual costs of preparinga lobbying submission. As such, these factors should be associated with thedecision to comment on the FASB's collection capitalization proposal.


    The museums and museum associations that submitted comment letters onthe 1990 collections capitalization proposal were identified from the SFAS


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  • No. 116 Public Record (FASB, 1994). Eight museum associations and 115individual museums submitted letters. The eight museum associationsconsisted of the AAM, the Museum Trustees Association, three state societies(Florida, Georgia, and Indiana) and three museum `type' organizations(science, systematics collections, and historic preservation). The 115individual museums were located in 37 states and the District of Columbia.As in for-profit lobbying studies, the lobbying museums and museumassociations represent only a small proportion of the total constituency. Ingeneral, museum associations exist for each state, several broader geographicregions, and for a wide variety of topical areas. The AAM (1992a) estimatedthe total number of individual USmuseums at nearly 14,000 at the time of theFASB capitalization proposal.The eight museum associations were not included in the statistical analysis7

    since most of the research variables are defined in terms of the characteristicsof individual museums. For the logit analysis, a matched random sample of115 additional individual museums was selected from The Official MuseumDirectory-1991 (AAM, 1990). (This directory is a broad-based data source onUS museums. The 1991 version contained data on more than 6,800museums.) The non-lobbying museums were matched by state with thesample of lobbying museums. The state of domicile was considered to be anecessary matching factor since state laws governing required disclosures ofnonprofit entities vary considerably8 and could affect the incremental costs ofadditional disclosure.


    The dependent variable was defined as the museum's decision to lobby on theFASB's 1990 capitalization proposal. It was measured as a dichotomousvariable and assumed a value of `one' if the museum chose to lobby or a valueof `zero' if the museum did not lobby.Data for the independent variables were obtained fromThe OfficialMuseum

    Directory (AAM, 1990 and 1992b).9 Size was measured as annual attend-ance,10 age as years since founding, and AAMmembership and accreditationas (0, 1) dichotomous variables. Museums for which the governing authoritywas a federal agency, a county or municipal government, or a publicuniversity were classified as `public'. Those governed by a private universityor a nonprofit association, foundation, or board were categorized as `private.'Finally, based on The Official Museum Directory classifications, dummyvariables were used to categorize the sample museums as `art', `history',`science', `library', `zoo', and `other'.Data on one ormore of the independent variables were not available for ten of

    the lobbying museums. Those museums (and their `matches') were excludedfrom the analysis. In addition, when Cook's distance statistic (Cook, 1979) wascalculated to screen for outliers, two more lobbying museums and two non-


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  • lobbying museums were eliminated.11 The final sample consisted of 103museums that lobbied and 103 that did not lobby on the 1990 exposure draft.A profile of the museum sample is presented in Table 1. The mean annual

    attendance formuseums that lobbied was 380,505 compared to 63,945 for thosethat did not lobby. Museums that lobbied were generally older (mean age of79.4 years) than those that did not (mean age of 47.5 years). In addition,museums that lobbied were more likely to be members of the AAM (91 of 103museums) and accredited by the AAM (65 of 103) than museums that did notlobby (51 were members and 12 were accredited). Eighty of the museums thatlobbied were privately owned compared to 72 that did not lobby. Most of thelobbyingmuseums were categorized as either `history' or `art'.


    For the sample of lobbying and nonlobbying museums, the multivariaterelationship between the dichotomous dependent variable and the set of

    Table 1

    Sample Museum Profile

    Independent Variables Lobbied Did Not Lobby

    Mean Attendance 380,505 63,945Standard Deviation 829,948 118,844

    Mean Age (years) 79.4 47.5Standard Deviation 45.7 36.9

    Membership in AAMYes 91 51No 12 52

    AccreditedYes 65 12No 38 91

    MuseumOwnershipPrivate 80 72Public 23 31

    Museum TypeHistory 43 68Art 44 17Library 2 0Zoo 1 5Natural Science/Science 11 8Other 2 5


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  • independent variables was examined with logistic regression analysis.Parameter estimates and assessment of the probability of lobbying werecalculated with the maximum-likelihood method (Norusis, 1993). A follow-up analysis was then conducted to examine relationships among theindependent variables. Finally, chi-square statistics were calculated tocompare the sample of lobbying museums to the overall museum population.


    Logistic Regression

    The results of the logistic regression are presented in Table 2. The analysisindicates that four of the independent variables are significant predictors (atp < 0.05) of museum lobbying activity. These are: attendance, age, AAMmembership and AAM accreditation. One additional variable, museum typeis `art', was significant at 0.062. Given the nature of logistic regression, thislatter variable can also be viewed as a useful predictor of lobbying activity(Maddala, 1991).Attendance, our measure of museum size, was hypothesized (H1) to be

    positively related to lobbying. The results indicate that as attendance

    Table 2

    Logistic Regression Results for Museum Lobbying Behaviour

    Variable Parameter Standard Wald SignificanceEstimates Error Chi-square*

    Attendance 4.07E-06 1.488E-06 7.4973 0.0062Age 0.0089 0.0043 4.3551 0.0369AAMMember 1.6231 0.5083 10.1960 0.0014AAMAccredited 1.0801 0.4533 5.6772 0.0172MuseumOwnership 0.2891 0.4277 0.4570 0.4990Museum TypeHistory 1.9831 1.3441 2.1767 0.1401Art 2.5190 1.3488 3.4880 0.0618Library 10.4999 24.8683 0.1783 0.6729Zoo 5.2809 16.8382 0.0984 0.7538Science 2.2270 1.4659 2.3082 0.1287

    Constant 4.9042 1.4947 10.7650 0.0010Note:*The Wald Chi-square statistic is calculated by dividing the standard error into the parameterestimate and squaring the result.


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  • increases the likelihood of lobbying increases. This evidence supports H1 and isconsistent with the `size' findings of prior lobbying research.The second hypothesis (H2) proposed that museum age would be positively

    related to the decision to engage in lobbying. This hypothesis was supported.The museum personnel of the older entities may have perceived the costs ofgathering and reporting capitalized collections data as highly burdensomeand were thus more likely to lobby against such a requirement.The results also support hypothesis H3 which stated that museums which

    are members of or accredited by the AAM would be more likely to engage inlobbying. This finding suggests that AAM activities, such as using newslettersto urge members to lobby against the proposal, were effective.Type of ownership (public versus private) was not a significant predictor in

    the logistic regression. This result is somewhat surprising in that publicmuseumswere not technically required to abide by the FASB pronouncement.The final hypothesis (H5) stated that the decision to lobby on collections

    capitalization would be related to museum type. In the logistic regression,`art' was the only museum type that entered the equation at a credible levelof significance. This may reflect the fact that the collections of art museumsare more frequently `of a kind for which markets exist in which they are orcould be sold or exchanged' (FASB, 1990, par. 18) than, for example, thenatural artifacts of a science museum or the old photos of a historical centre.Since the proposed requirement applied only to collections that met these`marketability' conditions (Bossio, 1991), its implementation may have moredirectly impacted the reporting costs of art museums than of other museumtypes.As reported in Table 3, the logistic regression correctly classified 79.13

    percent of the sample museums. Classification accuracy was somewhat higherfor museums that did not engage in lobbying (80.58 percent) than for thosethat did (77.67 percent). In addition, Cox and Snell's R2 and Nagelkerke'sR2 were 0.41 and 0.54, respectively, which indicates that the variables in theequation explain a significant portion of the overall variance.The independent variables were then examined to determine if significant

    relationships existed among them. As reported in Table 4, some significantrelationships do exist. The largest statistic (contingency coefficient 0.46)links the twomeasures of AAM involvement (membership and accreditation).Also, accredited museums tend to be older and larger, and the `art' and`history' museums in this study were likely to be larger and AAMmembers orAAM accredited. Clearly, though, none of the Table 4 statistics evenapproach a perfect linear relationship.To determine whether each of the independent variables was useful in

    explaining museum lobbying behaviour, we examined a follow-up logisticregression using backward elimination and theWald statistic. At the final stepof the elimination process, the retained variables were: attendance, age, AAMmembership, AAM accreditation, and museum type `art'. Thus, each of these


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  • Table 3

    Classification Table for Logistic Regression Results of Museum LobbyingBehaviour

    Predicted Percent Correct

    Do Not Lobby LobbyDo Not Lobby 83 20 80.58Lobby 23 80 77.67

    Overall 79.13

    Notes:Model Chi-Square 107.1042 Log Likelihood 178.472Goodness of Fit 193.153df 10Significance 0.0000Cook & Snell R2 0.4050Nagelkerke R2 0.5410

    Table 4

    Measures of Association Among the Independent Variables

    Variables Attendance Age Accredited AAM Ownership

    Attendance 1.0Age 0.170*1 1.0Accredited 0.258***2 0.367*** 1.0AAM 0.092 0.176* 0.460***3 1.0Ownership 0.089 0.164* 0.072 0.029 1.0History 0.238** 0.065 0.244*** 0.255*** 0.064Art 0.141* 0.059 0.298*** 0.325*** 0.048Library 0.008 0.006 0.076 0.146* 0.059Zoo 0.174* 0.059 0.133 0.071 0.028Science 0.074 0.130 0.066 0.076 0.037Other 0.015 0.125 0.034 0.125 0.010

    Notes:1 Pearson correlation coefficients were used to measure association between interval variables.2 Etas were used to measure association between interval and nominal variables.3 Contingency coefficients were used to measure association between nominal variables.

    *p< 0.05.**p< 0.01.

    ***p< 0.001.


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  • independent variables explains a unique and significant portion of the overallvariance in lobbying behaviour.

    Chi-square Comparisons to Overall Population

    In 1989, the AAM conducted its most recent large-scale museum survey. Theresulting Data Report (AAM, 1992a) applied a statistical weighting scheme tothe 1,077 usable responses (a 70.4 percent response rate) in order to provideaggregate categorical and other descriptive data for the overall population ofUSmuseums. Those aggregate data, along with information fromTheOfficialMuseumDirectory-1991 (AAM, 1990) on AAMmembership and accreditation,were used to compare the characteristics of themuseums that chose to lobby tothe characteristics that would have been expected in the general museumpopulation. All of the independent variables, except for attendance, wereexamined. An attendance test was not conducted because the Data Reportdisclosed only a mean attendance figure of 69,181 without any standarddeviation or other distributional data.12

    The chi-square results, reported in Table 5, reveal that the characteristicsof the lobbying museums are all significantly different from the overallmuseum population. In Table 5, the chi-square statistics for museum age(chi-square 425.36, df 4, p < 0.001), AAM membership (chi-square 116.51,df 1, p < 0.001), and accreditation (chi-square 322.77, df 1, p < 0.001)support the results of the logistic regression. Older museums and those thatare members of or accredited by the AAMwere over-represented among thelobbying museums. In addition, proportionally more private museums thanexist in the overall population (chi-square 14.84, df 1, p < 0.001) chose tolobby on the proposed requirement. Also, significantly more art museums(chi-square 69.12, df 3, p < 0.001) lobbied and fewer history, science, andother museums than the proportions that exist in the total museumpopulation.


    One purpose of this study was to determine whether museum size, age,involvement with the AAM, type of ownership, and type of museum wererelated to the decision to lobby on the FASB's 1990 collections capitalizationproposal. Museum size, age, and type, which were hypothesized to captureaspects of the economic costs of producing the proposed data, were allpositively related to the lobbying decision. Furthermore, membership in andaccreditation by the AAM, which may be indicative of an enhancedawareness of the proposal, were also significantly associated with the decisionto lobby. Museum ownership (public or private) was not a significantpredictor of lobbying activity.


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  • An additional purpose of the study was to determine to what extentlobbying museums were representative of the overall population of USmuseums. The museums that engaged in lobbying on the 1990 ED weregenerally larger, older, and more involved with the AAM than the generalpopulation of museums. Private museums and art museums also lobbiedproportionately more frequently than public museums and other types ofmuseums.Consistent with prior lobbying studies that focused on for-profit

    constituencies, those museums that decided to lobby were nearly alwaysopposed to the proposed standard and represented only a small portion of theoverall constituency. These observations, along with the finding that largerand older museums were more likely to lobby, suggest that there are

    Table 5

    Chi-Square Tests Museum Characteristics Expected and Observed

    Variable Category Cases Expected Residual 2 Observed

    Age in Years 425.36 0.00000^19 1 3 41 3820^39 2 19 36 1740^79 3 39 19 2080^119 4 23 6 17120 5 19 1 18

    AAMMember 116.51 0.0000No 0 12 65 53Yes 1 91 38 53

    Accredited 322.77 0.0000No 0 38 93 55Yes 1 65 10 55

    MuseumOwnership 14.84 0.0001Public 0 23 42 19Private 1 80 61 19

    Type 69.12 0.0000History 1 43 56 13Art 2 44 15 29Science 3 11 14 3Other 4 5 18 13


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  • similarities in the characteristics of both for-profit and not-for-profit lobbyists.Notably, the significance of the `size' factor in this study is consistent with thefindings of earlier for-profit lobbying research. Though prior research hasoften used firm size as a surrogate for political costs, we believe that here the`size' measure captures aspects of both information production and politicalcosts, as suggested by Ball and Foster (1982, pp. 190^1). That is, both the costsof producing the new information for large and complex entities and thepolitical costs associated with `bigness' or `richness' may underlie the observedlobbying behaviour. Large art museums, which lobbied proportionately morefrequently than other types of museums, appear to have been especiallyconcerned with the costs of reporting capitalized collections data. This latterobservation is also consistent with Christensen andMohr's (1995) finding thatart museums with larger numbers of paintings and higher levels of federalsupport were less likely to capitalize their art collections.Involvement with the AAM was also a significant predictor of the decision

    to lobby. The AAM took a strong position in opposition to the proposedchanges in collections reporting. As such, lobbying in opposition to theproposal may have been viewed as having both economic and psychologicalbenefits. Perceived economic benefits were in the savings associated with nothaving to value themuseum's collection and psychological benefits were in theform of supporting the position of a highly respected `industry' association.The significance of the AAM involvement measures also suggests that`industry' associations may play a more important role in not-for-profit thanin for-profit standard setting and lobbying behaviour.13

    The insignificance of public versus private ownership as a predictor variablein the logistic regression may have resulted from several factors. Lobbying byquite a number of public museums may reflect the fact that the commentperiod on the 1990 Exposure Draft (October 1990 to May 1991) coincidedwith the period when the relative `domains' of the FASB and GASB were stillbeing defined (Sauter, 1991) and the FASAB (for federal agencies) was justbeing established. As such, there may have been either (1) a lack of knowledgeor `confusion' as to the extent of applicability of FASB standards14 or (2)concern that standards set by one rulemaking body can influence the rulesformulated by other standard setting entities.15 Lobbying by both public andprivate entities is also consistent with the museum community viewing itself asa single `industry' which prefers a single set of reporting standards. Since,however, the follow-up chi-square test revealed that the proportion of privatemuseums that lobbied was greater than the proportion in the overallpopulation, there is also some evidence, as expected, of greater private sectorinterest in the capitalization issue. Additional research is needed to assess theeffects of private sector accounting requirements on public sector standardsetting.The chi-square tests also revealed that significantly more art museums than

    would be expected based on their proportion in the total population chose to


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  • lobby on the FASB ED. These results are not surprising in that art museumsusually have the type of valuable and identifiable collection items that can bepriced and traded in markets and, as such, were covered by the proposedrequirement. The results are also consistent with the for-profit findings ofHope and Gray (1982) wherein firms in particular industries (e.g., aerospace)commented more frequently on proposals (research and development) thatwere likely to have significant financial statement effects.Finally, the results of this study suggest that the museums that engaged in

    lobbying on the 1990 ED were not representative of the entire museumpopulation. In general, the lobbying museums were larger, older, and moreheavily involved with the AAM. Also, private and art museums were moreprevalent.These research findings have several implications for accounting standard

    setters. To ensure adequate levels of feedback and acceptability, standardsetters may need to be more proactive in reaching out to the full range ofaffected constituents. Perhaps, as a starting point, the FASB could worktoward more press visibility or a wider distribution of its newsletters. ThoughFASB exposure drafts are available free on request, there are costs associatedwith an `awareness' of their applicability and availability. FASB newsletters,particularly the Status Report, are a useful media for enhancing constituentawareness. However, as noted by Tandy and Wilburn (1996), evenaccounting academics cite high subscription costs as a deterrent toparticipation in the standard setting process.Relatedly, having a positive working relationship with national `industry'

    associations (such as the AAM for museums) would appear to be a usefulchannel for improving communication and enhancing the acceptability ofnonprofit accounting proposals. Given a generally smaller investment inaccounting systems and personnel, more nonprofit entities may rely on`industry' associations for guidance in interpreting proposed accountingstandards. Such associations also usually have regional and specialty sub-divisions that could be accessed by standard setters to move beyond the large,highly visible entities that seem to dominate the standard setting process.The above conclusions also suggest that additional research is needed in

    several areas. First, this study investigates lobbying behaviour with regard toa single issue and a single type of nonprofit entity. Additional study is neededto determine how differences among nonprofit entities may affect lobbyingbehaviour. Second, to assess the potential usefulness of proposed not-for-profitstandards, it is essential that standard setters hear thoughtful, well-reasonedarguments from representatives of all affected groups. Analyzing thecomments contained in the lobbying letters of nonprofit entities could helpdetermine the types of concerns raised and how well informed participantsare on standard setting issues. Finally, research should examine how standardsetters might employ new channels (e.g., the Internet) to encourage increasedparticipation in future standard setting efforts.


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    1 The FASB proposal allowed flexibility as to the collections amount to be capitalized,particularly for prior acquisitions. Such items were to `be retroactively capitalized at their costor fair value at date of acquisition, current cost, or current market value, whichever is deemedmost practical' (FASB, 1990, para 19).

    2 One thousand letters far exceeds the response to most FASB proposals (Tandy and Wilburn,1992). Even such controversial proposals as the exposure draft on post-employment retirementbenefits (FASB, 1989) generated fewer than 500 comment letters.

    3 Some museums submitted several letters, e.g. one from each trustee. Those letters espoused acommon viewpoint (and were sometimes `carbon copies' of each other). In the FASB PublicRecord (FASB, 1994) and in this research, such sets of letters are classified as a single submission.

    4 Our own review of the comment letters confirmed that several of the respondents wereobjecting to perceived requirements that were not part of the FASB proposal (e.g. annualreappraisal of collection items).

    5 Some lobbying studies of for-profit accounting issues have also focused on a single industrybecause `an accounting issue that affects the firms in only one industry tends to limit thenumber of potential confounding effects that can influence the decision to lobby' (Deakin,1989, p. 138).

    6 Some for-profit lobbying studies have also found that management's lobbying decision isrelated to firm debt (e.g. Dhaliwal, 1982; and Kelly, 1982). However, those studies focusedon proposed standards that would have impacted the debt/equity ratio. No debt measure wasincluded in this study because: (1) collection capitalization does not affect the reportedamount of debt, (2) debt measures are not readily available for museums, and (3) there is someevidence that `lenders, underwriters, and bond raters do not consider the value of the collection. . . as a potential source of debt service' (Jaenicke and Glazer, 1991, p. 75).

    7 A comparison of the comment letters from themuseum associations (e.g., Association of IndianaMuseums)with those from the individual represented entities (the three lobbyingmuseums fromIndiana) revealed that, in general, the individual letters were not `carbon copies' of theassociation letter. Most often, the individual letters contained varying arguments and entity-specific facts that supported the same overall conclusion, i.e., opposition to the capitalizationproposal. This research cannot, however,measure the extent towhich some individualmuseumsmay have relied on a related association to lobby for them. Clearly, though, the AAM (1991)strongly encouraged individual museums to respond to the FASB proposal.

    8 Some states require nonprofit entities to file complete audited financial statements with stateregulatory agencies; others require only IRS Form 990 or no annual filings whatsoever.

    9 Attendance data were not yet reported in the 1991 version ofThe OfficialMuseumDirectory.Assuch, they were obtained from the 1993Directory (AAM, 1992b).

    10 Data availability limited the choice of a `size' measure. Attendance was the most reasonablemeasure consistently reported across the different types of museums examined in this study.Also, Christensen and Mohr (1995, p. 333) noted that, for their sample of art museums,attendance was highly correlated with their `size' measure, number of paintings owned.

    11 The outlier lobbying museums were The Smithsonian and the Cincinnati Zoo and BotanicalGardens; the non-lobbying outliers were the National Zoological Park inWashington DC andthe Athenaeum of Philadelphia.

    12 However, the mean attendance of 69,181 from theData Report (AAM, 1992a) is very similar tothe 63,945 reported in Table 1 for the 103 non-lobbyingmuseums. A t-test on the Table 1meanattendance figures is significant at p

  • since 1990, the role of the FASABhas been further delineated through a series of federal laws(Ewer, 1997).

    15 For example, recent GASB actions on accounting for investments reflect related FASBconclusions (Gauthier, 1997). Such consistency among standards for different types of entitiesis often viewed as desirable. In his testimony before the FASAB, Joseph F. Moraglio of theAmerican Institute of Certified Public Accountants encouraged standards that are `consistentwith generally accepted accounting principles . . . and the Financial Accounting StandardsBoard . . . unless the transactions or events are truly unique' (Miller and Barrett, 1992).


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