Did you know that 1 out of every 10 American workers is a nonprofit employee?
No? That’s because you haven’t watched this video… yet. Teacher and nonprofit director Ben Klasky put together this brief history of everything nonprofit, and we think it’s an awesome and extremely lazy way for TILE philanthropists to understand the world they’re giving in.
(via philanthropy.com)
What?? But yes, it’s true…
“The service area has been growing, historically, pretty fast, much more so than manufacturing.” – Lester M. Salamon, Director of the Center for Civil Society Studies
Yes! A nonprofit can “go out of business,” so to speak. There are all sorts of reasons why an organization would shut down. The most common reason is lack of funding. Almost all nonprofits rely on donors and foundations to cover the costs of staff salaries and all other overhead expenses. If and when funding sources dry up, many nonprofits have no option but to close their doors. Additionally, some nonprofits are actually formed with the intention of “going out of business” at a certain point – once their mission has been accomplished and they no longer need to exist.
The rapid growth of the number of charitable organizations is raising some red flags for some.
“It just seems utterly implausible that anyone can be doing due diligence in any way that constitutes a serious review of the applicant, let alone keeping an eye on them after they are approved. Why bother to have a review at all if you only reject 0.5 percent of the applicants?” – Rob Reich, Associate Professor of Political Science at Stanford
Everyone is feeling the recession – even the rich – and that’s making it difficult for nonprofits to find honorees for their glitzy gala fundraising events.
“This idea of getting on the phone and saying, ‘Wouldn’t you like to be honored at our gala?’ – that’s more difficult, more challenging now than in my 30 years of experience at this.” – Will Maitland Weiss, Executive Director of the Arts and Business Council of New York
While nonprofits are somewhat restricted when it comes to investing, they can basically act like any hedge fund or corporation. In the past, this leeway allowed nonprofits to grow their assets enormously, but right now it’s causing them some financial headaches.
“[O]ver the next several years nonprofits across the country will have to renegotiate bond covenants, reduce services, cut staff or actually default and face foreclosures, repossessions, and in some cases, even bankruptcy.” – Norman I. Silber, Law Professor at Hofstra University
Frequently (especially in tough economies), nonprofits struggle to meet their costs on grants and donations alone. When these organizations consider their options for a financially sustainable future, they sometimes choose to create a for-profit arm – though the goal of the for-profit business is generally just to finance the nonprofit’s mission and activities when its members can’t do so by other means.
Like any other organization, nonprofits need money to accomplish their goals, or even just to pay employees and keep the lights on, and there isn’t any way around that. So if they can run a business that doesn’t conflict with their mission or ideals, how is that so much different from throwing fundraising parties or soliciting donations? But having a for-profit arm doesn’t turn a nonprofit into a full-scale business. Why? The difference is that, in a regular company, the goal is to make money for the owners of the business. The more money the company makes, the richer its owners (and stockholders) get and, by extension, the more they’re willing to pay their employees. But even if a nonprofit has a for-profit arm, the extra money generated goes toward the nonprofit’s mission, not in its CEO’s wallet.
“Business-savvy volunteers are particularly good at helping nonprofits do more with less. These people are setting up credit unions, writing grants, managing resoures – it’s called indirect service.” – Sandy Scott, Director of Public Affairs at AmeriCorps
It was a good idea, but it hasn’t quite worked out on popular social-networking site Facebook. Have you joined a Cause? Have you given money to that Cause?
“I definitely think it’s first and foremost a tool for brand and reputation. It definitely does more for influence than for fundraising.” – Sue Citro, Digital Membership Director at The Nature Conservancy
A nonprofit organization might choose to file as 501c4 if it wishes to engage in political lobbying or if it does not qualify for 501c3 status because of political activities. Unlike 501c3s, contributions to 501c4s are not tax-deductible, making them less attractive to donors who wish to save money on their taxes.
For example, MoveOn.org – a progressive online advocacy group initially registered as a 501c3 – wanted to lobby Congress freely and run ads for and against certain political candidates, so they registered a separate 501c4 organization and eventually phased out the 501c3 arm of the organization.